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  Joumaa and his network of drug traffickers and launderers would then use the US correspondent accounts to wire suspicious amounts of money to used-car dealerships in the United States. The recipients, often known drug dealers, purchased hundreds of used cars from approximately twenty US dealers and transported them to West Africa or other parts of the world. The proceeds from the sale of those cars were then transmitted back to Lebanon for Joumaa and Hezbollah to use. So the drug money was laundered through used-car sales, and the used cars themselves became literal money-laundering vehicles.

  Joumaa also used a long-standing trade-based money-laundering system in Latin America that was known as the “Black Market Peso Exchange.” He ordered money in the LCB accounts to be wired to Asian suppliers of consumer goods, such as refrigerators and electronics, who would then ship goods to Latin America for sale by trusted brokers or companies controlled by Joumaa and his associates. They then deposited the proceeds in their accounts in local banks and withdrew hard currency. That currency was deposited into accounts at the Lebanese Canadian Bank, with transfers back to accounts in Lebanon. Joumaa and Hezbollah thus profited from drug proceeds laundered through a well-established money-laundering operation in Latin America.1 The money-laundering cycle was complete.

  The US Treasury Department designated Joumaa and members of his network in June 2012 as terrorist financiers and drug-money launderers. David Cohen, the undersecretary of the treasury for terrorism and financial intelligence, stated that “the Joumaa network is a sophisticated multi-national money laundering ring, which launders the proceeds of drug trafficking for the benefit of criminals and the terrorist group Hizballah.”2

  More significantly, the US Treasury Department and the Drug Enforcement Administration exposed this money-laundering scheme by targeting the bad bank that was at the heart of the scheme. On February 27, 2011, the Treasury Department announced that the Lebanese Canadian Bank was being designated as a bank of primary money-laundering concern under Section 311 of the Patriot Act. The proposed rule laid out the public indictment of the bank, noting that LCB management had been complicit in allowing money laundering tied to international drug-trafficking networks run by Hezbollah from South America to Europe and the Middle East via West Africa. The bank allowed suspect cash transactions and wire transfers and was the favored bank for drug-traffickers’ exchange houses.

  The Treasury had been sparing in its use of Section 311 since the designation of Banco Delta Asia in 2005, but the designation once again proved effective. The proposed rule exposed LCB as a money-laundering bank worthy of isolation, the centerpiece of a sophisticated global money-laundering scheme that Hezbollah had helped develop, and the canary in the coal mine of the Beirut banking system as a refuge for mass amounts of illicit financing—for Iran, Hezbollah, and others evading the scrutiny of the legitimate financial system. The shock waves in the Lebanese banking system and for Hezbollah’s financial managers were significant.

  Hezbollah officials began to scramble to find alternate ways of holding and moving money, Beirut bankers began to calculate whether they might be next on the Treasury target list, and Lebanese officials worried about the potential targeting of their entire banking system. The Central Bank of Lebanon revoked the LCB’s license in an attempt to contain the damage to the reputation of Beirut’s banking system. Treasury officials have noted that the spotlight remains on the Lebanese banking system. In May 2012, David Cohen reaffirmed the Treasury’s focus on the Lebanese financial sector, saying, “We’ve been very clear with the Lebanese authorities about this—we will do what we need to do to protect the U.S. financial system from that sort of illicit activity.”3 In addition, private advocacy groups—in particular, United Against a Nuclear Iran—have continued to push the Lebanese Central Bank, Congress, and the media to focus attention on the illicit financial activity coursing through the nearly fifty private Lebanese and foreign banks based in Beirut.

  In August 2012, the United States seized $150 million in illicit funds from the then defunct Lebanese Canadian Bank’s correspondent New York accounts. The bank was shut down, and its assets were sold off like scraps to other banks and investors.

