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Blood from Stones

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Douglas Farah May 13, 2004 "Lessons Learned About
Terror Financing in West Africa"
Presented to The Consortium for the Study of Intelligence

The purpose of this paper is to briefly outline five lessons learned about the financing of Middle Eastern terror in West Africa. The lessons are derived from the work presented in Blood From Stones: The Secret Financial Network of Terror (Broadway Books, New York, May 2004). The book documents the ties of al Qaeda and Hezbollah to the illicit or "blood diamond' trade in Sierra Leone and Liberia, particularly through the regime of Charles Taylor, the former Liberian president.

The first lesson is that terrorist groups are sophisticated in their exploitation of "gray areas" where states are weak, corruption is rampant and the rule of law nonexistent. It is now clear these groups have used areas like West Africa for many years to finance their activities. They correctly bet that Western intelligence services did not have the capacity, resources or interest to track their activities there. While al Qaeda's operations in West Africa were undetected, they only lasted a few years. But Hezbollah has been in the diamond trade for almost two decades, yet that connection was largely unknown in the Intelligence Community.

Al Qaeda did not stumble into the diamond business in West Africa. The connection was one part of a carefully planned network, where the organization targeted the exploitation of specific resources through specific people who were sympathetic to their goals. In Sierra Leone and Liberia, a main conduit was Ibrahim Bah, a Senegalese who fought with the mujahadeen in Afghanistan in the mid-1980s and stayed in touch with extreme Islamic movements in the following years. The contacts remained even after Bah returned to West Africa and became an important ally of Liberian president Charles Taylor, acting as Taylor's chief gatekeeper for the illicit diamond sales. The Islamist network tapped him again when they needed access to what he could provide: diamonds. Why diamonds? Because they are an ideal vehicle for generating income as well as transferring value from more vulnerable assets. The diamond world was already a familiar field for al Qaeda, as I will discuss later.

With diamonds, the terrorists could concentrate wealth in stones that are very low in volume, easy to transport, and virtually undetectable. Dogs can't sniff them and they don't set off metal detectors. Yet they are easy to convert back to cash around the world. The same is true for tanzanite and other gemstones that made their way into the financial network.

The second lesson is that terrorist groups in these areas learn from their own mistakes as well as each other. They are adaptable in ways that make them extremely hard to combat. Hezbollah has been using diamonds from West Africa to finance its activities for at least 20 years, perfecting smuggling routes to Europe and Lebanon, and successfully embedding its financial structure within the diamond trade. Once al Qaeda was engaged in the trade, its operatives plugged into the same network. The network is based on family groups with members in Africa, Europe and Lebanon. The same group of inter-related clans and families controll much of the flow of diamonds from Sierra Leone, the Democratic Republic of Congo and Angola. They were happy to incorporate al Qaeda's needs into their structure.

Despite a public record that clearly laid out the long-standing ties between Hezbollah and al Qaeda, the connection was often ignored by managers in the intelligence community. The conventional view was that Shi'ites and Sunnis could not and would not do business together. But Osama bin Laden had been in contact with Hezbollah at least as far back as the mid-1990s. His men were learning how to build truck bombs from Imad Mugniyah, Hezbollah's security chief. Ibrahim Bah, who fought with the mujahadeen, went on to fight with Hezbollah in Lebanon. The relationship between the two groups, through specific individuals, is important.

U.S. officials have recently said publicly that the relationship between the two groups, while not cordial, is now more extensive than ever. Meeting since 9/11 between Hezbollah and al Qaeda have been documented, and Hezbollah is believed to be providing al Qaeda with expertise on the use of the internet for communications and propaganda.

Al Qaeda also demonstrated its ability to learn from its own mistakes. In the aftermath of the 1998 bombings of two U.S. embassies in East Africa the United States managed to freeze some $220 million in Taliban gold reserves deposited in the Federal Reserve system. Much of that money belonged to al Qaeda. So the terrorist group, in order to ensure that future finances could not be attacked in a similar way, began to systematically move its money out of banking systems and into commodities.

