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Dr. Rachel Ehrenfeld, American Center for Democracy
Terror Financing: a Threat to South-East Asia


"The terrorists aren't waiting for us to get our enforcement act together. While we struggle over how to restructure our agencies, they're squirreling away money to fund their attacks. Shutting down terrorism financing must be an urgent and high priority," warned Senator Chuck Grassley in March 2004 (3). However, not everybody shared his logic. Both the 9/11 Commission and the Treasury Department have, according to Treasury Under Secretary Stuart A. Levey, "recognized that the U.S. Government's campaign against terrorist financing must be viewed as but one of many fronts in the global war on terror, rather than an as an end in itself" (4). However, Levey admitted that "our counter-terrorism financing efforts are a vital part of the overall war. Terrorists require money to train, travel, communicate, indoctrinate, procure weapons, carry out attacks, and conceal themselves. Starving them of money debilitates every aspect of their operations and, ultimately, their ability to survive" (5).

Testifying before the Senate Committee on Banking, Housing, and Urban Affairs on July 13, Under Secretary Levey states that:

"Still, we have a long way to go in the battle against terrorist financing in the…both in terms of robust implementation of" the anti-terror financing laws, "and in responding to specific threats and circumstances."

He went on to say that the "Adoption of legislation and regulations is meaningless without strong and effective implementation." As an example he mentioned that "some countries, eager to curry favor with their neighbors or the international community, may believe that adopting an anti-money laundering and counter-terrorist financing law will keep observers at bay. Such half-steps will neither fool nor satisfy the United States and the international community." He promised that the United Sates "will continue to press for effective implementation, including investigations, prosecutions, designations, and other demonstrable actions," to stop terror financing.

However, among the many difficulties we are facing is the fact that terrorist groups like to exploit charities. They do so because:

ArrowThe "legitimate" activities of charities, such as operating schools, religious institutions, and hospitals, can - if abused - create fertile recruitment grounds, allowing terrorists to generate support for their causes and to propagate extremist ideologies.

Arrow"Charities attract large numbers of unwitting donors along with the witting." Thus increasing the amount of money available to terrorists.

ArrowTo the extent that charities provide genuine relief, which nearly all of them do, they benefit from public support and an attendant disinclination by many governments to take enforcement action against them.

ArrowCharitable funds are meant to move in one direction only; accordingly, large purported charitable transfers can move without a corresponding return of value and without arousing suspicion.

International charities naturally focus their relief efforts on areas of conflict, also prime locations for terrorist networks. Such charities provide excellent cover for the movement of personnel and even military supplies to and from high-risk areas."

Four years after September 11, the United States has designated more than 400 entities as terrorists or supporters of designated terrorists and frozen only $147 million dollars in terrorist-related assets, $37 million dollars of which has been frozen in the United States. In addition, the U.S. Government has identified and frozen over $4.5 million dollars in al-Qaeda-related funds, while $72 million dollars of al-Qaeda's money has been frozen by other governments worldwide. Eighty countries have also introduced new terrorism-related legislation, and 94 have established Financial Intelligence Units. Altogether, more than 170 countries and jurisdictions have issued freezing orders, however, many frozen accounts have since been "defrosted" and the money returned to the account holders (6).

The mechanisms of terror financing include "donations to charities, use of shell companies and otherwise legitimate businesses, and narcotics trafficking." In addition to wire transfers through commercial banks, money is moved via trade mispricing, credit and debit cards, informal value and underground banking systems, and bulk cash smuggling, including through cash couriers and containers, which by nature, are difficult to identify and stop.

"The emergence of trust-based money transfer systems such as Hawallah for cross-border funds transfers creates even more enforcement difficulties, as those networks lie outside the regulatory system covering financial markets and clearing systems. The worldwide growth of bearer instruments in the capital and commodities markets also makes tracing the ownership of the value embodied in those instruments extremely difficult. In addition, the use of portable commodities such as diamonds and gold, rather than direct money transfers, requires that attention be paid to merchant markets outside the financial community. Techniques such as over- or under-invoicing, which convert a legitimate sales transaction into a device for illicitly transferring value, compound the challenges" (7).

A major source of terror financing for terrorist organizations and terrorists states alike, is the illegal trade in illegal drugs. North Korea, a dictatorship and a member of the "axis of evil," commenced heroin production and trafficking on a large scale in the early 1990s after the collapse of its major sponsors, the Soviet Union and the Communist Bloc.