  Hezbollah has found a way to use global criminal and money-laundering networks to raise and move money—relying on South American drug networks, West African facilitators, used-car dealers in the United States, and moneymen and banks on three continents to help hide and launder the money. The US Treasury team and other authorities have tried to stay on top of these adaptations to keep Hezbollah scrambling for access to the financial system and sources of money. Unfortunately, Hezbollah is not the only target that has adapted to the Treasury’s pressure.

  Al Qaeda and its affiliates, too, have had to adapt. Since 9/11, Al Qaeda’s overall budget and financial infrastructure have been hit hard. With Osama bin Laden—the symbolic center and fundraiser for Al Qaeda and Associated Movements (AQAM)—gone, the movement will have even greater difficulty raising money. The bin Laden documents found in the Abbottabad compound in May 2011 tell the story of an Al Qaeda core struggling financially and relying more heavily on its affiliates for funding. The intense counterterrorism and regulatory focus on funders, corrupted charities, front operations, and even banks used to facilitate financial flows to terrorist groups has served not just to disrupt but also to deter donations and support.

  The Al Qaeda movement has adapted to this pressure, and its affiliates have grown more independent and innovative in developing self-funding mechanisms while individual members and cells use local means to raise necessary funds. The future of terrorist financing parallels the more fractured and localized nature of Al Qaeda itself and will present new challenges and opportunities for counterterrorism officials.

  With a weakened and financially feeble Al Qaeda core, AQAM is relying more heavily on diffuse and localized funding schemes, often relying on criminal activities such as extortion, kidnapping, and financial fraud that provide fruitful sources of funding.4 These activities, however, also expose networks and members to attention from local authorities and enforcement. We have already witnessed this evolution.

  Al Qaeda in Iraq has siphoned oil, extorted businesses, and robbed banks—attempting to rob the Central Bank of Iraq on June 13, 2010—and engaged in a July 2011 online funding appeal. Al Qaeda in the Islamic Maghreb (AQIM), which had gained a territorial foothold in the northern part of Mali until being dislodged by French and African forces, has mastered the kidnapping-for-ransom business, taking European hostages and ransoming them to the tune of tens of millions of dollars a year paid for by governments and insurance companies. The revenue has proven so significant that bin Laden himself was contemplating moving Al Qaeda to rely heavily on kidnapping for ransom as the central funding source. This, along with AQIM’s involvement in drug smuggling through the Sahel into southern Europe, has allowed AQIM to become a funding engine for the broader Al Qaeda movement, with support to Boko Haram, the Nigerian Al Qaeda adherents, and perhaps even other sympathetic groups emerging in North Africa, especially in the wake of the Arab revolutions.5 In combination with the flow of new arms from Libya and the lack of governance and security in the region, the funding has allowed AQIM to expand its reach and lethality.

  The Al Qaeda affiliate in Somalia, the Al Shabaab movement, created the most diversified and innovative funding method, a combination of taxes and checkpoint fees, diaspora remittances, and a charcoal trade–based money-laundering scheme to raise millions of dollars. Al Shabaab has generated $70 million to $100 million in revenue from its financial operations.6 This should come as no surprise, as the Al Shabaab fighters have controlled key territory and trade in southern and coastal Somalia, including the lucrative port of Kismayo; can tap into flows of remittances from the wealthy, worldwide Somali diaspora; and rely on a committed cadre of savvy Somali businessmen, including Ahmed Jumale. Jumale, who remains at large and is at the heart of the Al Shabaab financial empire, had long before used the Al Barakaat network t
o help fund Osama bin Laden and the Al Qaeda network.

