Staff Report to the Commission

investigation” (FFI) into AIAI as a group. All FBI FFIs require predication: that is, some

evidence must already exist to give the FBI reason to believe that an individual is

involved in activities on behalf of a foreign government or terrorist organization, which

would justify further surveillance or intelligence collection. This requirement, which

prevents the FBI from undertaking random domestic intelligence collection on

individuals, was introduced as a way to protect civil liberties. An FFI can be instituted

after a preliminary investigation (PI), which is opened to determine whether an FFI is

justified. A PI can be opened only for a limited time, and agents in a PI are restricted in

their methods of collecting intelligence.

When they opened the AIAI investigation, the Minneapolis agents saw it as “purely

intelligence gathering.” They simply wanted to learn whether AIAI was operating in the

United States and, if so, determine the nature of its activities (such as fund-raising,

logistics, or operations). There was no attempt to build a criminal case in the traditional

sense, nor was any effort given to developing probable cause, the standard that criminal

case agents typically work toward. They were interested in developing probable cause

that specific individuals were agents of a foreign power or the particular communications

were to be used in the furtherance of terrorist activities, the standard used to obtain a

FISA warrant.

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Considering a Criminal Case

The intelligence agent knew of the SARs and knew that al-Barakaat was closely tied into

the Somali network in Minneapolis. Moreover, the intelligence agent knew what the

federal criminal agents investigating the money-laundering claims did not: intelligence

reports tied the al-Barakaat network to AIAI and Usama Bin Ladin. As a result, the

intelligence agent thought that it would be useful to open a criminal case on al-Barakaat.

This was a matter of some controversy, as there was a fairly rigid rule within the FBI and

Department of Justice against mingling intelligence cases and law enforcement cases. In

the jargon of the day, this prohibition was known as “the wall,” and it was the source of

considerable confusion among agents in the field. Working-level agents understood that

headquarters frowned on having simultaneous criminal and intelligence cases, although it

was hard for them to articulate why.

Opening a criminal case to complement the intelligence case would have several

advantages, however, if the agent could get the approvals. First, criminal charges could

be threatened against subjects, providing motivation for them to cooperate in furthering

the intelligence investigations. Equally important, a criminal case would give the

intelligence agent far better tools to investigate al-Barakaat and the suspected AIAI

members in Minneapolis. These tools included grand jury subpoenas to obtain bank

records. Grand jury subpoenas were far preferable to National Security Letters (NSLs),

the method for obtaining documents in intelligence investigations, because the FBI could

obtain subpoenas almost instantly, whereas NSLs took 6 to 12 months to be issued.65

Outside of the New York Field Office, which had its own procedures, NSLs could be

approved only at FBI headquarters and had to be signed by a supervisor.

Additionally, the intelligence agent wanted to brief the Assistant U.S. Attorney (AUSA),

the local federal prosecutor in Minneapolis, on the intelligence investigation. He thought

that it would be useful for the prosecutor to obtain an understanding of the context and

motivation for the criminal case. From past experience the agent believed that the U.S.

Attorney’s Office would not get involved in a criminal spin-off of an intelligence case

unless FBI headquarters approved the transfer. And he also knew from past experience

that because the potential criminal charges evident at that time were relatively minor, the

U.S. Attorney’s Office would not be interested unless the prosecutors were briefed on al-

Barakaat’s terrorist connections.66 As a result, the agent applied for permission to brief

the AUSA on the case. He did not receive this approval for 13 months—many months

after the FBI Director himself took a personal interest in the case.

The FBI Radical Fundamentalist Unit (RFU) at headquarters, responsible for approving

this briefing, initially opposed it. The RFU did not see it as necessary and questioned

whether the evidence was strong enough to justify breaching the wall between criminal

65 According to the intelligence agent doing these types of investigations, this delay no longer exists, and

NSLs can be obtained just as fast as grand jury subpoenas.

66 The most obvious crime was “structuring financial transactions.” The crime consists of breaking apart

cash bank deposits into increments of less than $10,000, so that the bank does not file a form identifying

such depositors to the Department of the Treasury.

Terrorist Financing Staff Monograph

73

and intelligence cases. At the time, FBI headquarters required greater evidence to brief

the U.S. Attorney’s Office on an intelligence case than it did to open an intelligence full

field investigation, and headquarters did not think the evidence regarding the AIAI case

had reached the requisite level. In the Minneapolis intelligence agent’s view,

headquarters viewed Minneapolis as excessively aggressive in pushing the limits of the

wall and may have been more cautious in this case as a result.

