Staff Report to the Commission

connection to al Qaeda may be involved in drug trafficking, there is no convincing

evidence that al Qaeda plays a major role in it or that it is an important source of

revenue.13 In addition to the lack of affirmative evidence, there are substantial reasons to

believe that al Qaeda has no role in drug trafficking: al Qaeda members are

geographically hemmed in and are unable to travel as the narcotics business demands.

Trafficking would unnecessarily expose al Qaeda operatives to risks of detection or

arrest. Moreover, established traffickers have no reason to involve al Qaeda in their

lucrative businesses; associating with the world’s most hunted men would attract

unwanted attention to their activities and exponentially increase the resources devoted to

catching them. Furthermore, Al Qaeda neither controls territory nor brings needed skills

and therefore has no leverage to break into the sector.

Allegations that al Qaeda has used the trade in conflict diamonds to fund itself similarly

have not been substantiated. Commission staff has evaluated the sources of information

for these various public reports raising the diamond allegations. These include reports of

journalists, the United Nations, and certain nongovernmental organizations investigating

this issue. The FBI conducted an intensive international investigation of the conflict

diamond issue, including interviews of key witnesses with direct knowledge of the

relevant facts, and found no evidence of any substantial al Qaeda involvement; the CIA

has come to the same judgment. Additionally, detained operatives have since reported

that al Qaeda was not involved in legal or illegal trading in diamonds or precious stones

during its Afghan years. We have evaluated the U.S. government investigations in light

of the public reports to the contrary, the relative veracity of the sources of information,

and the best available intelligence on the subject, and see no basis to dispute these

conclusions. There is some evidence that specific al Qaeda operatives may have either

dabbled in trading precious stones at some point, or expressed an interest in doing so, but

that evidence cannot be extrapolated to conclude that al Qaeda has funded itself in that

manner.

13 We are aware of the December 2003 seizure of two tons of hashish from a ship in the Persian Gulf, and

of the initial press reports that three individuals on board had purported al Qaeda links. Both the CIA and

the DEA discount the significance of those links, and neither agency believes that this seizure is evidence

that al Qaeda is financing itself through narcotics trafficking. We have seen no evidence to the contrary.

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Other than support provided by the Taliban in Afghanistan, there is no persuasive

evidence of systematic government financial sponsorship of al Qaeda by any country

either before or after 9/11. While there have been numerous allegations about Saudi

government complicity in al Qaeda, the Commission staff has found no persuasive

evidence that the Saudi government as an institution or as individual senior officials

knowingly support or supported al Qaeda.14

Al Qaeda fund-raising in the United States

The United States is not, and has not been, a substantial source of al Qaeda funding, but

some funds raised in the United States may have made their way to al Qaeda and its

affiliated groups. A murky U.S. network of jihadist supporters has plainly provided funds

to foreign mujahideen with al Qaeda links. Still, there is little hard evidence of substantial

funds from the United States actually going to al Qaeda. A CIA expert on al Qaeda

financing believes that any money coming out of the United States for al Qaeda is

“minuscule.” Domestic law enforcement officials, acknowledging the possibility of

schemes that they have not identified, generally state it is impossible to know how much,

if any, funding al Qaeda receives out of the United States. These officials agree that any

funds al Qaeda raises in the United States amount to much less than is raised by other

terrorist groups, such as Hamas and Hezbollah, and that the United States is not a primary

source of al Qaeda funding.

Finally, contrary to some public reports, we have not seen substantial evidence that al

Qaeda shares a fund-raising infrastructure in the United States with Hamas, Hezbollah, or

Palestinian Islamic Jihad. None of the witnesses we interviewed, including the FBI’s

leading authorities on terrorist financing generally and its expert on Palestinian extremist

fund-raising specifically, reported evidence of this overlap, although supporters of

Palestinian extremist groups travel in the same general circles as suspected al Qaeda

supporters and have some contact with them.15 In fact, there is far more evidence of fundraising

collaboration between Hamas and Hezbollah than between either of these groups

and al Qaeda, according to the FBI official responsible for tracking these groups’

funding.

How did al Qaeda move its money?

14 The Saudi government turned a blind eye to the financing of al Qaeda by prominent religious and

business leaders and organizations, at least before 9/11, and the Saudis did not begin to crack down hard on

al Qaeda financing in the Kingdom until after the May 2003 al Qaeda attacks in Riyadh. See chapter 3,

“Government Efforts Before and After the September 11 Attacks,” and chapter 7 on al Haramain and Saudi

Arabia.

15 In addition, individuals may have made donations both to suspected Hamas front groups and to other

organizations believed to be somehow affiliated with al Qaeda. Such overlap does not establish any

organizational coordination or cooperation, however.

