Terror finance trail vanishes in Saudi Arabia

The kingdom has pledged to crack down on funding activities for the likes of al-Qa'ida. So why the secrecy? Paul Cochrane reports
Published: 30 September 2007 The Independent On Sunday

Six years on from the atrocities of 9/11, in which 19 terrorists, 15 of them Saudi nationals, flew jets into the World Trade Center and the Pentagon – with the fourth plane crashing in a field – Saudi Arabia is still a major obstacle in the fight to crack down on terrorist financing.

Saudi Arabia, the Middle East's economic powerhouse and major US ally, only criminalised money laundering and terrorist financing in 2003, after the kingdom itself was the target of terrorist attacks.

It claims it is clamping down on terrorist financing, but just one major report has been carried out into how effectively the kingdom is implementing legislation. This was in 2004 by the OECD's Financial Action Task Force (FATF), a global body overseeing anti-money laundering and counter-terrorist financing initiatives.

Recent information on the kingdom's efforts is almost non-existent, which the US State Department considers a problem as it "impedes the evaluation and design of enhancements to the judicial aspects of its anti-money laundering system".

The FATF said: "We don't have any current information on Saudi Arabia." It recommended getting in touch with the International Monetary Fund and the Middle East/ North Africa FATF, a regional body based in Bahrain.

However, the IMF did not respond to queries and Mena-FATF could not provide any information – not even the central bank's phone number – on the kingdom's progress. Such a lack of detail raises questions about the organisation's claim that money laundering and terrorist financing have fallen by 90 per cent in the Middle East in recent years.

The private sector was also of little help in shedding light on Saudi Arabia's compliance with FATF and UN recommendations. The head of financial crime investigations at a leading Saudi bank said: "Rules within the Kingdom of Saudi Arabia prevent me from discussing what Saudi Arabia or the bank has achieved in relation to anti-money laundering and counter-terrorist financing."

Such a glaring lack of transparency is not unusual. Saudi Arabia is secretive about its internal workings and press freedoms are non-existent. The Saudi media made no mention of the recent exposé by the British press of BAE paying a sweetener to Saudi Prince Bandar bin Sultan.

But the information blackout on terrorist financing is alarming as Saudi Arabia is considered a "moderate" Arab state by the US and UK governments and an ally in the "war on terror".

Moreover, Saudi Arabia's brand of Islam, the ultra-conservative Wahhabism, has been exported globally and is followed by al-Qa'ida and other Sunni fundamentalist groups responsible for terrorist attacks around the world.

Funding for such groups comes from charitable organisations and wealthy individuals in Saudi Arabia and other Gulf states. Exactly how much cash flows through or from Saudi Arabia is difficult to tell due to the country's cash-based society and because no personal income records are kept for tax purposes. Additionally, under the five pillars of Islam, Muslims have a religious obligation – zakat – to donate money to charity, which is often done anonymously.

Such donationscan be, knowingly or unknowingly, used to finance terrorist organisations. In the decade up to 2002, according to a report to the UN Security Council, al- Qa'ida and other Islamist bodies collected between £150m and £250m, mostly from Saudi charities and private donors. This practice is still occurring, with Saudi Arabia linked to funding Sunni jihadists in Iraq.

Stuart Levey, the US Treasury's under-secretary for terrorism and financial intelligence, told the Senate Banking Committee last year that there were concerns over "deep-pocket donors" and the abuse of charities to fund militants. "Is money leaving Saudi Arabia to fund terrorism abroad? Yes," he was quoted as saying. "Undoubtedly, some of that money is going to Iraq. And it's going to South-East Asia and it's going to any other place where there are terrorists."

Several multilateral charities based in Saudi Arabia are under scrutiny by the US government, such as the Muslim World League (MWL), the World Assembly of Muslim Youth (WAMY) for donations to Palestinian group Hamas, and the International Islamic Relief Organization (IIRO), which has been linked to funding for al-Qa'ida, Islamic groups in Chechnya and the Philippines, and Hamas

Saudi Arabia has been directly linked to the funding of Hamas, with Israel issuing indictments in June claiming that millions of shekels were transferred from the Saudi Arabia-based Charity Coalition to operatives in Jerusalem.

However, Hamas is widely viewed in Saudi Arabia and the rest of the Middle East as a legitimate resistance group and political party. This in part explains why, according to the 2004 FATF report, the kingdom's legal definition of terrorist financing "does not conform to international standards as expressed in the UN International Convention on the Suppression of Terrorist Financing".

Nonetheless, Saudi Arabia's unwillingness to curb such funding has been queried by the US government, which believes it is dragging its feet on multilateral charities.

According to the US Senate, assets of formerly suspected Saudi Arabia-based charities were slated to be merged into a new organisation last year, the Saudi National Commission for Relief and Charity Work Abroad, but as of this month, it has still not been established. The US Treasury has urged the commission to include the MWL, WAMY and IIRO under its watch.

Saudi Arabia has also been accused of using current legislation to further its own political ends. In February, 10 Saudi individuals arrested for terrorist financing were alleged to be political dissidents by human rights groups.