  Jumale and his cadre have developed an effective financial infrastructure. The Al Shabaab tax system is simple and effective, levying taxes in six principal ways in the territory it controls: there is a tax on consumer goods in merchandise stores; a tax on businesses by size and profitability; a tax on the livestock and crops of farmers; a levy by acre on farmers; a 2.5 percent tax on corporate profits; and ad hoc military contributions. In addition, before being dislodged by Kenyan, Ethiopian, and African Union forces, Al Shabaab fighters operated mobile military checkpoints in vast swaths of territory where travelers were obliged to pay taxes for passage.7

  Until late 2012, the port of Kismayo had been a major source of revenue, providing $35 million to $50 million in revenues, with $15 million coming from the trade in charcoal and sugar. For many years, the Al Shabaab business clique had outmaneuvered the Transitional Federal Government in Mogadishu, setting more competitive fees for the port of Kismayo than the government set for the port of Mogadishu and driving trade into Al Shabaab–controlled channels. The port of Kismayo, for example, imposed smaller import duties than the Somali government, with a fee of $200 on any vehicle rather than $1,300.8 Most impressively, Al Shabaab has harnessed the trade in charcoal, which is exported from Somalia to wealthy Gulf states in return for sugar. Eighty percent of the charcoal produced in Somalia is exported to Gulf Cooperative Council (GCC) states, much of it in exchange for sugar from preferred traders who pay no tax to Al Shabaab.9 The sugar is then sold at higher rates in East Africa, giving Al Shabaab profits in the millions of dollars. This explains why the United Nations has imposed sanctions on charcoal exports from Somalia—it was an attempt to cut off an important revenue source for the Al Shabaab moneymen. It also explains why it was a priority for Kenyan troops and allied forces to dislodge Al Shabaab control over Kismayo in 2012.

  Because AQAM is seeking alternative financing sources and efficient vehicles for moving money, it will continue to develop relationships and operations that tie its financing to the infrastructure and operations of other organizations. Today, Al Qaeda in Pakistan relies on donations from sympathizers and supporters in the Persian Gulf and Arab states while also increasingly collaborating and sharing resources with Pakistani-based militant groups. For example, Al Qaeda is known to share resources and secure funding from Lashkar-e-Taiba, Pakistan’s largest and most capable terrorist organization. In addition, Al Qaeda has sought to generate revenue from foreign recruits, charging tuition to radicals who journey from the West to Pakistan for militant training and support.10 This funding collaboration is happening between Al Qaeda affiliates. AQIM is funding and training Boko Haram members in Nigeria, and Boko Haram, Al Shabaab, and Al Qaeda are sharing funds and trading explosives.11

  This adaptive collaboration is seen already in the case of drug trafficking, where AQIM has profited from the drug trade from South America through West Africa and the Sahel into Europe. In the past, Al Qaeda and groups like Lashkar-e-Taiba have benefited from alliances with Indian crime lord Dawood Ibrahim and his organized crime network. The overlaps between the criminal underworld, illicit financial activity, and terrorist operations and funding will continue to evolve as marriages of convenience emerge in common areas of operation. Focusing on key financial conduits, nodes, and networks that serve not just terrorists but transnational criminals will be critical for counterterrorism officials.

  Although AQAM has been hurt financially, the old funding networks that sustained the Afghan and Arab mujahideen, Al Qaeda core, Islamists in Chechnya, Al Qaeda in Iraq, and other elements of AQAM still exist. Sympathizers, deep-pocket donors, and charities and other organizations remain, and they can be used to funnel money to sympathetic causes.

  These networks have been weakened over time, but they have also been revitalized around specific causes important to violent Islamic extremists, such as the invasion of Iraq, the wars in the Caucasus, and sectarian fighting in Lebanon. Thus, galvanizing events, conflicts, or causes could help resurrect these established networks and the means by which they have justified support for Islamist causes and moved money transnationally, often relying on front companies, traditional hawala, and cash couriers. The deepening conflict between Sunni and Shia Muslims in countries throughout the Middle East and South Asia—along with the tumult of the Arab revolutions—is providing an opportunity for these networks to rejuvenate. Syria may provide the most fertile ground for a resurrection of the old financing and recruitment networks—out of the Arabian Gulf, Iraq, and North Africa—as extremists help to drive the fight against Assad in Damascus. Authorities then must maintain vigilance over these networks and financiers and ensure consistent oversight using existing measures to combat money laundering and terrorism financing.

