The Magazine

Follow the Money...

...But don't hold your breath.

Oct 8, 2001, Vol. 7, No. 04 • By JAMES HIGGINS
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GENERALS AREN’T THE ONLY ONES at risk of fighting the last war. Indeed, military leaders today may be less prone to this failing than are members of some other professions, since military leaders are aware of experiences like World War I and Vietnam that remind them in a most painful way of the hazards of driving with both eyes on the rear-view mirror.

Over the last three weeks, we have heard many pronouncements from government officials, right up to the president, about the importance of attacking Osama bin Laden and his al Qaeda organization through their money trail. True enough: Shutting down sham "charities" and terrorist-owned businesses can’t hurt the war effort.

This has led the American media to dust off a mantra from their greatest victory, the fight against the man who until September 11, 2001, was the figure they had most hated in the past half-century, Richard Milhous Nixon. "Follow the money," is the battle cry, echoing down the years from the ramparts of an underground parking garage near Bob Woodward’s apartment. Unfortunately, there is a big problem with following the money to track down the sponsors of the war crimes committed against us: It is not likely to work.

Law enforcement authorities catch spies and terrorists using every sort of technique and in many cases rely on alert investigators to take advantage of unexpected developments. Philippine police got onto Ramzi Yousef, the fiend behind the 1993 World Trade Center bombings, when an inept accomplice using explosive chemicals caused Yousef’s Manila apartment to catch fire. Alger Hiss was done in by his pride at watching the prothonotary warbler. Signals intelligence led to tying Libya to the 1986 terror bombing of a Berlin nightclub. Sometimes old-fashioned gumshoe work does the trick. Authorities in Spain reported in late September that they had thwarted several more terrorist slaughters of civilians just by talking with Belgian police and comparing notes on who had been meeting with whom.

Following the money through bank records has historically been more effective when the mischief was bank fraud, as in the Banco Ambrosiano case, or where the underlying activity itself generates large sums of cash on an ongoing basis, as with some South American drug cartels. The September 11 war crimes, however, may have been the most cost-effective attacks in history. Expenses for the attacks, including pilot school for some of the terrorists, appear to have been in the vicinity of $200,000, with an Arab sponsor of the perpetrators getting change mailed back to him. While there have been some news reports that all the hijackers got their money wired from one U.S. source, the overall sophistication of the attacks suggests that such a source would cover any tracks leading from FedWire to Osama bin Laden.

Remember also that bin Laden is reported to have substantial cash and businesses in various countries and guises, so he may have had an active but non-financial partner. It is entirely possible that one or more terror-sponsoring states may have provided critical logistical or human support that will show up nowhere at all in the money trail. The major costs behind the September 11 operation, training these sleeper agents and planting them in American society, were incurred in places like Afghanistan, Sudan, or wherever else the sponsors of the attacks run their chain of Famous Terrorist Schools. In such places, cash and barter are king, and a U.S. demand for bank records is not the local regime’s greatest worry.

Even if all the money for such an operation were accounted for in the U.S. banking system, this information would be of little help in preventing future terrorist attacks. Actual and proposed U.S. regulations are so sensitive regarding ethnicity, age, and sex that they force law enforcement to swim through an ocean of information to find a financial message in a bottle. The competing demands of the Internal Revenue Service and of the "war on drugs" don’t help matters either. Thus every $10,000 cash transaction must be reported to the federal government, even if it is just a 90-year-old, wheelchair-bound Granny hitting the jackpot on the nickel slots. The proposed, misleadingly named FDIC "Know Your Customer" rule, withdrawn under the weight of citizen protest in 1999 but still apparently being reworked, would require that authorities be alerted of "inconsistent" bank activity by depositors. Aunt Tilly from Tupelo making an especially large withdrawal to buy her niece a confirmation present gets reported in a similar way to someone on the FBI watch list suddenly closing out his account.

Every one of the alleged hijackers and publicly identified suspects is a male Arab Muslim who is young or in early middle age (and, by the way, white). This is a fact, not a myth arising from bigotry. It is also a fact that many of them appear to come from Egypt and Saudi Arabia. Osama bin Laden and his henchmen, not law enforcement agencies, are the ones doing racial profiling here in selecting recruits. Hitler himself was not as rigorous in choosing only accomplices of one ethnic, racial, and religious identity. Until politicians in this and other civilized countries realize that the bin Ladens of the world flunked diversity training, there will be little point in following the money because any evidence of wrongdoing will be buried in irrelevant data collected in the interest of "fairness."

Much attention has, appropriately, been paid to increases in the volume of short sales on certain airlines and reinsurance companies just before September 11 and to some really startling increases in the volume of puts—options to sell at a specified price—on UAL (United Airlines) and AMR (American Airlines). Under normal circumstances such activity would soon have come to the attention of exchanges and regulators, not because they might indicate for-profit terrorism but because they might hint at, horror of horrors, insider trading.

Trading securities on U.S. exchanges is not something done with hawalas and cash. It is all documented, and it is possible to find out whose pockets those profits went into. Such a search will very likely require the cooperation of previously unhelpful governments, many in small island countries, whose competitive advantage in the world economy is effective bank privacy statutes. But in this special case the United States might get cooperation from governments who have heard President Bush say we will not distinguish between terrorist groups and those who harbor them, governments that have no wish to end up like Manuel Noriega or the Grenadian junta. The United States and the Organization for Economic Cooperation and Development in recent years have, unfortunately, sought to punish such money havens for competing on the basis of financial laws. Making it clear that our interest is in hunting terrorists, not destroying local economies, might result in more cooperation.

But keep in mind the technical and psychological sophistication of the September 11 attacks. Whoever planned the attacks apparently knew not only what problems a jet fuel fire would cause the World Trade Center, but also how U.S. airline pilots would react to knife attacks on flight attendants. Such a mind was certainly capable of setting up a false trail by giving a "friendly tip" to, say, a fellow Muslim fundamentalist over a lap dance and beer (the recreation of choice for some of the hijackers) about the money to be made buying puts on certain U.S. carriers because of—wink, wink—a big event coming up. The tippee would wind up with the profits and the entire military and law enforcement apparatus of the United States chasing his scalp. The tipper would walk off to plan the next murder of innocents. And that is only one conceivable scenario.

There is a reason that the world of counterespionage is called the "Wilderness of Mirrors." Welcome to the Wilderness.

James Higgins is a partner in a private equity firm based in New York and is an Adjunct Fellow at the Claremont Institute for the Study of Statesmanship and Political Philosophy.