Staff Report to the Commission

finding or detecting terrorist operatives or fund-raisers.58 Under this approach,

counterterrorist officials would be able to access privately held data by using computer

technology to search for known terrorist suspects by name, data of birth, Social Security

number, or other identifying information, which would find terrorist suspects living under

their own name and also help identify others living under assumed names. The

government could also use privately held financial data in conjunction with a wide

variety of other data to link a suspect to his or her associates. As one former government

official testified to the Commission: “Counterterrorism officers should be able to identify

known associates of the terrorist suspect within 30 seconds, using shared addresses,

records of phone calls to and from the suspect’s phone, emails to and from the suspect’s

accounts, financial transactions, travel history and reservations, and common

memberships in organizations, including (with appropriate safeguards) religious and

expressive organizations.”59 The government is currently far from these capabilities, and

57 The commonality of many names, especially Arabic names, compounds the potential for mayhem. For

example, an official of one major financial institution told Commission staff that there were 85 Mohamed

Attas in New York City alone. Intelligence reports of varying quality may provide the basis for bank action

against not only the persons alleged to be involved in terrorist financing but innumerable people with the

same or similar names.

58 See, e.g, Creating a Trusted Network for Homeland Security, Second Report of the Markle Foundation

Task Force (Dec. 2003), appendix F (“Within 30 seconds [of learning the identify of a terrorist suspect], the

counterterrorism agency should be able to access U.S. and international financial records associated with

the suspect”).

59 Prepared testimony of Stewart Baker, Dec. 8, 2003.

Terrorist Financing Staff Monograph

65

significant technical, legal and privacy hurdles would need to be crossed before it would

have anything remotely approaching this ability.

Supporters of this approach contend that privacy would be protected through anonymity

and technology. The data of millions of people could be electronically searched but all

individuals would remain anonymous except those identified as terrorist suspects, who

would then be subjected to further scrutiny. Sophisticated technology would control

access to the data, electronically audit the data and keep a detailed record of exactly who

accessed it for what purpose, and ensure the anonymity of persons whose data are

searched.

If such a system existed, it would be tremendously useful in looking for known terrorist

operatives living under their own name, such as al Mihdhar or al Hazmi, or future

hijackers living under false identities. Technology could be imagined that would scan

masses of financial data looking for terrorist fund-raising operations as well, while

preserving the anonymity of the data belonging to persons whom it does not identify as

potential terrorist fund-raisers.

Of course, major technological improvements would be required to implement this kind

of a system. Currently, financial records are spread out across the country in thousands of

financial institutions, each with its own data collection and retrieval system and level of

technological sophistication.60 There is no single database that the government can tap

even in an emergency.

Even if such a database could be created, sweeping legal changes would be required to

use it. The government does not have unfettered access to this financial information

under current laws. Although the Supreme Court has stated that an account holder does

not have an expectation of privacy in information he or she gives to another, such as a

bank, there are a number of restrictions on the government’s right to obtain such data.

Most fundamentally, the government can obtain financial information or data only by

lawful process, such as a grand jury subpoena or an NSL, for a particular case or

investigation. The government has no general authority to access the entire country’s

financial records en masse, so that it can scan them to find potential terrorists or criminal

suspects. Instead, an inquiry has to be made of each financial institution for each

investigation.

Pushing the technological and legal limits even further is the idea that the government

could develop the technology to sift through all the financial data that exists and create a

program able to single out those financial transactions that are inherently suspicious.

60 Banks and other financial institutions keep records as a part of the operation of their ongoing businesses.

Financial institutions are generally required to keep financial information on hand, in a retrievable form, for

five years. In contrast, other industries whose records would also be of use to counterterrorism

investigators, such as Internet service providers, are not required to keep transaction records for any length

of time and can (and do) regularly destroy them unless law enforcement requests that they be maintained.

This has often been a source of frustration to law enforcement and intelligence agents, whose investigations

are often hampered in the digital age by lack of a uniform and mandated record retention policy for internet

service providers.

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66

These ideas have been discussed in the open literature and have triggered major

controversy and speculation. The Department of Defense’s  “Total Information

Awareness” program, complete with its logo of an all-seeing eye, was a prime example of

this type of technology. This research program sought to use sophisticated technologies

to detect terrorist planning activities from the vast data in cyberspace; in other words, it

sought to “pick the signal out of the noise.”  Congress has prohibited the funding of such

a program, largely because of privacy concerns. Despite 9/11, it seems that privacy

concerns will prevent anything remotely like these ideas from becoming reality in the

foreseeable future.

