Disrupt and Dismantle

hortly after midnight on a December night in Washington, a taxicab makes its way north on Connecticut Avenue, a major thoroughfare. The driver, a native of India, laments how slow business has been and how difficult it is to support a family overseas. But on those occasions when he does have money, he's happy he can get it to his relatives very easily. There are two ways, he says: "Banks and money laundering."

The driver's not referring to the traditional act of money laundering (masking funds gained from illicit purposes in cooked-up account ledgers or behind otherwise legitimate businesses), but rather an informal, largely paperless way to get cash to people in other countries, without drawing the attention of the Western banking apparatus.

It's called hawala, and it's now a primary target of two major financial crimes task forces in Washington. The FBI's Financial Review Group and an interagency Treasury investigation team called Operation Green Quest both set up shop in the weeks after the Sept. 11 attacks. Established by senior Justice and Treasury Department leaders as the Bush administration's vanguards in its war on terrorist financing and financiers, the two groups have undertaken the arduous task of investigating, targeting and destroying terrorists' funding sources. Their interest in hawala as one of those sources has flared since Sept. 11.

Hawala, (Arabic for "to change" and Hindi for "in trust") is ubiquitous in the Middle East and South Asia. Hawala dealers don't physically transport money, but rather arrange cash pickups in local currency on behalf of their clients, who pay them a fee. A cab driver in the United States, for example, gets money to his brother in Bombay by contacting a U.S. dealer, who asks another hawala dealer in India to pay the brother. Hawala dealers are constantly giving money out and taking money in, and they work informally to keep their books in balance.

The practice has existed under different names for decades. GIs in Vietnam used hawala-style dealers, who worked more quickly and less expensively than banks, to pay their mortgages back home. Immigrants to the United States have found hawala more expedient than bank and wire transfers and easier to use since dealers require no identification from customers.

Investigators on the two task forces believe the 19 alleged Sept. 11 terrorists funded their operations with money sent through the hawala system. They fear that other terrorist cells are financing their work the same way and are moving furiously to thwart such efforts.

The FBI's Financial Review Group has focused solely on the financial connections of those involved in the Sept. 11 assault. The team has already linked the 19 suspects through bank accounts and funds transfer records, and it contributed evidence in the December indictment of Zacarias Moussaoui, who investigators believe would have been the 20th man aboard a hijacked commercial airliner had he not been detained weeks before and charged with immigration violations. Moussaoui is scheduled to stand trial in Alexandria, Va., in October. The Financial Review Group works in tandem with Operation Green Quest, which has the broader and more daunting mandate to "disrupt and dismantle" all terrorist funding sources wherever they may be. By sharing leads, the task forces have learned some things about how the September attacks were financed.

While the agents assigned to the task forces have decades of experience laboring over the ledgers of swindlers and smugglers, they're not accustomed to investigating terrorists. In fact, Treasury and the FBI have never mounted a task force investigation into terrorist financing and assets. In the past few months, that deficit of experience has led to a troubling realization: What the Washington cab driver and millions of others already know about how to quietly move money around the world, many federal investigators are only beginning to understand.

Playing Catch-Up

The hawala system confounds American investigators because it's based solely on trust among dealers and customers and because transactions leave almost no trace-most records are destroyed once an exchange is complete or are kept in a code only a dealer understands. But investigators' fears don't begin and end with hawala. In the months since Sept. 11, the Treasury and FBI task forces have found evidence that terrorists are also supported through a vast network of wire transfers and cash deposits funneled through traditional money laundering rings by groups posing as legitimate businesses in the United States and abroad.

Operation Green Quest's investigations have led to raids on a handful of businesses and charities suspected of aiding terrorists, and the blocking of those groups' access to their assets. On Nov. 7, Treasury froze the accounts of Al Barakaat, a money wiring company whose owner, the administration has said, is a supporter and friend of Osama bin Laden. Treasury agents raided and shut down eight Al Barakaat offices and seized their financial records. Green Quest's work also led to the blocking of assets of the Holy Land Foundation, a Texas-based charity suspected of providing millions of dollars each year to Hamas, the group that has claimed responsibility for numerous suicide bomb attacks in Israel.

While the Bush administration has only recently publicly identified these alleged terrorist supporters, some government officials have been suspicious of their activities for years. President Clinton designated Hamas a terrorist organization in 1995 and investigators monitored the Holy Land Foundation's communications as early as 1993. But prior to Sept. 11, there was no compelling need or political will to undertake a broad-based investigation of the finances of such groups. Therefore, the investigators who have inherited the task of pursuing these organizations have had to become quick studies in the way their new enemies operate.

"Most of the U.S. couldn't spell hawala" before Sept. 11, says Marcy Forman, a seasoned Customs investigator and the director of Operation Green Quest. To launch the investigation in October, Forman pulled together the top money sleuths from across Treasury's investigative agencies.

Each agency on the Green Quest team brings a particular specialty to the table, and Forman keeps them from getting their wires crossed. The IRS investigates tax holdings and filings, while the Financial Crimes Enforcement Network (FinCEN) looks into bank transactions by organizations and individuals. The Secret Service provides expertise on credit card crime, while Customs investigators monitor the ebb and flow of illegal currency. Rounding out the Treasury group, the Office of Foreign Assets Control issues blocking orders through the department's enforcement division. Officials from the Justice Department also confer with the task force, and one Justice investigator acts as a liaison to the FBI.