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25

Before 9/11 al Qaeda appears to have relied primarily on hawala16 and couriers to move

substantial amounts of money for its activities in Afghanistan. Charities were also used as

conduits to transfer funds from donors to al Qaeda leaders. At times al Qaeda operatives

and supporters in the West and other banking centers freely used the international

financing system.

Hawala

Al Qaeda moved much of its money by hawala before 9/11. In some ways, al Qaeda had

no choice after its move to Afghanistan in 1996; the banking system there was antiquated

and undependable. Hawala became particularly important after the August 1998 East

Africa bombings increased worldwide scrutiny of the formal financial system. Bin Ladin

turned to an established hawala network operating in Pakistan, in Dubai, and throughout

the Middle East to transfer funds efficiently. Hawalas were attractive to al Qaeda because

they, unlike formal financial institutions, were not subject to potential government

oversight and did not keep detailed records in standard form. Although hawaladars do

keep ledgers, their records are often written in idiosyncratic shorthand and maintained

only briefly. Al Qaeda used about a dozen trusted hawaladars, who almost certainly knew

of the source and purpose of the money. Al Qaeda also used both unwitting hawaladars

and hawaladars who probably strongly suspected that they were dealing with al Qaeda

but were nevertheless willing to deal with anyone.

Financial institutions

Al Qaeda itself probably did not use the formal financial system to store or transfer funds

internally after Bin Ladin moved to Afghanistan. Bin Ladin’s finances were initially in

dire straits; al Qaeda was living hand to mouth and did not have any funds to store.

Additionally, the Afghan banking system was rudimentary at best, and the increased

scrutiny after the East Africa bombings and the UN resolutions against Bin Ladin and the

Taliban made the use of such institutions problematic.

Al Qaeda’s extended network of supporters and operatives did use the formal financial

system before 9/11. Hawaladars associated with al Qaeda (like hawaladars generally)

relied on banks as part of their hawala operations. One bank, for example, had 1,800 to

2,000 branches in Pakistan, making it relatively easy for a hawaladar to use the bank to

move funds.17 In addition to hawaladars, charities such as Wafa Humanitarian

16 A definition of hawala is contained in the case study of the al-Barakaat network. Additionally, a good

discussion of hawala is found in U.S. Department of Treasury, A Report to Congress in Accordance with

Section 359 of the USA PATRIOT Act, November 2002 (online at

www.fincen.gov.hawalarptfinal11222002.pdf).

17 Hawala was frequently combined with other means of moving money. For a single transaction, the

hawaladars sometimes used both hawala and the formal banking system or money remitters; the senders

and receivers of the funds also often used couriers to transfer the funds to and from their respective

hawaladars. Hawala also enabled operatives to access the banking system without having to open an

account.

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Organization had accounts at banks, which served as a means to move money for

terrorists.

Fund-raisers for al Qaeda also used banks to store and move their money. Most banks

probably did not know their institutions were being used to facilitate the flow of funds to

al Qaeda, although some may have. Corrupt individuals on the inside of these banks may

have facilitated the transactions. There is little question that the near-total lack of

regulation and oversight of the financial industry in the UAE and Pakistan before 9/11

allowed these activities to flourish.

Al Qaeda operational cells outside Afghanistan made extensive use of the formal

financial system. As discussed in appendix A, the September 11 hijackers and their coconspirators

had bank accounts and credit cards, made extensive use of ATM cards, and

sent and received international wire and bank-to-bank transfers. Those al Qaeda

operatives and supporters who were relatively anonymous could more easily risk using

the formal financial system than could al Qaeda’s core leadership.

Couriers

Al Qaeda used couriers because they provided a secure way to move funds. Couriers

were typically recruited from within al Qaeda and could maintain a low profile—perhaps

because of their background, language skills, ethnicity, or documentation—and so,

ideally, no outsiders were involved or had knowledge of the transaction. They usually did

not know the exact purpose of the funds. A single courier or several couriers might be

used, depending on the route and the amount of money involved. They picked up money

from a hawaladar, financial facilitator, or donor, and took it to its destination. For

example, al Qaeda reportedly used a Pakistani-based money changer to move $1 million

from the UAE to Pakistan, at which point the money was couriered across the border into

Afghanistan. The 9/11 transaction provides a good example of al Qaeda’s use of couriers.

As discussed in appendix A, the plot leader Khalid Sheikh Mohammad delivered a large

amount of cash, perhaps $120,000, to the plot facilitator Abdul Aziz Ali in Dubai; Ali

then used the cash to wire funds to the hijackers in the United States.

