New Phase of Terror Finance Cutoff Starts

Citing successes in the public designation of terrorist supporters and the blocking orders used to cut off their financing, the Treasury Department announced that it is moving into the next phase of its plan to cut off money to terror groups.

"This new phase is characterized by increased leadership by our coalition partners and increased focus on means of financing terrorism outside the mainstream financial system," Kenneth Dam, deputy secretary of the treasury, told members of the Council on Foreign Relations Saturday.

"At the same time, the United States must and will remain vigilant in preventing terrorists from abusing its financial system."

The Treasury Department instituted Operation Greenback in the days following the Sept. 11 terror attacks to cut off the financial tools used by terrorist groups and their sympathizers to pay for their training, weapons and travel.

So far, the United States and its coalition partners have publicly designated 210 terrorists or terrorist supporters and frozen over $115 million around the world. With the support of the United Nations, 166 countries and jurisdictions have blocking orders in force, and the European Union, Saudi Arabia and Pakistan have all taken legal action against suspected terrorist financiers.

Dam said the United States will continue to "make sure that countries do more than just add names to a list," but will also make sure that financial institutions and their regulators have the "teeth" to back their blocking orders.

But, he said, with the overwhelming success of the blocking orders and public designations, terrorists are looking at less traditional ways to move money, and will not rely on banking institutions if they know that they will be caught.

"Public designations are, by their very nature, public," Dam said. "Terrorists learn about them and adapt their behavior accordingly. They will avoid keeping their money in the United States or other financial centers with effective rules and regulations to thwart them."

Dam said the new phase will focus on improving the regulatory climate, but also will turn investigators' attention toward issues that are central to Islamic culture, enlisting the aid of private business leaders who may come in contact with sizable sums and instituting money laundering surveillance techniques that have already been established to fight the drug trade.

"They may avoid storing value in currency at all, instead preferring commodities like gold or diamonds, converting the commodities to cash only as needed," he said.

Charitable groups have already complained that they are being targeted because they pass aid to countries that have been identified as harboring or sponsoring terrorism. Last month, Israel detained an American who officials suspected was a senior member of the Texas-based Holy Land Foundation for Relief and Development. Holy Land's assets were frozen in December after it was labeled a front group for the terrorist organization Hamas.

The American, Dr. Riad Abdelkarim from Orange County, Calif., remained in Israeli custody for two weeks before being released last month without charges. Holy Land Foundation has denied that it is financing terror groups, saying it raises money only to help Palestinians caught in the middle of the Mideast conflict.

Dam did not comment on Abdelkarim's or Holy Land's status, but acknowledged that some charities will be affected even though only part of its organization is involved in illegal activities.

"There is no denying that some legitimate charities have been penetrated by terrorists or terrorist supporters — possibly by only a few managerial employees — who misdirect a portion of the charity's funds for terrorist ends. There are also organizations that are primarily organized and directed to abuse charitable status for terrorist ends," he said. "Our challenge is to prevent terrorists from using charities as a cover for supporting terrorism while ensuring that charitable giving and charitable works continue."