Like Treasury, the FBI's Financial Review Group is being led into unfamiliar territory by an experienced investigator. Dennis Lormel, a 26-year veteran of the bureau and chief of the financial crimes section, takes pains to make clear that he's an expert on money, not terrorism. Yet about 90 percent of Lormel's staff now spend their time investigating the Sept. 11 attacks, marking the first time in the history of the FBI that agents have looked into the financial evidence of a terrorist action.

The composition of Operation Green Quest reflects the Treasury's expertise in financial investigations, says Treasury Undersecretary James Gurulé, who heads the department's Foreign Terrorist Asset Tracking Center. Made up of the same member agencies as Operation Green Quest, the tracking center aids in investigations and authorizes the orders to freeze assets made by the Office of Foreign Assets Control. President Clinton created the center in May 2000, but Treasury officials were reluctant to give Green Quest any enforcement powers, largely for fear of being accused of racial profiling, or targeting particular ethnic groups. Senior Justice and Treasury officials finally approved the project three days after the Sept. 11 attacks.

As of December, the terrorist asset tracking center had frozen $33 million in assets of organizations the administration believes sponsor terrorism. Another $33 million has been frozen by other countries that are part of the coalition battling terrorism. Their cooperation is the ultimate key to the success of the effort to track down terrorists' finances, Gurulé says. Of the more than 135 names of individuals and organizations whose assets have been blocked since Sept. 11, nearly every one is Muslim or Middle Eastern.

Target Profile

Forman confirms that Green Quest's primary targets today are Middle Eastern organizations, although agents are ready to shift their attention to other regions if they find evidence of financial terrorist activity there.

Unfortunately for investigators, the Middle Eastern circles they'd like to penetrate in the United States are hard to crack. Most undercover agents don't speak the language or look like the people they're monitoring. While Green Quest is mounting some undercover operations to infiltrate hawala circles, overall the team has had to become more creative in the ways it hunts its prey.

Just as the federal government prosecuted Al Capone in 1930 for tax evasion, which was easier to prove than charges of murder or conspiracy, Green Quest tries to lure terrorists into a financial net rather than focusing on the end result of their schemes. A Customs unit in Northern Virginia, for example, is building dummy Web sites to snare people who are donating to terrorist groups or engaging in illegal practices online. The sites are loaded with code words that carry that are significant to members of communities who use hawala or might support terrorist organizations.

In addition, "jump teams" of Treasury investigators have visited foreign countries to meet with their counterparts, gathering and sharing intelligence on financial crime and bringing it back to Green Quest to develop leads. The teams have been dropping in on Middle Eastern finance officials. For example, they shared intelligence about alleged money laundering activities by Al Barakaat with officials in the United Arab Emirates, Forman says.

In October, Customs began closer inspections of shipments to the Middle East. Fed by tips from Green Quest, agents have used dogs to sniff for large amounts of undocumented currency. (Shipments of more than $10,000 must be registered with Customs.) The operation has netted $7 million in smuggled checks and cash.

Forman says Treasury has the authority to flush money smugglers out into the open by issuing 60-day orders to such money-wiring services as Western Union to report all transactions in excess of $750. Money-wiring services and banks are usually required only to report transactions of more than $10,000, but lowering the threshold might force money smugglers to take their cash out of the United States over borders or through airports and seaports, where they would encounter Customs officers already on heightened alert.

While such an order might greatly assist Green Quest investigators, Gurulé says Treasury has no plans to require money-wiring services to lower their reporting threshold. Rather, he would like to make wire services, like banks, file reports on suspicious activity. The Financial Crimes Enforcement Network maintains and reviews all of these transaction reports for signs of suspicious activity. But for years, FinCEN, too, has been focused primarily on money laundering schemes and not the finances of terrorists. While FinCEN officials declined to comment for this story, Forman notes that without the agency's access to vital records, Green Quest's work would not be possible.

Bank representatives and members of the American Bankers Association in Washington also declined to comment, but sources say banks have been generally compliant with Treasury's requests for financial records.

But despite interagency and private sector cooperation and the government's best efforts to crack the terrorist finance network, what investigators have learned about the habits of the suspected Sept. 11 terrorists unnerves them and might give some hint about how other terrorist cells operate in the United States.

Blending In

Rather than go against the grain of the financial system, the Sept. 11 suspects blended into it, says Lormel. While they received income from hawala or money laundering fronts, they kept their money in legitimate bank accounts and made purchases with credit cards.

The variety of financial resources available to terrorists baffles investigators. Lormel says agents discovered a wire transfer receipt belonging to Mohamed Atta, the alleged ringleader of the attacks, which links him to various accounts. But investigators also have found cash in the 19 suspects' accounts, for which there is no identifiable source. Lormel believes those funds arrived via a hawala transfer. "The fund-raising mechanisms available to these different networks has . . . been astonishing. The ability to raise money worldwide is scary," he says.

As the Washington cab driver explains, everyone in his neighborhood knows where to go find a quiet way to send money. Whether investigators also know where to look remains to be seen, but local law enforcement officers and federal officials agree that intelligence gathered at the grass roots level is essential to the administration's plan.

These days, the cab driver says, hawala dealers are harder to find than they were before Sept. 11. Have they been arrested? No, he says. They know investigators are looking for them, and they're hiding.