That is not to say research should not go forward. Government and the private sector can,

and should, continue to work on technology that could scan vast amounts of financial

data to find known terrorist suspects, while protecting the privacy of the innocent persons

whose data are searched. Perhaps sophisticated technology can be developed that would

even be able to pick out unknown terrorist operatives or fund-raisers by their financial

transactions—currently a near impossibility. Legitimate concerns about privacy should

not retard research that might someday make us safer and, at the same time, actually not

infringe on privacy rights. Ideally, the research efforts should draw on both the law

enforcement and intelligence expertise of the government and the sophisticated

technology and data management expertise of the private sector. Obviously, no such

technology should ever be implemented on real data without public acceptance that the

technological and legal safeguards in place will be sufficient to ensure privacy. The

development of such technology and any public acceptance of it remain, at this point,

pure speculation.

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67

Chapter 5

Al-Barakaat Case Study

The Somali Community and al-Barakaat

In about 1991, the East African country of Somalia became embroiled in turbulent civil

unrest that wreaked devastation on its people and institutions. Already destitute, the

government collapsed and basic services withered. Famine and violence in the country

were the norm, and a diaspora of Somalis began. Many arrived in the United States. In

one of those strange flukes sometimes found in patterns of migration, cold and snowy

Minneapolis has the largest concentration of Somali immigrants in the United States.

Somali immigrants, like individuals in immigrant communities throughout the United

States, sought a safe, quick, and effective way to move money earned in the United States

back to their families and homes. The need was even more dire for Somalia, as this was

one of the only sources of hard currency available to the country. Many foreign workers

in the United States have a number of different options to move money internationally.

The most formal and obvious way is to use the established backbone of the international

wire transfer system to shift funds between a bank account in the United States and one in

the destination country. This method has several significant advantages. It is safe and

convenient, particularly when large amounts of money are being sent between

commercial customers. There are drawbacks to wiring money, however: it can be

expensive; banks can hold the money for extended periods before sending it; it requires a

bank account in the United States; and the banks are required to use the official exchange

rate and in some countries levy a tax on foreign exchange, which often makes the

effective rate of exchange punitively high. Indeed, other countries often restrict the export

of foreign currency and foreign exchange.

However, for Somalis living in the United States, the question was moot. Somalia simply

had no banking system and no central bank by which foreign exchange could be made.

Thus, a different way had to be found to get money to Somalia. The al-Barakaat network

of money remitters was set up to address this need. Founded by Ahmed Nur Ali Jumale

in 1985, al-Barakaat at the time of 9/11 had more than 180 offices in 40 countries, all

existing primarily to transfer money to Somalia. The financial headquarters for al-

Barakaat was in the United Arab Emirates, where Jumale had opened a number of

accounts at the Emirates Bank International (EBI) to facilitate the transmission of money.

At the time of the terrorist attacks, al-Barakaat was considered the largest money

remittance system operating in Somalia; in addition to being used by a significant number

of Somalis who had fled the anarchy in their home country, it was the primary means that

the United Nations used to transmit money in support of its relief operations there.

A money remitter, described most simply, collects money from an individual at one point

and pays it to another in another location, charging a fee for the service. The money itself

does not actually move; rather, the originating office simply sends a message to the

destination office, informing it of the amount of money and the identity of the sender and

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of the recipient. The destination office then pays the ultimate recipient. To settle, money

is periodically wired in aggregate amounts from the originating office’s bank account

either to a central clearing account owned by the money-remitting company or through

correspondent bank accounts. The central office, in turn, settles with the destination

office. Each office is typically an agent or licensee of the main office, and its

relationships are usually arm’s-length and governed by a written contract. The main

office is responsible for keeping track of the settling transactions with all of the other

offices. Most money remitters in the United States belong to large franchise, such as

Western Union or MoneyGram. They effectively operate along the same principles as al-

Barakaat, albeit more formally. Additionally, the absence of any agents for large,

Western-based money remitters in Somalia forced Somalis to use smaller, ethnically

based ones.

Al-Barakaat has been commonly called a hawala, but it is not one.61 There are similarities

between the two systems. In both, there is a need to compensate the agent who has paid

out money pursuant to a money transfer. In both, the money is not sent for each

individual transaction; rather, there is a larger settling transaction conducted periodically

to adjust for the differences in what each office took in and what it had to pay out.