According to the Minneapolis intelligence agent, the RFU thought the case was not

strong for a number of reasons. First, the RFU supervisor did not believe AIAI was a

threat to the United States and questioned whether AIAI, with its decentralized command

structure, was really a group at all. Moreover, AIAI had not been designated a foreign

terrorist organization by the Secretary of State. This was a significant point because

without that designation, it was not a crime to give AIAI material support (absent

evidence that the support went to carrying out a specific terrorist attack). As for al-

Barakaat, the RFU thought that the information about connections with al Qaeda was

dated; also, it pointed out, there was no evidence that any of the Somalis who used al-

Barakaat to remit funds did so with the intention of supporting terrorism. The agent

agreed that all of these allegations remained unproven and required further investigation,

but he wanted to brief the AUSA to obtain better tools to find out the truth.

While waiting for the approval to brief the AUSA, the Minneapolis intelligence agent

came to learn of the IRS and U.S. Customs investigation, and in October 1999 he met

with those involved. The FBI opened a criminal investigation in November 1999. The

agents agreed to work together, along with the Immigration and Naturalization Service, to

see whether they could make a criminal case. Multiagency cooperation has become

common in large criminal investigations, as each agency brings its unique skills to bear:

the FBI provides resources and investigative experience, the IRS has a reputation for very

well trained and skilled financial investigators, Customs has the ability to control the

borders, and INS brings to bear its authorities to enforce the immigration laws (critical to

developing witnesses in investigations of this type). Moreover, a joint case makes

possible information sharing, as each agent can search his or her own agency’s database

and communicate the results to the group.

Ultimately, following several meetings by officials in Washington, the Minneapolis FBI

received approval to brief the AUSA in December 2000 on the connections between the

criminal violations and the larger intelligence issues, which it did. It thereafter enjoyed an

excellent relationship with the U.S. Attorney’s Office in Minneapolis.

The strategy in the criminal case was to try to gather evidence and gain an understanding

of where the money was going once al-Barakaat sent it, and thus to determine whether it

was being used to support terrorism. The focus was on the employees and owners of the

three al-Barakaat outlets in Minneapolis. Part of the mission of the criminal case would

be to support the intelligence case. At the time, the investigators were “still trying to find

out what we had.” The criminal FBI agent (the criminal case had to have a separate

investigator because of “wall” issues, although both agents worked in the same

National Commission on Terrorist Attacks Upon the United States

74

intelligence squad) was looking more toward a “nickel-and-dime fraud case.” There did

not seem to be enough evidence to make a pure terrorist-financing case.67

One difficulty was that it was almost impossible to follow the money once it left the

United States. All of the transfers went to the UAE, and there the investigators lost the

trail. To pick it up again, they would have to get records from the bank the money was

being wired to—the Emirates Bank International in Dubai. But U.S. law enforcement

could not simply ask the EBI for the records. Rather, the agents would have to ask the

government of the UAE to ask the EBI for the records. Then, the UAE could turn the

records over to the United States. Obtaining records from a foreign government is a long

and cumbersome process, filled with potential pitfalls. To begin with, there is no

guarantee that the foreign country will even consider the request, particularly in the

absence of a treaty requiring such cooperation. Each country has its own notions about

bank secrecy and many jurisdictions resist opening up their records to another country.

Even if the foreign jurisdiction agrees in principle to the request, it must be persuaded

that the United States has a legitimate need for the records and is not merely undertaking

a fishing expedition. This showing may require the disclosure of sensitive information to

a foreign government, and the United States may not necessarily be able to trust that

government or have confidence in its control over the further dissemination of the

information. Thus, an agent conducting such an investigation has to balance the need for

the records against the possibility of disclosure.

Al-Barakaat was moving significant amounts of money overseas, and to the Minneapolis

criminal case agent, it seemed improbable that the relatively low-skilled Somali

community in Minneapolis, although large, could have amassed so much money through

legitimate wages. In early 2001, al-Barakaat was transferring as much as $1,000,000

through its Minneapolis facilities. The agent believed that some of that money must have

been derived from fraud.

The Other Field Offices Pick Up the Investigation

In the meantime, other FBI field offices were finding similar al-Barakaat activity. By the

summer of 1999, the FBI knew that there were al-Barakaat offices in San Diego,

Washington, D.C., and Minneapolis, and Minneapolis was actively polling other cities to

determine the links. Seattle opened a case in December 1999, and by February 2001 had

developed a source who reported that “apparently”  al-Barakaat fees were used to fund

AIAI.68 The FBI field offices coordinated with each other, and ultimately held

67 The central terrorist financing crime is called “material support,” in violation of 18 U.S.C. 2339B. This

requires the knowing contribution of something of value (it need not be money) to an organization that has

been listed as a Foreign Terrorist Organization by the Secretary of State. It is an extraordinarily broad

statue, in that prosecutors need not trace specific money to a terrorist act.

