Experts Accuse U.S. Agencies of Footdragging Before Sept. 11th

By MYRON LEVIN and JOSH MEYER, Times Staff Writers

WASHINGTON -- Money-laundering experts say that the U.S. effort to deny funds to terrorists by freezing their assets lacked a sense of urgency before Sept. 11, reflecting a failure to appreciate the extent of the terrorist threat.

They cited several examples:

* After successfully pushing the United Nations "to freeze without delay" the assets of people linked to alleged terrorist mastermind Osama bin Laden, the United States took more than seven months to impose the sanctions on a string of top Bin Laden lieutenants--something it accomplished only Friday.

* The new unit within the U.S. Treasury Department that is spearheading the probe of terrorist finances was authorized by Congress in October 2000, yet was still in the organizational stage at the time of last month's attacks. Spurred by the deadly hijackings, Treasury officials hastily got the Foreign Terrorist Asset Tracking Center up and running Sept. 14.

* Congress in 1994 passed anti-money-laundering legislation that required unregulated financial services--such as currency exchanges, check cashers and the money brokers known in the Arab world as hawalas--to register with the government and report large and suspicious transfers of cash. But proposed rules to implement the program were not written until 1997, and the regulations will not take effect until next year.

"There was not the urgency" before Sept. 11, "and now we have this disaster," said Kenneth B. Katzman, a Middle East specialist with the Congressional Research Service who formerly worked for the CIA.

Friday, Treasury Secretary Paul H. O'Neill named an additional 39 people and groups whose U.S. assets can be frozen under a sweeping order issued by President Bush on Sept. 24. The order also allows the assets of foreign banks that do business with terrorists, or that refuse to cooperate with the U.S. probe of their finances, to be blocked.

Friday's announcement brought the total number of names on the U.S. blacklist to 66.

In December, the U.S. and Russia successfully co-sponsored a U.N. Security Council resolution requiring member states to block funds of those on a list of designated terrorists. The list, released in March by the U.N. and the European Union, included five alleged lieutenants of Bin Laden--Amin al-Haq, Saqar al-Jadawi, Ahmad Sa'id Al-Kadr, Sa'd Al-Sharif and Bilal bin Marwan--who were not designated by the U.S. until Friday.

Treasury spokeswoman Tasia M. Scolinos on Monday declined comment on the delay. But she said, "We are aggressively pursuing terrorist fund-raising schemes at every level."

But Sen. Charles E. Grassley of Iowa, the ranking Republican on the Senate Finance Committee, said Monday that he will ask Treasury officials for an explanation, and ask whether the delay "is indicative of larger problems" with the "use of financial data to target criminals."

"The United States should lead the world in fighting terrorism and shutting down terrorists' financial networks," Grassley said in a prepared statement. "This isn't the time for U.S. law enforcement, including our financial watchdogs, to be asleep at the switch."

But Jack Blum, a money-laundering expert and former special counsel to the Senate Foreign Relations Committee, said the surprise is not the delay but "that anything happens" at all.

"We're involved in a very complicated set of bureaucracies, some of which are so pathetically understaffed that they can't do their jobs," said Blum, who singled out Treasury's Office of Foreign Asset Control.

That office administers more than 20 economic sanction programs aimed at narcotics traffickers and nations, groups and individuals that sponsor terrorism.

In testimony last May before a Senate subcommittee, R. Richard Newcomb, director of the office, said it was in the process of expanding its staff of 77, with some of the new hires to staff the new anti-terrorism task force that Congress had authorized last year.

The National Commission on Terrorism had urged creation of the task force, called the Foreign Terrorist Asset Tracking Center, to blend the expertise of Treasury agencies and the CIA, FBI and National Security Agency in tracking and disrupting the flow of money to terrorist groups.

Treasury officials said Monday that the foreign-asset office staff has grown to 129, but they declined to say for security reasons how many of the new hires joined the task force.

A Treasury spokeswoman denied there was any undue delay in launching the task force, citing the logistical difficulties of bringing together representatives of a number of investigative agencies.

Officials said Friday that at least 66 nations have implemented procedures for blocking assets of terrorist groups designated by the U.S. in the wake of last month's attacks.

The additional names announced Friday include 33 individuals and six organizations. Among them are three Middle Eastern honey distributors that authorities said have been used as fronts to move money, weapons and fighters throughout the world.

Others included the Society of Islamic Cooperation, which Treasury officials said was founded by Bin Laden earlier this year, and a Pakistan-based charity, the Rabita Trust.

Among the individuals was Yasin al-Qadi, described as the head of the Muwafaq, or "Blessed Relief," Foundation. Treasury officials said the foundation has been used by Saudi businessmen to funnel millions to Bin Laden's terrorism network Al Qaeda.

Treasury officials also said last week that the U.S. and its allies have frozen about $24 million in assets since Sept. 11. Most of the money has been found overseas.

Previously, Treasury officials put the total of frozen assets since Sept. 11 at more than $100 million. But last week they said that figure included money frozen before the September attacks. About $254 million in Taliban accounts were frozen in the U.S. under a 1999 executive order.

Experts say it will be impossible to trace most of the funds available to terrorists, given their use of shell entities and unconventional channels to move money.

But U.S. officials say every little bit helps, adding that tracking the money can provide valuable leads on the activities of terrorist groups.

October 15, 2001

Copyright 2001 Los Angeles Times