Staff Report to the Commission

February 2004. Also in February 2004, FATF issued its report indicating that Saudi

Arabia was in compliance or near-compliance with international standards for almost

every indicator of effective instruments to combat money laundering and terrorist

financing.

On February 29, 2004, the Saudi government announced that it had approved the creation

of the Saudi National Commission for Relief and Charity Work Abroad to take over all

aspects of overseas aid operations and assume responsibility for the distribution of

charitable donations from Saudi Arabia. Although the U.S. government had no details

about this commission as of the end of March 2004, one former U.S. government

counter-terrorist-financing official said that such an entity could, in theory, replace

charities such as al Haramain by subsuming all of HIF’s activities into its own. Al

Haramain was said to be in the process of restructuring its administration and revising its

financial regulations. Al Haramain was planning to refocus its charity work on Saudi

Arabia, according to a statement by its new director, Sheikh Dabbas al Dabbas.

Continuing the pressure on al Haramain, the U.S. and Saudi governments jointly

designated five additional branches of al Haramain (Afghanistan, Albania, Bangladesh,

Ethiopia, and the Netherlands) on June 2, 2004. The United States also designated former

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Executive Director Aqil. These names were subsequently submitted to the United Nations

for an international freeze on their assets.

Lessons Learned

The U.S. government’s efforts to address issues raised by al Haramain before and after

9/11 teach some critical lessons. First, to cause the Saudi government to move against

terrorist financiers, the U.S. government has to acquire and release to the Saudis specific

intelligence that will enable them to take the necessary action. Thus, the U.S. government

was able to get the Saudis to take concrete actions against al Haramain, and charities

generally, after it released the nonpaper containing specific intelligence about al

Haramain and its employees to the Saudis in January 2003. Previously, the U.S.

government appears, for the most part, to have tried to encourage the Saudis to act on the

basis of little more than U.S. suspicions or assurances that the United States had

intelligence it could not release.

Second, counter-terrorist-financing efforts are an essential part of the overall set of

counterterrorist activities and must be fully integrated into the broader U.S.

counterterrorism strategy toward Saudi Arabia. Without such integration, those working

on terrorist financing might not be aware of other bilateral counterterrorism issues. The

U.S. government might then have the appearance of sending mixed or inconsistent

messages on counterterrorism to the Saudis. Once the broader Saudi strategy was

approved, the U.S. government was able to develop a consistent message across

counterterrorism issues. It could push the Saudis more forcefully on terrorist-financing

issues, including al Haramain, by, for example, delivering the nonpaper in January 2003.

In direct response to the nonpaper, the Saudi government announced its decision to close

ten branch offices of al Haramain.

Third, U.S. counter-terrorist-financing strategy must be presented to the Saudi

government by a high-level U.S. government representative. The perils of not speaking

through a single high-level interlocutor were clear in the case of the reopenings of the

Bosnian and Somali offices of al Haramain, as discussed above, when, as one key

terrorist-financing official believed, the Saudis “gamed” us. It was not until the

appointment of a senior White House official that the U.S engagement of the Saudi

government on terrorist financing yielded its most concrete results. A PCC participant

said the Saudis did not take terrorist financing seriously until Townsend was appointed.

She has been able to apply consistent pressure, over a period of time, with the full

backing of the White House.

Fourth, the U.S. government needs a distinct interagency coordinating committee focused

on terrorist financing to ensure that terrorist-financing issues are not lost in the overall

counterterrorism effort. The PCC proved to be generally effective in focusing the U.S.

government on terrorist financing and retaining the momentum of the immediate post-

9/11 period. It enabled different branches of the U.S. government to vet the information

on al Haramain and assess the options. It ensured that al Haramain–related issues were

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not lost in the larger counterterrorism picture but were assessed periodically with the full

attention of the interagency representatives.

At the same time, the coordinating committee must be fully integrated with the overall

counterterrorism effort so that terrorist financing can be made part of the high-level

diplomacy necessary to win the cooperation of key allies like Saudi Arabia. One way to

achieve this goal is give the NSC the lead on the PCC, as is currently the case. The NSC

is better able than any individual agency to integrate terrorist financing into

counterterrorism through its leadership of the Counterterrorism Security Group; the NSC

is better able to see how the different terrorist-financing tools fit together; the NSC is

better able to task agencies and force agencies to reallocate resources; NSC leadership is

more efficient because it has the authority to resolve more issues rather than forcing them

up to the DC level; the NSC has the best access to information, especially regarding

covert action; and the NSC is not operational and is therefore more neutral. Throughout

the interagency process on al Haramain, NSC leadership of the PCC might have been

useful to expedite the process and clarify the U.S. position.

