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U.S. Response III: Despite Success, New Law Needs Improvement, Officials Say By Greg Seigle Tracking “clean money” bound for illicit organizations must be strengthened to combat the widespread “reverse money laundering” techniques used by terrorist groups such as al-Qaeda, Assistant Attorney General Michael Chertoff told the Senate Banking, Housing and Urban Affairs Committee. “We need to change the way we think about money laundering,” Chertoff testified, noting that the Justice Department wants to restrict the interstate transfer of more than $10,000 to so it can track — and, it is hoped, crack down on — organizations and individuals who might try to fund terrorists. “Since 1986, when the money laundering laws were first enacted, law enforcement has looked backward to determine the source of the money and how it has been concealed,” Chertoff said. “In this age of international terrorism, if we are to protect our citizens and prevent future terrorists acts, we must be forward-looking,” he continued. “What are the funds going to be used for and why are steps being taken to conceal the identity of the originator or the source of the funds?” The United States has recently frozen $80 million in suspected terrorist funds worldwide, Representative John LaFalce (D-N.Y.) told the committee. Of that, between $15 million and $20 million was prevented from reaching al-Qaeda’s terrorist network when the United States shut down an al-Barakaat hawala in Somalia last year, according to U.S. Treasury Secretary Kenneth Dam. Hawalas are informal organizations that transfer money throughout the world. “We remain focused on finishing off al-Qaeda,” Dam said. “We believe that al-Qaeda and other terrorist organizations are suffering as a result of our actions. We also believe that potential donors are being more cautious about giving money to organizations where they fear that the money might wind up in the hands of terrorists.” Committee Chairman Paul Sarbanes (R-Md.) indicated the panel supports legislative moves that further hinder terrorist funding. The Patriot Act, which in addition to squeezing financial transfers of suspected criminals outlaws the “attempted wrecking of a mass transportation vehicle,” a provision that calls for the death penalty, has only been used once thus far, without going to trial yet. Richard Colvin Reid, accused of trying to use a homemade shoe bomb to blow up an American Airlines flight over the Atlantic Ocean, was recently indicted by a Boston grand jury on this and eight other counts, including attempted murder and another untested provision in another law that covers “attempted use of weapons of mass destruction” (see GSN, Jan. 17). While the new law has been used to freeze the assets of nine New Jersey and Florida bank accounts apparently associated with the Sept. 11 strikes, it has only been used once to successfully seize overseas assets of an indicted suspect. U.S. authorities recently retrieved $1.7 million from the Belize bank account of James R. Gibson, a lawyer accused of defrauding Illinois tort victims by siphoning funds from their settlement agreements. While the Gibson case is unrelated to terrorism, it highlights how crucial it is for U.S. authorities to have financial laws on the books that other countries might recognize and uphold, as Belize did, Chertoff said. Legal investigators also want Congress to amend the Patriot Act so authorities can track domestic bank accounts believed to support terrorists groups, particularly those of hawalas, Chertoff said. By making the interstate transfer of $10,000 or more illegal without cause, investigators might be able to better track or crack down on the U.S. finances of terrorists, he added. In order to pinch the finances of terrorists who aim to organize and conduct mass casualty attacks, the Justice Department wants Congress to give it power to more closely scrutinize hawalas and other groups making large transactions with apparently “clean money,” Chertoff testified. “In terrorism cases it is now clear that terrorists engage in so-called ‘reverse’ money laundering in which they transport large quantities of cash that is not derived from any illegal source but which is intended to be used to finance a terrorist act,” Chertoff said. “Not only do we need the legislation addressing the use of ‘clean money’ intended to be used for the promotion of terrorism and other serious crime, but we need new tools to deal with the concurrent and dependent transactions involving ‘clean money’ washed through hawalas to support criminal activity.”
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