The key difference is in how the money or value moves between the office obtaining the

money from the customer and the office paying the money out to the ultimate

beneficiary. In transferring value between the sending and the receiving offices, a money

remitter uses the formal financial system, typically relying on wire transfers or a

correspondent banking relationship. A hawala, at least in its “pure” form, does not use a

negotiable instrument or other commonly recognized method for the exchange of money.

Hawaladars instead employ a variety of means, often in combination, to settle with each

other: they can settle preexisting debt, pay to or receive from the accounts of third parties

within the same country, import or export goods (both legal goods, with false invoicing,

or illegal commerce, such as drug trafficking) to satisfy the accounts, or physically move

currency or precious metal or stones.

There are other distinguishing characteristics of a hawala. Many hawalas operate between

specific areas of the world, or even specific areas within a specific country. An individual

wanting to send money from Canada to one area in Pakistan, for example, might use one

hawaladar; to move money to a different part of Pakistan, it may be necessary to use a

different one. Hawalas typically do not maintain a large central control office for settling

transactions. Instead, a loose association of hawaladars conduct business with each other,

typically without any formal or legally binding agreements. Hawaladars often keep few

formal records; those that do exist are usually handwritten in idiosyncratic shorthand and

are typically destroyed once the transaction is completed.

As noted in chapter 2, Usama Bin Ladin and al Qaeda made significant use of hawalas to

move money in the Middle East—particularly in Pakistan, the UAE, and Afghanistan—in

61 The following discussion is aided by two reports, both produced by FinCEN: A Report to Congress in

Accordance with Section 359 of the USA PATRIOT Act, (2002) and Hawala: the Hawala Alternate

Remittance System and its Role in Money Laundering, (undated, probably 1996)

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69

the period before 9/11. This does not make the use of hawalas inherently criminal,

although it has been recognized that some of their characteristics allow criminal activity

to flourish: little formal record keeping, lack of government controls, and settling

transactions that do not go through formal financial channels.

The Somali money remitters in Minneapolis had attracted official attention for some

time. There were three primary remitters in Minneapolis in the late 1990s: al-Barakaat,

Dahb Shiil, and Shirkadda Xawilada Amal. Al-Barakaat had by far attracted the most

attention. A local bank had filed Suspicious Activity Reports (SARs)62 as early as the

summer of 1996 with the Treasury Department regarding what they believed to be

suspicious financial activity: large amounts of cash and other instruments were being

deposited and then immediately wire transferred to a single account in the UAE the next

day. The SARs did not describe what the bank thought the nature of the activity was, just

that it seemed inconsistent with normal banking activity. By 9/11, these reports numbered

in the hundreds.

The FBI, which received a regular summary of these reports, opened a criminal moneylaundering

case file on al-Barakaat in May 1997.63 In a typical money-laundering

investigation, an investigative agent tries to develop evidence that the money was derived

from a crime that was statutorily described as a “specified unlawful activity” (SUA), and

that the purpose of the transaction was either to disguise the nature, source, ownership, or

control of the money or to further the criminal activities. The difficulty here, which

would plague both the intelligence and criminal investigators for the rest of the

investigation into al-Barakaat, was that the transactions themselves revealed neither who

the recipient of the money was nor what happened to the money once it arrived in the

UAE. The source of the money or purpose behind the transaction could be legitimate or

nefarious: in the absence of further information, it was impossible to know which. After a

preliminary investigation, the FBI closed its criminal investigation of al-Barakaat in

August 1998, unable to find an SUA or gain an understanding of the purpose of the

transactions. More SARs continued to pour in, however, and U.S. Customs and Internal

Revenue Service agents in Minneapolis, who had opened a separate investigation into al-

Barakaat, continued to investigate.

62 Suspicious Activity Reports and their role in the overall scheme of anti-money laundering regulation of

banks and other financial institutions are discussed in chapter 4.

63 The description of the FBI intelligence and multi-agency law enforcement investigation against al-

Barakaat was derived from a review of FBI case reports and source reporting, as well as face to face

interviews with the agents and FBI officials involved. The description of the government’s understanding

of al-Barakaat prior to 9/11 was derived from a review of intelligence agency reporting. The description of

the foreign government participation in the al-Barakaat action is derived from State Department cables and

Treasury memoranda. The discussion of OFAC is derived from review of internal Treasury documents and

from interviews of Treasury and OFAC officials.