The concept of a “terrorist-financing czar”  has been proposed at times; while perhaps it

could have been useful before 9/11, it would serve little purpose today and could detract

from the U.S. government’s current efforts and recent successes. Terrorist financing is

already on the agenda of senior officials, so there is no need for a czar to draw attention

to the issue. Each of the relevant agencies has established new sections on terrorist

financing or augmented existing groups to work on terrorist-financing issues. Further

elevating the issue might overemphasize it or, at the very least, detract from current

progress in the larger counterterrorism fight. Action against terrorist financing is only one

tool in the fight against terrorism and must be integrated into counterterrorism policy and

operations. A czar would undermine this goal. Such a position would also dilute the

power of a unified message and the benefits of a single messenger on all terrorism-related

issues that the leadership of the NSC seeks to provide.

Challenges Ahead

Much remains to be done to address terrorist-financing issues in Saudi Arabia and the

activities of Saudi charities, such as al Haramain, around the globe. Saudi Arabia has

worked hard to institute an improved legal and regulatory regime. It remains to be seen if

the new laws and regulations will be fully implemented and enforced, and if further

necessary legal and regulatory changes will be made. The Saudis still have not

established the National Commission as they promised in February 2004 and have not

demonstrated that they are willing and able to serve as the conduit for all external Saudi

donations in lieu of Saudi charities.141 Moreover, it is imperative that the Saudi

government develop its capabilities to monitor cash flows; otherwise, it will not be able

to assess a given entity’s or individual’s compliance with the new laws and regulations.

The Saudi government’s acceptance of training from the United States and other

141 The impact of the Saudi government’s June 2004 announcement of the formation of such a commission

remains to be seen.

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countries would demonstrate its willingness to assure that gains in expertise and

capabilities are ongoing.

It remains to be seen whether the Saudi government will be willing to make politically

and religiously difficult decisions. The action it has taken in 2004 against several al

Haramain branch offices is unquestionably significant. Although the government has

frozen the assets of branches of al Haramain, it has not used its leverage with the head

office to ensure that no funds flow to the designated branches.142 Similarly, the Saudis

have yet to hold prominent individuals—like the former head of al Haramain, for

instance—accountable for terrorist financing. Such actions would send a signal both to

potential targets and to the Saudi public that the Saudi government is serious about

stemming the flow of funds to terrorists and their supporters.

We are optimistic that the U.S. and Saudi governments are on the right track in their

mutual efforts on terrorist financing. Neither country can afford to lessen the intensity of

its current approach. The Saudi government has come far in recognizing the extent of its

terrorist-financing problem. We cannot underplay, however, the reluctance of the Saudi

government to make the necessary changes between 9/11 and late spring of 2003. It

remains to be seen whether it has truly internalized its responsibility for the problem. A

critical part of the U.S. strategy to combat terrorist financing will be monitoring,

encouraging, and nurturing Saudi cooperation while simultaneously recognizing that

terrorist financing is only one of a number of crucial issues on which the U.S. and Saudi

governments need each other.

142 Again, the impact of the Saudi government’s June 2004 announcement dissolving al Haramain remains

to be seen.

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Appendix A: The Financing of the 9/11 Plot

This appendix provides additional detail on the funding of the 9/11 plot itself and how the

Commission staff investigated the plot financing.

Staff Investigation of the 9/11 Plot

The staff’s investigation of the 9/11 plot built on the extensive investigations conducted

by the U.S. government, particularly the FBI. The government thoroughly examined the

plot’s financial transactions, and the Commission staff had neither the need nor the

resources to duplicate that work. Rather, the staff independently assessed the earlier

investigation. We had access to the actual evidence of the plotters’ financial transactions,

including U.S. and foreign bank account statements, fund transfer records, and other

financial records. We also had access to the FBI’s extensive work product, including

analyses, financial spreadsheets and timelines, and relevant summaries of interviews with

witnesses, such as bank tellers, money exchange operators and others with knowledge of

the conspirators’ financial dealings. We were briefed by and formally interviewed the

FBI agents who led the plot-financing investigation, sometimes more than once.

In addition to the FBI, we met with key people from other agencies, including the CIA

and the Financial Crimes Enforcement Network (FinCEN), who had relevant knowledge

about the plot financing. Commission staff also interviewed law enforcement officials

from other countries who had investigated the 9/11 plot, reviewed investigative materials

from other countries, and interviewed relevant private-sector witnesses. Finally, the staff

regularly received relevant reports on the interrogations of the plot participants now in

custody.