68 A review of the FBI files in the case revealed a substantial amount of secondary reporting. The most

valuable intelligence is from first hand witnesses: individuals who can report something based on personal

experience. There were few sources who could do this regarding al-Barakaat. Rather, most of what was

collected was information that others had heard. The line between intelligence and rumor mongering can be

quite thin, and great care needed to be taken to evaluate that information for what it was.

Terrorist Financing Staff Monograph

75

multidistrict meetings in April 2000 and May and June 2001. Unlike in other cases,

however, there was very little to coordinate: each al-Barakaat office appeared to be

operating independently, with the EBI account in the UAE serving as the only link

between them. By 9/11, there were FBI investigations in Charlotte, Cincinnati, New

York, Seattle, San Diego, and Washington, D.C.

Al-Barakaat also had attracted the attention of the Financial Crimes Enforcement

Network (FinCEN), the Treasury agency established to review and disseminate

suspicious activity reports submitted by banks and other financial institutions. In

December 1999 (about four months after the FBI was reporting that al-Barakaat had ties

to Bin Ladin and offices in at least three U.S. cities), a FinCEN analyst reviewing

intelligence community cables noted a reference to al-Barakaat along with the

identification of a specific account in the UAE. The analyst recalled that a co-worker the

previous month had noted an anomaly in reviewing al-Barakaat SARs. FinCEN analyzed

the al-Barakaat SARs and, in February 2000, briefed FBI headquarters concerning the

results. By March 2000, FinCEN had prepared a report and link-analysis chart

highlighting the connections between the al-Barakaat entities and the UAE accounts.

Still, no one knew the purpose behind the money transfers, the source of the money, or

the ultimate destination. To get to the source, the agents would have to locate informants

in the community who could tell them; to understand the ultimate destination of the

money, they would need access to the records within the UAE.

The FBI had a number of informants who could tell them about al-Barakaat. The criminal

case agent, in the course of the criminal investigation, had found two confidential sources

who were reporting that al-Barakaat was siphoning money to AIAI. The sources also

indicated that to be an al-Barakaat representative, one also had to be a member of AIAI.

But the criminal case agent’s sources had no direct knowledge of these claims; they were

simply repeating what was purportedly common knowledge within the Somali

community.

In conjunction with members of the intelligence community, the intelligence agent also

worked two sources who could speak out of personal knowledge. These sources were

able to travel and provide intelligence on AIAI and the situation in East Africa. His

sources claimed direct contact with senior al-Barakaat management. Much of the

reporting, however, concerned AIAI in Somalia; there was less on the local AIAI cells

within the United States, or on the relationship of al-Barakaat to either AIAI or Usama

Bin Ladin.

Nevertheless, the statements of these two sources did corroborate information regarding

the relationship between al-Barakaat, al Qaeda, and AIAI. The sources contended that at

the direction of senior management, al-Barakaat funneled a percentage of its profits to

terrorist groups and that UBL had provided venture capital to al-Barakaat founder Ahmed

Jumale to start the company. The agent believed these sources, because they had been

vetted and the information they were providing was consistent with intelligence he had

previously received. Moreover, the intelligence agent believed that relationship of these

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76

sources to al-Barakaat management was such that the sources would have firsthand

knowledge of al-Barakaat’s activities.

The September 11 attacks

After the attacks, “all bets were off.”  The al-Barakaat criminal team—the FBI, U.S.

Customs, and the IRS—which had been working in separate offices received space to

work together. More agents were assigned. Moreover, they contemplated bringing

criminal charges, and considered getting criminal search warrants on the al-Barakaat

businesses. The headquarters of both FBI and Customs, too, started to take a special

interest in the case. FBI headquarters had set up a “financial review group” to sift through

the financial transactions of the 9/11 hijackers. It started to look at the al-Barakaat case,

as did “Operation Green Quest,” a newly formed Treasury task force with essentially the

same mission as the FBI’s group.

Moreover, within the upper levels of the National Security Council (NSC) and State,

attention turned to al-Barakaat, and specifically to the EBI as a facilitator of terrorist

finance. According to State Department cables at the time, the U.S. government had

“strong evidence” that the EBI was used as a facilitator of terrorist financing. An obvious

option would be to designate the bank as a supporter of terrorism and block its assets

from coming into the country, a move that would send a message to the world financial

community. The UAE agreed to act against al-Barakaat and allowed a U.S. law

enforcement team to take a look at the EBI records—something none of the agents in

either the intelligence or the law enforcement investigations had been able to access

previously.69

Designation by the Office of Foreign Asset Control

On September 23, 2001, the President signed Executive Order 13224, which expanded

the list of terrorist organizations subject to freezing and blocking.