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The Early Intelligence Case

The primary domestic investigation of potential Somali-based terrorist activities occurred

in Minneapolis.64 The lead case agent was able to develop intelligence both from his own

investigative efforts and from his review of the materials in the possession of the CIA. In

December 1998, a case agent in the intelligence squad in Minneapolis developed a source

of information on the activities of the Somali community. The source indicated that the

terrorist group Al-Itihaad Al-Islamiya (AIAI) had a cell in Minneapolis, and that it

supported radical Islamic activities against the United States. The investigation focused

on a specific individual within the United States, who was alleged to have plotted to

bomb U.S. embassies in Uganda and Ethiopia and to have been engaged in fund-raising

in Minneapolis to support AIAI activities overseas. Additionally, the source provided

information regarding about 15 Somali immigrants. After further inquiry, including

searches and an interview, the investigations were closed when it was found that the

FBI’s original source lacked credibility regarding this specific threat and that other

reliable sources had no knowledge of the suspected plotter.

While the original source did not pan out, the agent was able to learn from his contacts in

the intelligence community, particularly the CIA, a great deal about AIAI. The agent

learned that AIAI operated primarily in East Africa and was considered a loose affiliation

of Islamists. AIAI was considered a significant threat by the Defense Intelligence

Agency, which had experience in Somalia during the early 1990s, and intelligence

suggested that AIAI had links to Usama Bin Ladin. For example, there were indications

that Usama Bin Ladin had visited Somalia and visited an AIAI stronghold in southern

Somalia to look for a new base of operations when his stay in Sudan ended. Bin Ladin

purportedly met with the leaders of AIAI as well, and was said to have given AIAI

$400,000 in 1997 to support attacks on Ethiopia. Some of this intelligence was reinforced

after 9/11, when it was reported that AIAI discussed hiding Bin Ladin in the event he

needed to leave Afghanistan.

Despite these troubling links, the State Department thought AIAI did not meet the

standard for designation as a Foreign Terrorist Organization (FTO), which would have

the effect, among other things, of criminalizing support of it. Additionally, there was a

concern on the part of the State Department that some of the reporting involving AIAI

was simply not credible. State said that multiple reports from the CIA discredited its

earlier sources.

In the late 1990s, the intelligence community also began to draw links between AIAI, al-

Barakaat (particularly its founder, Ahmed Nur Ali Jumale) and Usama Bin Ladin. The

reporting centered on a few key facts. First, it alleged that Usama Bin Ladin not only

assisted Jumale in establishing al-Barakaat in about 1992 but was in fact a silent partner,

and that Jumale managed Bin Ladin’s finances as well. This was consistent with other

information that indicated a prior relationship between Jumale and Bin Ladin. Second,

64

The first FBI investigation on AIAI and al-Barakaat was started in San Diego in October 1996, on an

individual investigated as a result of his connection with HAMAS.

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the reporting indicated that al-Barakaat was associated with AIAI, in that al-Barakaat

managed the finances of AIAI, and AIAI used al-Barakaat to send money to operatives.

Variations of that reporting stated that the head of al-Barakaat, Jumale, was part of the

AIAI leadership, or that Usama Bin Ladin used al-Barakaat to fund AIAI. Third, there

were allegations that al-Barakaat actually assisted in procuring weapons for AIAI or sold

weapons to AIAI. There were specific reports, for example, of al-Barakaat’s supplying

Somalia’s Sharia court with 175 “technicals”  and 33 machine guns between January and

mid-July 2000, and AIAI with 780 machine guns, which it had procured from sources in

China and Chechnya. Other reporting indicated that al-Barakaat was founded by

members of the Muslim Brotherhood in order to facilitate the transfer of money to

terrorist organizations, including Hamas and AIAI.

Lastly, there was fairly detailed information from a U.S. embassy in Africa in July 1999.

Two sources known to the embassy claimed that Usama Bin Ladin was a silent partner

and frequent customer of al-Barakaat. One of the sources further related that Bin Ladin

gave Jumale $1 million of venture capital to start al-Barakaat, and that terrorist funds

were intermingled with the funds sent by NGOs. A third source told the embassy that al-

Barakaat did not practice any kind of due diligence in making financial transactions. Both

sources claimed that al-Barakaat security forces supported Usama Bin Ladin by

providing protection for Bin Ladin operatives when they visited Mogadishu. The

embassy cautioned that the allegations could not be confirmed and noted the risk that the

sources may simply be spreading negative information about their rivals.

The Minneapolis FBI intelligence agent continued to develop sources and investigate the

activities of the Somali community. By July 1999, he was able to open a “full field