Since 9/11

Since 9/11 the core al Qaeda operatives have relied on cash transactions involving trusted

hawaladars and couriers. The hawala network that existed prior to 9/11 seems to have

been largely destroyed. Several of the main hawaladars who were moving money for al

Qaeda before 9/11 have been detained, and the identities of others have been revealed in

seized records. Al Qaeda may have developed relationships with other hawaladars, and it

most likely uses them to move some of its money. However, major cash transfers

apparently are done by trusted couriers or, for added security, by the main operatives

themselves. Some couriers may be carrying information (although not specific

operational details) as well as cash.

Terrorist Financing Staff Monograph

27

Using couriers has slowed down al Qaeda’s movement of money, as physically

transporting money over large distances necessarily takes much longer than using

electronic means such as wire transfer. In addition, there is evidence that significant

delays in moving money, especially to al Qaeda operatives in far-flung parts of the world,

have been caused by the limited supply of trusted couriers. Moreover, transferring funds

by courier requires planning, coordination, and communication, all of which take time.

Al Qaeda’s use of couriers presents challenges and opportunities for the intelligence and

law enforcement communities. Couriers can be vulnerable to certain forms of

enforcement, however.

How did al Qaeda spend its money?

Before 9/11 al Qaeda’s expenses included funding operations, maintaining its training

and military apparatus, contributing to the Taliban and their high-level officials, and

sporadically contributing to related terrorist organizations. The CIA estimates that prior

to 9/11 it cost al Qaeda about $30 million per year to sustain these activities.

Al Qaeda’s expenses

Once in Afghanistan, Bin Ladin focused on building al Qaeda into a fully operating

organization. Al Qaeda spent money on military training and support, including salaries

for jihadists, training camps, and related expenses. Reportedly there were also

propaganda and proselytizing-related expenses and costs to support al Qaeda outside

Afghanistan.

Before 9/11 al Qaeda was reportedly highly organized, with a committee structure that

included the Finance Committee. Credible evidence indicates that Bin Ladin played a

significant role in planning each operation and was very attentive to financial matters.

Other than Bin Ladin, the person with the most important role in al Qaeda financing was

reportedly Sheikh Qari Sa’id. Sa’id, a trained accountant, had worked with Bin Ladin in

the late 1980s when they fought together in Afghanistan and then for one of Bin Ladin’s

companies in Sudan in the early to mid-1990s. Sa’id was apparently notoriously

tightfisted with al Qaeda’s money.18 Operational leaders may have occasionally bypassed

Sa’id and the Finance Committee and requested funds directly from Bin Ladin. Al Qaeda

members apparently financed themselves for day-to-day expenses and relied on the

central organization only for operational expenses.

Al Qaeda funded a number of terrorist operations, including the 1998 U.S. embassy

bombings in East Africa (which cost approximately $10,000), the 9/11 attacks

(approximately $400,000–500,000), the October 18, 2002, Bali bombings (approximately

18 Sa’id reportedly vetoed a $1500 expense for travel to Saudi Arabia to get visas for the 9/11 attacks until

Bin Ladin overruled him (although there is no reason to believe that Sa’id knew the reason for the travel at

that time).

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28

$20,000), and potential maritime operations against oil tankers in the Strait of Hormuz

(approximately $130,000). The actual operations themselves were relatively cheap,

although these figures do not include such “overhead”  as training at camps, evaluation of

trainees, and recruitment. Although the cyclical nature of fund-raising may have created

periodic cash shortfalls, we are not aware of any evidence indicating that terrorist acts

were interrupted as a result.

Money for the Taliban

Once Bin Ladin revitalized his fund-raising after moving to Afghanistan, he provided

funds to the Taliban in return for safe haven. Al Qaeda probably paid between $10 to 20

million per year to the Taliban. As time passed, it appeared that the Taliban relied on al

Qaeda for an ever-greater share of their needs, such as arms, goods, and vehicles, and

even social projects. In return, the Taliban resisted international pressure to expel Bin

Ladin or turn him over to a third country.

Money to other terrorist groups

Before 9/11 Bin Ladin appears to have used money to create alliances with other Islamic

terrorist organizations. Al Qaeda’s cash contributions helped establish connections with

these groups and encouraged them to share members, contacts, and facilities. It appears

that al Qaeda was not funding an overall jihad program but was selectively providing

start-up funds to new groups or money for specific operations. Generally, however, al

Qaeda was more likely to provide logistical support and cover and to assist with terrorist

operations than to provide money.

Since 9/11

Al Qaeda’s expenditures have decreased significantly since the 9/11 attacks and the

defeat of the Taliban, although it is impossible to determine to what extent. Al Qaeda has

become decentralized and it is unlikely that the Finance Committee still exists. Sa’id

continues to operate, but given the difficulties of communication, it is doubtful that he

exerts much control. The direction and financing of operations are now based more on

personal relationships with operatives than on a management structure.

