Emerson: Interrupting Money Flow Crucial in Thwarting Terrorist Groups

Steve Emerson has made a name for himself as Executive Director of the Investigative Project on Terrorism (IPT) and author of books like the recent Jihad Incorporated: A Guide to Militant Islam in the US. His 13-year-old nonprofit research group is recognized as the world's most comprehensive data center on radical Islamic terrorist groups. The IPT investigates the operations, funding, activities and front groups of Islamic terrorist and extremist groups, providing critical evidence to government and law enforcement offices and helping journalists produce stories about terrorism. IPT research has even led to successful government action against US-based terrorists and financiers. In March, Emerson shared some of his research with members of the banking, finance and law enforcement communities attending SAS’ 4th Annual Terrorism Financing and Money Laundering Forum.

In his keynote address, Emerson discussed how Islamic terrorist groups create benign-sounding charitable, religious or social nonprofit groups that act as fronts for laundering money used to fund terrorist operations. He related the origins of the Muslim Brotherhood and the many organizations it spawned in the US, ranging from the Muslim Student Association to the Holy Land Foundation. While the organizations increasingly choose names that will draw less scrutiny – such as the KindHearts charity – they often have board members linked to organizations whose funds have been frozen. Indeed, the KindHearts charity had its funds frozen in 2006 when the government discovered its link to the Hamas terrorist organization.

“They’ll have the same office, the same president. They get reconstituted,’’ says Emerson, noting that they must file 501(c)(3) forms that will eventually turn up the similarities. “There is an 18-month lag.’’

Radical Islamic groups are also funding terrorism through organized crime – from cigarette smuggling to reselling stolen baby formula. The crimes often involve some level of money laundering that banking and finance institutions can catch, although the criminals are constantly looking for new tactics. Cashier’s checks are becoming a more popular way to move money. “That’s a new area of concern because you don’t need to provide identification when you send the money,’’ Emerson said.

Emerson noted that bankers have played key roles in tipping off law enforcement to suspicious activity – even before many post 9/11 laws went into effect. “The FBI first learned of the National Association of Islamic Trusts in the 1980s from banks concerned about the amount of money flipping in and out of accounts in a single day.’’

“Your role,’’ said Emerson, addressing the audience, “is critical. Disrupting the money flow is critical. You have the opportunity to catch someone.’’

Emerson spoke with SAS after his address on financial institutions’ role in stopping terrorism and how technology can help.

What would you like to see banks and financial institutions do to better uncover terrorism financing?
They are doing a very good job now. The level of cooperation is great. I think what might enhance banks’ ability to investigate is if they could tap into terrorist information databases to be able to get more names, more connections. In a sense, give them the ability to replicate what the government does, to give them a larger picture.

When you speak at forums like this, what do you hope bankers and financial people take away?
I want to raise the level of awareness about the extent to which there is nefarious activity going on in the United States and how difficult it is to find it and determine what is legal and illegal. I also want to bring up the politically sensitive question about religion’s role in some of these organizations and how these apparently religious organizations have an ulterior agenda. I want to help banking and finance people understand that these aren’t isolated cases – they might be looking at a piece of the pie, but they aren’t looking at the whole pie.

What could law enforcement do better?
Law enforcement is still compartmentalized. These are major bureaucracies, and it’s probably a  permanent liability of large government. You’ve got departments that vie for budgets and compete with one another. I also find the reluctance to use open source information by government agencies a hindrance to their investigations. Most good intelligence, not all of it, comes from open source information – newspaper articles, court case filings, television broadcasts and conferences held by these groups – it doesn’t necessarily come from a wiretap. Open source intelligence is really critical. Our database is the largest open source database on terrorism in the world. I’m sure the FBI would like to classify half of it, but it derives from open sources. The other criticism is the political correctness some agencies embrace in trying to establish rapport with some of these groups in the belief that they can co-opt them. These groups are looking for legitimacy and respect and acquire it by meetings with government agencies. If the government embraces them, it’s like they are the Rotary club.

How do you think the government can do a better job of tracking money laundering?
There needs to be instant online identification of different regenerated charities whose officers are the same as those charities that have been shut down. It takes a year and a half to get that information now. We need instant, online access to those names.

Can you tell me more about the importance of tracking names?
First, it’s difficult. Sometimes, people change their name, such as from Shukri to Sam. The only way you can track a name change is with a social security number. A more elaborate database, say something with previous addresses, could be helpful.

How can technology be helpful in tracking money laundering and other criminal activities?
When we started using relational databases, it was a revolution in our office. How do you otherwise keep the names of 300 suspects and 200 bank accounts and 500 phone numbers and see what the relations are? Software is critical to man-hours. It won’t help you to understand the meaning of a document, but it can help you put into context the financial relationships between people and institutions, and that’s critical.