http://observer.guardian.co.uk/business/story/0,6903,1530075,00.html
Terrorism on the cheap - and with no paper trail Post-bombing calls for a clampdown on money laundering are missing the point, reports Conal Walsh Sunday July 17, 2005 The Observer Gordon Brown, the Chancellor, issued a fresh call last week for tighter banking controls to stem the flow of terrorist finance. But there is not much evidence that the London bombers were in receipt of large funds - or, despite much speculation, that terror groups are laundering money through the western banking system. Many such suggestions were made in the aftermath of 9/11. Such was the supposed financial ingenuity of al-Qaeda that the terrorists were even suspected of making a profit by 'shorting' airline and insurance stocks ahead of the attack. In time, however, that idea was discounted. Similarly, investigations into a handful of suspect bank accounts on both sides of the Atlantic yielded little of note. Of more apparent substance were suspicions that Islamic charities raising money in the Middle East and in the west were actually fronts whose funds were diverted for questionable causes. Several such organisations were shut down. Claims that the terrorists are getting their money from wealthy sympathisers in the Middle East also remain credible, as is the idea that some of it is moved discreetly through 'hawala' brokers operating an informal money transfer system. But intelligence agencies have made no great breakthroughs. It was the obvious sophistication of al-Qaeda, the international recruitment, sheltered training camps and apparently well-organised deployment of terror cells that made investigators believe there must also be a significant money trail. In the past, terror groups such as the Abu Nidal Organisation and the IRA were known to have laundered money through western financial institutions. And Osama bin Laden himself had a large personal fortune, wealthy benefactors and the suspected patronage of several governments. As organised as many Islamic terrorists have been, however, few have required much money to carry out their devastating operations. 'In New York, the terrorists' biggest expense was probably flying lessons,' says Ken Farrow of the City police. In London, he points out, it would have been the military-grade explosive used in all four bombs. Police are examining the bombers' financial transactions, but it seems clear they had no obvious need to move significant amounts of money under cover of phoney bank accounts. Even before 9/11, Britain's 'know-your-customer' requirements were among the most stringent in the world, as were the obligations placed on financial institutions to report any suspicious transactions to the police or the National Criminal Intelligence Services. These made it difficult to launder large amounts of money and were designed to detect terrorist activity as well as drug- running and tax-evasion. But Graham Dillon, a money-laundering expert at accountant KPMG, believes they no longer suffice. 'The old risk indicators no longer work,' says Dillon. 'The crux of the problem is that you can perform this kind of terrorism using nothing more than an individual's salary. It doesn't take a lot of money.' Dillon says that governments, police forces and banks need to formulate new warning signals that could flag up early signs of terrorist activity. This could include reprogramming bank computers so that they notice when several people open accounts simultaneously, as happened before 9/11; and when a person transfers all his savings or assets to a friend or relative, potentially a sign of imminent 'martyrdom'. Dillon also calls for closer monitoring of payments to companies that sell products that could be used to make bombs. 'Banks urgently need governments to pool what they have learnt from the attacks in New York, Madrid and now London, and give us new guidelines,' he says. But the real danger lies within For City firms disrupted by the London bombings, there was a glimmer of good news. On the day of the attack, 'disaster management' computer systems were put to work, trading floors stayed open, markets remained relatively stable and by the end of the day bankers were congratulating themselves on their contingency planning. Even UBS, which evacuated its Liverpool Street office close to one of the blasts, was back in business within hours. It was the first time the Square Mile's emergency systems - beefed up in the wake of 9/11 - had been seriously tested, and was a victory for new technology. Yet financial institutions are arguably less prepared for attacks by hackers and hi-tech fraudsters, who are themselves increasingly sophisticated and organised. Figures from the National Hi-Tech Crime Unit showed that, in 2003, 83 per cent of companies were targeted by hackers using 'worms' or 'trojans' in an attempt to seize control of their systems or cause chaos. New and spreading scams are costing the biggest firms tens of millions of pounds. This culminated last autumn in an audacious attempt by organised criminals to steal £220 million from the London offices of Sumitomo, the Japanese bank, in a case being investigated by the City of London police. The gang appears to have infiltrated Sumitomo's computer system and attempted to transfer the money to bank accounts around the world. Ken Farrow, head of the City police fraud squad, says that Sumitomo is the only incident so far in which an attack by external cyber- criminals has nearly succeeded against a major bank. 'The hackers are trying their best, but firms have invested huge sums in protecting themselves from outsiders,' he says. 'Increasingly, though, the firms are falling victim to insider involvement.' Farrow echoes a warning from the Financial Services Authority that people in organised crime are applying for jobs at banks in order to commit fraud. 'Once you have an infiltrator it's relatively easy,' he says. 'You get him to divert money into accounts you've set up elsewhere.' Acts of identity theft, such as 'phishing', in which online banking customers are persuaded to hand over their log-on details by a bogus email purporting to be from their bank, are also growing in number. Similar details have been stolen from banks' call centres. And credit card and ATM fraud has risen to more than £500m a year. It is not uncommon for terrorist organisations to do business with other forms of organised crime: one theory that police are considering about the London bombers, for example, is that they obtained their high-quality explosive on an eastern European black market. But Farrow says there is 'absolutely no suggestion' that terrorists would be involved in hi-tech, multi-million-pound attacks on City firms. 'Why bother with the effort of hi-tech when you can make all the money you need from drug dealing or credit card fraud?' -------------------------- Want to discuss this topic? Head on over to our discussion list, [EMAIL PROTECTED] -------------------------- Brooks Isoldi, editor [EMAIL PROTECTED] http://www.intellnet.org Post message: [email protected] Subscribe: [EMAIL PROTECTED] Unsubscribe: [EMAIL PROTECTED] *** FAIR USE NOTICE. This message contains copyrighted material whose use has not been specifically authorized by the copyright owner. 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