Financing of the Plot

To plan and conduct their attack, the 9/11 plotters spent somewhere between $400,000

and $500,000, the vast majority of which was provided by al Qaeda. Although the origin

of the funds remains unknown, extensive investigation has revealed quite a bit about the

financial transactions that supported the 9/11 plot. The hijackers and their financial

facilitators used the anonymity provided by the huge international and domestic financial

system to move and store their money through a series of unremarkable transactions. The

existing mechanisms to prevent abuse of the financial system did not fail. They were

never designed to detect or disrupt transactions of the type that financed 9/11.

Financing of the hijackers before they arrived in the United

States

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Al Qaeda absorbed costs related to the plot before the hijackers arrived in the United

States, although our knowledge of the funding during this period remains somewhat

murky. According to plot leader Khalid Sheikh Muhammad (KSM), the Hamburg cell

members (Muhamad Atta, Marwan al Shehhi, Ziad Jarrah, and Ramzi Binalshibh) each

received $5,000 to pay for their return from Afghanistan to Germany in late 1999 or early

2000, after they had been selected to join the plot, and the three Hamburg pilots also

received additional funds for travel from Germany to the United States. Once the nonpilot

muscle hijackers received their training, each received $2,000 to travel to Saudi Arabia to

obtain new passports and visas, and ultimately $10,000 to facilitate travel to the United

States, according to KSM.143

We have found no evidence that the Hamburg cell members received funds from al

Qaeda earlier than late 1999. Before then, they appear to have supported themselves. For

example, Shehhi was being paid by the UAE military, which was sponsoring his studies

in Germany. He continued to receive a salary through December 23, 2000. The funds

were deposited into his bank account in the United Arab Emirates and then wired by his

brother, who held power of attorney over the account, to his account at Dresdner Bank in

Germany (although there is no evidence that al-Shehhi’s brother knew about or supported

the plot).144 Binalshibh was employed intermittently in Germany until November 1999.

Jarrah apparently relied on his family for support. Indeed, Binalshibh said that Jarrah

always seemed to have plenty of money in Germany because his parents gave it to him.

Notwithstanding persistent press reports to the contrary, there is no evidence that the

Spanish al Qaeda cell, led by Barkat Yarkas and including al Qaeda European financier

Mohammed Galeb Kalaje Zouaydi, provided any funding to support 9/11 or the Hamburg

plotters. Zouaydi may have provided funds to Mamoun Darkazanli, who knew the

Hamburg plotters as a result of being a member of the Hamburg Muslim community, but

there is no evidence that he provided money to the plot participants or that any of his

funds were used to support the plot.

Mounir Motassadeq, the Hamburg friend of the hijackers, held power of attorney over

Shehhi’s Dresdner Bank account, from November 24, 1999, until at least January 2001.

Motassadeq told the German investigators that he held the power of attorney to handle

routine payments—for rent, tuition, and the like—for Shehhi when he traveled to his

homeland. On one occasion he transferred DM 5,000 from Shehhi’s account to

Binalshibh’s account while they were both out of town. Motassadeq’s role in managing

Shehhi’s account was part of the conduct that led to his conviction in Germany for

complicity in 9/11, a conviction that was subsequently reversed.

Al Qaeda also paid for the training camps at which the 9/11 hijackers were selected and

trained. We have not considered this expense as part of the plot costs, because the camps

143 Another person, who operated a safehouse in Pakistan through which the hijackers transited,

independently recalled that an al Qaeda courier provided at least one hijacker with $10,000 at KSM’s

direction.

144 Al-Shehhi’s last payment, received in December 2000, does not appear to have been moved to his

account in Germany.

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existed independently of the plot. The marginal cost of training the hijackers is a plot

cost, but any estimate of it would be little more than a guess.

Financing of hijackers in the United States

The best available evidence indicates that approximately $300,000 was deposited into the

hijackers’ bank accounts in the United States by a variety of means. Just prior to the

flights, the hijackers returned about $26,000 to one of their al Qaeda facilitators and

attempted to return another $10,000, which was intercepted by the FBI after 9/11. Their

primary expenses consisted of tuition for flight training, living expenses (room, board and

meals, vehicles, insurance, etc.), and travel (for casing flights, meetings, and the

September 11 flights themselves). The FBI believes that the funds in the bank accounts

held by the hijackers were sufficient to cover their expenses.145 The FBI, therefore,

believes it has identified all sources of funding. Our investigation has revealed nothing to

suggest the contrary, although it is possible that the $300,000 estimate omits some cash

that the hijackers brought into the United States and spent without depositing into a bank

account or otherwise creating a record.146

Al Qaeda funded the hijackers in the United States by three primary and unexceptional

means: (1) wire or bank-to-bank transfers from overseas to the United States, (2) the

physical transportation of cash or traveler’s checks into the United States, and (3) the use

of debit or credit cards to access funds held in foreign financial institutions. Once here,

all the hijackers used the U.S. banking system to store their funds and facilitate their

transactions.