Pre-9/11 designation efforts

The mission and authorities of the Office of Foreign Asset Control (OFAC) deserve a

brief discussion here. In implementing sanctions programs aimed at combating global

terrorism, OFAC derives its authority from delegations under the President’s powers

pursuant to the International Emergency Economic Powers Act (IEEPA) and other

Presidential authorities. IEEPA grants the President broad powers to deal with any

unusual and extraordinary threat to the national security, foreign policy, or the economy

of the United States if the President declares a national emergency with respect to such

threat. The source of the threat must be in whole or substantial part outside the United

69 As we note in chapter 3, the UAE had been a source of concern before 9/11 for their largely unregulated

financial system.

Terrorist Financing Staff Monograph

77

States. The President may also designate specific entities or individuals who pose or

contribute to the threat and set forth the standards for identifying more such entities and

individuals. The President delegates to the Executive Branch, generally the Department

of Treasury or State, the task of finding those who meet that criteria and “designating”

them as subject to the Executive order.

President Bill Clinton signed Executive Order 12947 in January 1995, blocking the assets

in the United States of specific terrorists and terrorist groups who threatened to use force

to disrupt the Middle East peace process and prohibiting U.S. persons from engaging in

transactions with these groups. The groups were named as a result of a presidential

judgment that they stood in the way of peace in the Middle East and, because peace in the

Middle East is deemed to be vital to our own national security, posed a national security

threat to the United States. The authority was not limited to those named in the executive

order; those supporting or associated with those named could also be listed by an

administrative designation authorized by the director of OFAC (a “secondary

designation”). Usama Bin Ladin was not named on this 1995 list. However, beginning in

approximately 1995 until the East Africa embassy bombings in the summer of 1998,

OFAC attempted to discover a link between Usama Bin Ladin and those named on the

list. This effort was not successful, both because the links between Usama Bin Ladin and

such groups were tenuous and because OFAC did not have the ability to undertake any

significant classified research or analysis.70 In the late 1990s, there was no thought given

to issuing a new executive order naming Bin Ladin, because of what one participant in

the process described as “sanctions fatigue”  and a general reluctance by Treasury

policymakers to impose additional sanctions.

The NSC had a long and deep interest in trying to provide OFAC with sufficient

resources to conduct classified all-source analysis on terrorist financing. At the direction

of Richard Clarke, the Office of Management and Budget requested, and Congress

appropriated, $6.4 million dollars for a center to conduct such analysis, dubbed the

Foreign Terrorist Asset Tracking Center (FTATC), beginning in fiscal year 2001

(nominally October 2000). By November 2000, Clarke had suggested a two-week pilot

program, which would use CIA facilities to test if the FTATC concept was workable. On

the eve of 9/11, FTATC was little more than a plan on paper and an unspent budget

authorization.

After the East Africa bombings, President Clinton amended E.O. 12947 to name Usama

Bin Ladin and his key aides, thereby prohibiting any U.S. persons from financial dealings

with any of them. But the OFAC’s success in blocking terrorist assets under this order

was limited, for it covers only property or interests in of U.S. persons or within the

United States. Moreover, because it named individuals, not groups, OFAC could not

build on it with secondary designations—a listing by the head of OFAC of individuals

70 This was a significant problem both before and after the September 11 attacks. OFAC line level analysts

were nearly universal in their frustration in not being able to engage in the type of all source analysis that

would be required to understand the financial links involved. One analyst with a background in intelligence

described the process by which OFAC obtained classified documents as 20 years behind the procedure used

by the CIA.

National Commission on Terrorist Attacks Upon the United States

78

supporting the group named in the executive order. In addition, there was little

intelligence on assets to block. These limitations were sources of frustration for the NSC,

which wanted action on the financial front of the government’s war on Bin Ladin. In

retrospect, one OFAC official thought that the reason it was unable to freeze Bin Ladin

assets is because none existed within OFAC’s jurisdiction.

The United Nations Security Council passed UNSCR 1267 on October 15, 1999, calling

for the Taliban to surrender Bin Ladin or face a U.S.-style international freeze of its

assets and transactions. The resolution gave a 30-day period before sanctions took effect,

however, allowing the Taliban and al Qaeda to repatriate funds from banks in the United

Kingdom and Germany to Afghanistan. As a result, these sanctions brought official

international censure but were easily circumvented.

Post-9/11 designation efforts