A third lesson is that small clues and critical analysis matter in tracing terrorist funding, but there was limited understanding of the financial structure of al Qaeda and Hezbollah before 9/11. William Wechsler, when he was at the NSC, found that the intelligence community had never carried out a comprehensive look at al Qaeda's financial structure until 1999, despite the fact that the terrorist organization had existed since 1988. The 9/11 Commission found the same to be true for at al Qaeda's organizational structure in its entirety. Rather than understanding the complex web of commodities, charities and individual donors that filled al Qaeda's coffers, the conventional wisdom in the intelligence community was that bin Laden was largely using his personal wealth to finance his organization's operations. Had that probing of the financial structure happened sooner, the clues laid out in court testimony and by informants would have been harder to ignore. But it was largely ingnored.

Wadi el Hage, bin Laden's personal secretary until he was arrested in 1998, kept notebooks full of information on his attempts to buy and sell diamonds and tanzanite, as well as how to grade stones for value. His personal telephone directory was filled with the names of jewelers and diamond dealers, including the home phone numbers of many. All this was introduced as evidence in his trial, yet never looked at carefully. Much of it was not even translated until long after 9/11. Much of it is untranslated still. Yet had they been looked at carefully, investigators would have found references to diamond deals in Liberia and across Africa. It was not a passing reference to an obscure activity, but one of the central themes of his travels across the continent.

Jamal al Fadl, the most significant defector from al Qaeda to ever walk into a U.S. embassy, also talked extensively about the al Qaeda's involvement in the gemstone trade. Little of what he said in his testimony about al Qaeda's finances was followed up on. Yet he too constantly referenced the diamond trade as an important interest of the terrorist organization.

There are strong indications that bin Laden had a personal interest in the diamond trade that extended at least back to the mid-1990s. In November 2003, Sheik Abdul Fadlallah Mamour, a radical Senegalese cleric expelled was from Italy for his alleged ties to al Qaeda. When asked if he knew bin Laden, Mamour replied yes, he had met him several times from 1993 to 1996, when bin Laden was living in Sudan. The reason, he said, was that bin Laden was financing Mamour's diamond business. This, he said, consisted of "selling diamonds between West Africa and Belgium."i Yet no one had even begun to look at gemstones as a possible financial mechanism before 9/11. The CIA had one analyst assigned part-time to looking at the diamond trade around the world. The DIA and State Department had no one at all.

Part of the problem was cultural within the Intelligence Community. Despite a radically changed world environment, most of the community was still operating on inherited assumptions about terrorist financing. There were small groups in the National Security Council, Treasury and elsewhere that were far ahead of the rest of the government. Treasury actually developed an ad hoc working group looking at informal financial transfer mechanism for terrorists and drug traffickers. But they were eventually told to halt their work. Even more telling, they were forced to remove their data bases from the computer for fear that their investigations could be construed as racial profiling. The work as largely lost.

Another serious problem in following the evidence that emerged was the lack of intelligence assets on the ground. The drastic reductions in intelligence budgets after the Cold War hit sub-Saharan Africa particularly hard. The stations in the region had largely been used to recruit Soviet diplomats serving there, with the host countries themselves being only a secondary reporting targets. Because sub-Saharan Africa posed no easily-discerable threat to the United States, Agency stations were cut to the bone when the Cold War ended. I have been told that almost two-thirds of the stations in the region were closed, and those that remained open had only minimal staffs.

However, there was a growing threat in the region that went largely unnoticed. Radical Islam, particularly wahhabism, spread through West Africa in the 1990s, financed by Saudi generosity. This has given the wahhabis a particularly strong foothold in Sierra Leone, Guinea and the Ivory Coast. The Muslim Brotherhood also worked hard to create an infrastructure across the region, formally establishing itself in Sierra Leone in the early 1990s, and even earlier elsewhere in the region. It is here, and especially in areas controlled by the RUF rebels in Sierra Leone, that charities now under suspicion for helping funnel funds to al Qaeda, operated. Here, the Muslim World League and the International Islamic Relif Organization of Saudi Arabia, and the African Muslims' Agency of Kuwait were all active, and all have been linked to al Qaeda activities in other countries.ii As far as I can determine, no one looking at the movement of terrorist money has even made cursory inquiries into the activities of these agencies in West Africa.