The hijackers received assistance in financing their activities from two facilitators based

in the United Arab Emirates: Ali Abdul Aziz Ali, a.k.a. Ammar al Baluchi (Ali), and

Mustafa al Hawsawi. To a lesser extent, Binalshibh helped fund the plot from Germany.

145 FBI Assistant Director, Counterterrorism Division, John S. Pistole, stated during a congressional hearing

last fall that “the 9/11 hijackers utilized slightly over $300,000 through formal banking channels to

facilitate their time in the U.S. We assess they used another $200-$300,000 in cash to pay for living

expenses . . .” Senate Committee on Banking, Housing, and Urban Affairs, September 25, 2003, FDCH

Political Transcripts at page 5. His statement concerning additional cash was apparently made in error. The

FBI personnel most familiar with the 9-11 investigation have uniformly disagreed with it, and the FBI has

never conducted any financial analysis that supports it. Although some FBI personnel involved in the early

days of the investigation after 9/11 believed the hijackers had substantially more cash than that which was

deposited in their accounts, the FBI view after more thorough investigation is to the contrary.

146 We will never know the exact amount of funds the hijackers deposited into their accounts, as they made

transactions which made it difficult to trace the money. For example, at times they made substantial cash

withdrawals, followed by substantial cash deposits. It is impossible to tell if the deposit reflected new funds

or merely the return of funds previously withdrawn but not spent. Nor is a complete analysis of their

expenditures possible. They conducted many transactions in cash. Although the FBI has obtained evidence

of many these transactions, there surely were many others of which no record exists. Additionally, gaps

remain in our understanding of what exactly the hijackers did in U.S., so it is possible that they spent funds

on activities of which we have no knowledge. Because the hijackers’ activities and expenses are not fully

known, we cannot say with certainty that every dollar has been accounted for. We believe, however, that

the identified funding was sufficient to cover their known expenses and the other expenses they surely

incurred in connection with their known activities.

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Wire transfers

Upon their arrival in the United States, the hijackers received a total of approximately

$130,000 from overseas facilitators via wire or bank-to-bank transfers. Most of the

transfers originated from the Persian Gulf financial center of Dubai, UAE, and were sent

by plot facilitator Ali. Ali is the nephew of KSM, the plot’s leader, and his sister is

married to convicted terrorist Ramzi Yousef. He lived in the UAE for several years

before the September 11 attacks, working for a computer wholesaler in a free trade zone

in Dubai. According to Ali, KSM gave him the assignment and provided him with some

of the necessary funds at a meeting in Pakistan in early 2000. KSM provided the bulk of

the money later in 2000 via a courier.147 Although Ali had two bank accounts in the UAE,

he kept most of the funds for the hijackers in a laundry bag at home.148

Ali transferred a total of $119,500 to the hijackers in the United States in six transactions

between April 16, 2000, and September 17, 2000. Nawaf al Hazmi and Khalid al

Mihdhar, the first hijackers to arrive, received the first wire transfer. On April 16, 2000,

Ali, using the name “Mr. Ali,” wired $5,000 from the Wall Street Exchange Centre in

Dubai to an account at the Union Bank of California. The funds flowed through a

correspondent account at the Royal Bank of Canada. Ali brought the $5,000 to the

Exchange Center in cash. The Wall Street Exchange Center required identification, and it

made a copy of Ali’s work ID, along with his cell phone number and work address—all

of which helped the FBI identify him and his subsequent aliases after 9/11. Ali wired the

money to the account of a San Diego resident whom Hazmi met at a mosque and had

solicited to receive the transaction on his behalf.149

Ali wire transferred a total of $114,500 to the plot leaders Shehhi and Atta after their

arrival in the United States. Ali did not return to the Wall Street Exchange Centre.

Instead, using a variety of aliases, he sent the money from the UAE Exchange Centre in

Dubai, where no identification was required. On June 29, 2000, Ali, using an alias, sent a

$5,000 wire transfer to a Western Union facility in New York where Shehhi picked it up.

Over the next several months, Ali sent four bank-to-bank transfers directly to a checking

account jointly held by Shehhi and Atta at SunTrust Bank in Florida: $10,000 on July 18,

$9,500 on August 5, $20,000 on August 29, and $70,000 on September 17. On three of

these occasions he used an alias; once he went by “Mr. Ali.” In each case, Ali brought

cash in UAE dirhams, which were then changed into dollars; the transaction receipts

reflect the conversion. All of the bank-to-bank transactions flowed through the UAE

Exchange’s correspondent account at Citibank. Although Ali made the last five

147 Ali also said KSM gave him money at various other face to face meetings and also wired him money.

He used these funds both to support the hijackers and to buy things for KSM. He also occasionally fronted