Al Qaeda no longer pays money to the Taliban (for safe haven or otherwise) and no

longer operates extensive training camps in Afghanistan or elsewhere. It still provides

operatives and their families with modest support. Al Qaeda occasionally provides funds

to other terrorist organizations, especially those in Southeast Asia. Intelligence analysts

estimate that al Qaeda’s operating budget may be only a few million dollars per year,

although such estimates are only tentative.

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We have learned much since 9/11 about how al Qaeda raises, moves, and stores money,

but our understanding is still somewhat speculative. The U.S. intelligence community is

forced to extrapolate from current information to fill in the gaps in our knowledge.

Detainees have confirmed the basic sources of al Qaeda funding and methods of moving

money, and have provided insights into changes in al Qaeda’s financing since 9/11.

Moreover, al Qaeda adapts quickly and effectively, creating new difficulties in

understanding its financial picture. Intelligence challenges remain and are likely to

continue, although the picture is clearer today than ever before. As al Qaeda becomes

more diffuse—or becomes essentially indistinguishable from a larger global jihadist

movement—the very concept of al Qaeda financing may have to be reconsidered. Rather

than the al Qaeda model of a single organization raising money that is then funneled

through a central source, we may find we are contending with an array of loosely

affiliated groups, each raising funds on its own initiative.

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Chapter 3

Government Efforts Before and After the September

11 Attacks

This chapter discusses the U.S. government terrorist financing efforts before September

11, and describes and assesses our current efforts. As in other areas of counterterrorism,

the government has poured vastly more resources and attention to combating terrorist

financing since the attacks, and has made great strides in a difficult area.

Before the September 11 Attacks

Notwithstanding the government’s efforts to choke off Bin Ladin’s finances before 9/11,

on the eve of the September 11 attacks the CIA judged that Bin Ladin’s cash flow was

“steady and secure.”19 Although fund-raising was somewhat cyclical, al Qaeda had

enough money to operate its network of Afghan training camps, support the families of

its members, pay an estimated $10–20 million to the Taliban and its officials, and fund

terrorist operations.20

Domestic intelligence and law enforcement

Before September 11, FBI street agents in a number of field offices gathered intelligence

on a significant number of suspect terrorist-financing organizations. These FBI offices,

despite setbacks and bureaucratic inefficiencies, had been able to gain a basic

understanding of some of the largest and most problematic terrorist-financing

conspiracies that have since been identified. The agents understood that there were

extremist organizations operating within the United States supporting a global Islamic

jihad movement. They did not know the degree to which these extremist groups were

associated with al Qaeda, and it was unclear whether any of these groups were sending

money to al Qaeda. The FBI operated a web of informants, conducted electronic

surveillance, and engaged in other investigative activities. Numerous field offices,

including New York, Chicago, Detroit, San Diego, and Minneapolis, had significant

intelligence investigations into groups that appeared to be raising money for foreign

jihadists or other radical Islamist groups. Many of these groups appeared to the FBI to

have had some connections either to al Qaeda or to Usama Bin Ladin.

The FBI was hampered by an inability to develop an endgame; its agents continued to

gather intelligence with little hope that they would be able to make a criminal case or

otherwise disrupt an operation. Making a case in terrorist financing was certainly as if not

19 Intelligence report, 29 August 2001. Commission staff has seen no evidence that would contradict the

CIA’s assessment.

20 Commission staff, in researching this chapter, conducted a comprehensive review of government

materials on terrorist financing from essentially every law enforcement, intelligence and policy agency

involved in the effort. This review included interviews of current and former government personnel, from

intelligence analysts and street agents, up to and including members of the cabinet.

Terrorist Financing Staff Monograph

31

more difficult than in other similarly complex international financial criminal

investigations. The money inevitably moved overseas—and once that occurred, the

agents were at a dead end. Financial investigations depend on access to financial records.

This usually requires a formal legal request, typically through a previously negotiated

mutual legal assistance treaty (MLAT), or an informal request to a foreign government

security service through the FBI’s legal attaché  (Legat) responsible for the relevant

country. The United States rarely had mutual legal assistance treaties with the countries

holding the most important evidence; and when agents could make an MLAT request, the

process was slow and sometimes took years to get results. In addition, an MLAT request

required the existence of a criminal investigation. Because the vast majority of FBI

terrorist-financing investigations involved intelligence, not crimes, agents could not avail

themselves of even this imperfect vehicle for accessing critical foreign information.

Informal requests were frequently ignored, even when made of U.S. allies in important

cases. Moreover, simply to make a request required that the agents disclose the target and

the nature of the evidence. The risk of potential compromise was great, and most agents