It was only after the 9/11 attacks on the U.S., however, that information about North Korea's "heroin for nukes" business became public. In August 1992, according to U.S. intelligence sources, Kim Jong-il, ordered the Central Party's 39th Office to oversee opium cultivation and heroin production and traffic with which to raise money for the North Korea's empty coffers. Since then, those who sell heroin for more than $1 million dollars are awarded with the title "Hero of White Bellflower."

Since the late 1990's North Korea is reported to have produced at least 50 tons of heroin annually, which it smuggles, along with counterfeit currency, through its diplomatic missions around the world. In December of 2004, the State Department's International Narcotics Control Strategy Report states that the "North Korean Government was involved in the global drugs trade as a matter of policy…State trading of narcotics is a conspiracy between officials at the highest levels of the ruling party/government and their subordinates to cultivate, manufacture, and/or traffic narcotics with impunity through the use of, but not limited to, state-owned assets."

Moreover, "Law enforcement cases over the years have not only clearly established that North Korean diplomats, military officers, and other party/government officials have been involved in the smuggling of narcotics, but also that state-owned assets, particularly ships, have been used to facilitate and support international drug-trafficking ventures." Over the last 20 years, there have been more than 50 well-documented incidents where North Korean diplomats have been caught trafficking in illegal drugs. The late incident in December 2004, involved two North Korean diplomats, who were stationed in Bulgaria, were arrested by Turkish authorities for smuggling $7 million dollars worth of narcotics pills into Turkey.

While North Korea's revenues from legitimate exports was estimated by South Korea's central bank to be approximately $650 million dollars for 2001, U.S. military officials in South Korea estimate that its profits from the illegal drug trade are between $1-2 billion dollars per year.

On April 20, 2003 in the middle of the international crisis regarding North Korea's development of nuclear weapons, and as Secretary of Defense Rumsfeld called for "regime change" in Pyongyang, Australian Special Forces raided a North Korean ship off New South Wales, containing "110 pounds of heroin, worth an estimated $48 million dollars." North Korea has also forged alliances with international crime syndicates, such as the Chinese Triads, the Japanese Yakuza, and the Russian Mafia, to distribute both the heroin and the counterfeit currency it produces - activity that is said to generate at least $100 million dollars in hard currency per year.

To generate more money, enabling North Korea to advance its nuclear weapons program, it also engages in illegal arms sales, especially missiles and related technology. Secret shipments of missiles are sent from North Korea to Iran, Syria, Egypt, Yemen, Libya, Pakistan and Vietnam - generating at least $560 million dollars in the year 2001 alone.

And, of course, North Korean is not alone in the selling of illegal drugs to fund its illegal activities. The Taliban and al-Qaeda in Afghanistan, the Abu-Sayyaf Organization in the Philippines, and almost every and all terrorist organization, including the insurgents in Iraq, are using illegal drugs to fund their operations. The U.S. failure to identify and to take action against narco-terrorism - and its flooding of the U.S. and the rest of the world with illicit drugs by terrorist organizations and states - is particularly troubling since similar failures in the past are precisely what has helped the terrorists to operate so successfully, independently, and globally today.

Finally, the wide spread all Islamist terror organizations today is the result of at least $90 billions spent by the Saudis to spread Wahhabism and train armies of ready Jihadists. The Saudis are the ones that with their money and oil-power lead the efforts to destroy the West, and first and foremost Israel. Please do everything in your power to stop that from happening. Remember, Jerusalem is the world symbol.



NOTES:

1. "North Korea: Another Outcropping of Terrorism," Forbes.com, September 18, 2001.
2. "Special Warfare," Foreign Military Studies Office, The Professional Bulletin of the John F. Kennedy Special Warfare Center and School, PB 80-94-4, October 1994, Vol. 7, No. 4.
3. Ward, Andrew, "North Korea: US Accused N. Korea of links to Narcotics Trade," Financial Times, December 3, 2002.
4. Jay Solomon and Jason Dean, "Heroin Busts Point to Source of Funds for North Koreans," The Wall Street Journal, Page 1, April 23, 2003.
5. Barbie Dutter, "North Korean heroin ship is seized by SAS," The Daily Telegraph, April 21, 2003, http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2003/04/21/whaul21.xml; Also, "North Korean sailors caught smuggling heroin." Geostrategy-Direct, www.geostrategy-direct.com, May 6, 2003
6. Ward, Andrew, ibid.
7. Lintner, Bertil and Steclow Steve, "Trail of Paper Illuminates North Korea's Arms Trading," The Wall Street Journal, February 10, 2003

 
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