A fourth lesson is that terrorist networks and criminal networks can overlap and function in the environments of failed states, like that of Liberia. There are no longer neatly-compartmentalized areas where one group, like a Russian organized crime family, work and everyone else stays out.

In 2000, here is partial list of those operating simultaneously in Liberia under Taylor: senior al Qaeda operatives; Victor Bout, a Russian who was among the largest illegal weapons merchant in the world and who registered more than 50 aircraft in Liberia; Lenoid Menin, a Ukranian-Israeli drug dealer and arms merchant; South African mercenaries; and Aziz Nassour, the one-time bagman for Mobuto Sese Seko in Zaire and then middleman for both al Qaeda and Hezbollah. Libya, still a rogue nation designated a state sponsor of terror, illegally delivered hundreds of tons of weapons of weapons to Taylor and the RUF through Burkina Faso.

Not only did the groups coexist. As I said earlier, the Hezbollah/Amal network for moving diamonds moved al Qaeda diamonds as well. Victor Bout flew weapons not only to Taylor and the RUF, but to the Northern Alliance AND the Taliban and al Qaeda in Afghanistan. He often took diamonds as payment for his weapons. What is the exact tie among all these different people and activities? I don't know, but I strongly believe that if we do not quickly develop the capacity to understand and penetrate these regions, we will continue to give terrorist groups a free pass on how their money and weapons move.

Finally, a fifth lesson that can be learned is that the intelligence community reacts very poorly to information it does not initially have ownership of. Within the culture of the community, the assumption was that the initial diamond story made the CIA look bad. It was therefore attacked.

The story stood the test of time because it was true, but also because a few people made a concerted effort to get at the truth. Rep. Frank Wolf of Virginia is one. The investigators at the U.N.-backed Special Court for Sierra Leone are others. The court prosecutor and chief investigators for the Special Court obtained cooperation from many people close to Taylor, and verified the presence not only of the three al Qaeda operatives I had identified, but two others as well.

Their information, when passed to the intelligence community, was met with hostility and deep skepticism. Why DOD prosecutors with 30 years experience each would risk their reputations over information that had no impact on them or their job, is hard to explain. Congressman Wolf, who oversees FBI funding, requested the Bureau send a team to West Africa to investigate my stories. When the first team spent only a few days on the ground, Wolf asked Director Mueller to send another team to do it again. The result was that last month the FBI wrote a classified report confirming my initial findings. They polygraphed individuals in Sierra Leone and Liberia, sources I was unfamiliar with, and found the evidence strong. But it was only after more than two years pressure to undertake the investigation.

Last month Gen. Charles Wald, deputy commander of the European Command with responsibility for Africa, publicly stated that my reporting was accurate. He stated that, based on his most recent intelligence, it appeared al Qaeda was continuing its involvement in the West African diamond trade. The DIA is switching personnel to the region because they believe the use of diamonds is an ongoing problem and threat.iii

But is it enough? I am told by reliable sources that there is still no official and little or no unofficial U.S. presence in Northern Nigeria, home to more than 80 million Muslims, most of whom have for many years been listening to Wahhabi imams sent from Saudi Arabia. Al Qaeda-related groups have engaged government troops in combat in Mali, Mauritania, Niger and Chad in the past few weeks. Gen. Wald said al Qaeda, in addition to it financial infrastructure, was seeking to build a logistical infrastructure in the region.iv

Hezbollah continues to use the region as well. On Christmas day last year an airplane flying from Contonou, Benin, to Lebanon, crashed. On board were senior Hezbollah officials carrying $2 million in cash raised from the Lebanese diasporas in West Africa. The money may not have been destined for Hezbollah's military activity, but it was a significant sum that shows the group's importance in the region.v

Efforts to deprive terrorists of their funds means, necessarily, depriving them of their safe havens. The new havens are in parts of the world we have long ignored, the spreading swaths of stateless territories and rogue regimes. Until we recognize this and begin to understand the true nature of terrorist finance, there will be little progress made.

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