  On July 28, 2011, the US Treasury designated six Al Qaeda members operating in Iran. The designation was explosive in its accusation that these individuals had operated in Iran “under an agreement between al-Qa’ida and the Iranian government.”12 The designation noted that Al Qaeda operatives in Iran had played a critical financial role in facilitating donations and other funding streams to Al Qaeda’s senior leaders in Pakistan, including Atiyah Abd al-Rahman. These Al Qaeda operatives utilized their perch in Iran to travel in the Gulf, raise funds, recruit members, and channel resources to Pakistan and other Al Qaeda operatives worldwide. Ezedin Abdel Aziz Khalil, Al Qaeda’s representative in Iran, has brokered deals with the Iranian government for the release of Al Qaeda members from Iranian prisons, the transit of Al Qaeda members and families through the country, and the transfer of funds and resources to Al Qaeda in Pakistan and its global affiliates. According to the Treasury designation, Khalil required every Al Qaeda operative transiting to Pakistan to carry $10,000 to Al Qaeda senior leaders in Pakistan. These old networks can be rejuvenated, in the wake of conflict, with the aid of state sponsors, and with those willing to make deals with the devil against the United States.

  All the while, new technologies and innovations in the storage and movement of money and value are reshaping the international financial landscape. This is especially the case in developing economies and communities without access to formal financial outlets, which are relying more heavily on mobile devices and mechanisms for storing and transferring money. The pace of growth of these systems in the developing world has been staggering. By 2009, the developing world accounted for three-quarters of the more than 4 billion mobile handsets in use.13 Some studies estimate that there could be 1 billion users of mobile banking technologies by 2015. Prepaid cards, as an alternate way to store and transfer value, have gained momentum over the years as a replacement for standard currency transactions, with more innovation on the horizon. MasterCard and Sharjah Islamic Bank recently announced a deal with the UAE grocery store Sharjah Cooperative Society to issue a prepaid “Coop” card as an alternative to cash payment.

  The development of online alternative currencies and new mechanisms for virtual barter will further open the Internet for potential exploitation by AQAM and its sympathizers. On November 23, 2011, Philippine police officers arrested four people for involvement in a $2 million remote toll scam that started in 2009. The cell had gained access to AT&T customer lines and telephone operating systems, “forcing the businesses to dial expensive toll numbers, which the men controlled,” according to an Internet security website summary. The group thus hijacked the telephone infrastructure to collect funds from unwitting users.14 These funds were then sent on to support Jemaah Islamiyah, an Indonesian-based Al Qaeda network, and Lashkar-e-Taiba.

  Tracking the large volume of rapid and anonymous money flows around the world, and getting in front of new technologies to allow for lawful and appropriate tracking, will remain major challenges for law-enforcement, intelligence, and regulatory officials, especially because groups and individuals are able to hide and layer their identities and ownership interests. Digital currencies—replacing traditional currencies and the controls and chokep
oints that attach to traditional international money flows—are emerging as efficient yet potentially problematic ways to raise, move, or hide illicit capital.

  In many cases, the drive to evade the financial pressure of the United States has served as the impetus for new structures to profit from markets of opportunity and new relationships to subvert the legitimate financial system. The enemy has learned to adapt against the tools and methods used to pressure it financially. These financial networks often take advantage of opportunities and allies naturally present in the environment.

  Importantly, money allows seemingly disparate networks and groups to blend their operations. Money—and the potential for profit—greases relationships that ordinarily would not exist. The grand global arms traffickers of this era, such as Viktor Bout and Manzar al-Kassar, the “Prince of Marbella” who supplied weapons to criminals and terrorists and is now serving a federal prison sentence in the United States, have proven this rule. They were willing to service any group or regime willing to pay the right price—often, as in the case of Bout, selling arms to warring sides in the same conflict. This principle of opportunistic profit and operations is now implicating the interactions of networks of all ideological stripes. There is money to be made, and there are logistical networks to be harnessed, to achieve criminal and political goals.