Black Market Billions: How Organized Retail Crime Funds Global Terrorists (Gal Zentner's Library) (20 page)

This pattern of expansion through building alliances extended to the U.S. A Muslim organization called al Khifa had numerous branch offices, the largest of which was in the Farouq mosque in Brooklyn. In the mid-1980s, it had been set up as one of the first outposts of Abdullah Yusuf Azzam and bin Laden’s Maktab al-Khidamat. (This organization raised money to recruit foreign
mujahideen
to fight the war against the Soviets in Afghanistan and became the main fund-raising organization for al Qaeda.) Other cities with branches of al
Khifa included Chicago, Pittsburgh, Tucson, Atlanta, and Boston. Al Khifa recruited American Muslims to fight in Afghanistan. Some of them participated in terrorist actions in the U.S. in the early 1990s and in al Qaeda operations elsewhere, including the 1998 attacks on U.S. embassies in East Africa.

Bin Laden wasn’t the only head of a terrorist group to employ a corporate strategy to raise dwindling funds. Hatim Ahmad Barakat, also known as the “face of fund-raising” for his Hezbollah cell in Paraguay, would raise funds from different sympathizers and merchants. In one case, he used “strong-arm” tactics to coerce business owners at the Galeria Page mall to donate a percentage of their profits to the Hezbollah or risk getting their businesses shut down. In addition, links have been made between Assad Muhammad Barakat and bin Laden. A report in a Paraguayan newspaper in 2002 pointed out that Hatim, who owned the Mundial (World) Engineering and Construction company, with offices in Ciudad del Este and Beirut, was suspected of making contributions to al Qaeda. He obtained money via real estate fraud by purchasing apartments in Beirut and wire-transferring the money to al Qaeda in amounts upwards of $120,000.
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Barakat also channeled money to al Qaeda by using charitable donations to orphanages as a monetary guise.

Says professor William Martel, “The Hezbollah, like al Qaeda and Taliban, incorporate many factors that make the organization complicated. With very dynamic evolving networks, subgroups of these larger organizations are popping up all over the world less, and instead of physical recruitment you would see maybe through a mosque, foundation, or community center, these organizers and recruiters are going on the Internet. They are trying to find niches and chinks in the armor in order to get the funding they need without being detected, which inevitably leads to a higher frequency of bank account and currency manipulation and fraud, smuggling, document alteration, and eventually funding of terrorist plots.”
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The Trust Factor: The Basis of Any Organized Retail Crime Ring

Funding terrorism takes a lot of coordination, planning, and strategizing on behalf of the members, the subgroups, and the leaders running the organization. Because most fund-raising is done through illegal means, trusted sources are imperative, and having the same mission is crucial. However, the mission statement isn’t written down in a business plan or formally discussed. It’s a state of mind.
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Most ORC fences are of Middle Eastern descent.
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Through a series of interviews with law enforcement, ORC fence suspects admit to being sponsored by other fences to come into the U.S. Upon arrival, the sponsoring fence bankrolls them into a business, creating an arrangement similar to indentured servitude. Newly arrived immigrants must conform to the organization’s methods or risk loss of financial support or, worse, deportation.

Burglary rings are well planned and organized, employing rooftop entries, destruction of surveillance systems, and disabling of alarm systems. These groups have a team leader who plans, coordinates, and executes the theft. Most of these teams are made up of illegal immigrants from Central America. In 2001, Pasadena, California police apprehended two teams stealing nearly $20 million, linking the group to a family of Middle Eastern fences to whom they would sell the merchandise. These burglaries took place not just in Pasadena but in other states, including Texas.

ORC rings operate across the nation and internationally, but the “foot soldiers” in this crime are professional shoplifters—the boosters. When ORC rings recruit boosters from within, their families add a layer of protection from being reported to law enforcement. In some cases, boosters as well as fences share the same ideologies. But in most cases longtime members and family organizations strong-arm recruits into supporting the cause.

Keeping track of the money is a job that falls to someone who has the complete trust of the ORC ringleader or terrorist group. Trust permeates not only organized groups who steal, but also the fences who purchase and resell the merchandise. According to Randy Merritt, a detective in the Pasadena Police Department, many Middle Eastern fences use the same bookkeeping firm, one also invested and participating in the fences’ illegal activity.
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Fences usually engage in layering schemes that can work effectively only if fences agree to operate together. One fence might own a company that sells merchandise to another company that is owned and operated by the same family or group. To eliminate any paper trail, these fences create separate invoices where the company selling the merchandise has records of items being purchased, but the company buying has no proof of the transaction.

Counterfeiting rings also function within the family. As Chris from the Congo explained to me, the Senegalese and most West Africans create their own counterfeit rings when they come to the U.S., based on a recommendation from “family” friends back in Senegal. “When you come here, you know you have to make money quickly, and this is the way you do it,” he explains. Chris got hooked up with another buyer of counterfeit handbags within a couple days of arriving in New York. Instead of working for a larger business owner, he decided to go out on his own using his “mentor’s” contacts and by establishing a good relationship with Chinese suppliers. While Chris doesn’t send his money overseas, many of the Senegalese vendors do to ensure that family members are taken care of and live well above the poverty line. Chris also explains that a portion of the money that is sent overseas from donations goes to fund “benevolent organizations.” He notes that some people bring in so much money that they feel they have no choice but to stay in this industry. “You know those big houses in Senegal? Who do you think finances them? It’s these guys! And guess who comes to them when they need financing? It’s the ‘organizations’ who use that money to spread the word about Islam.”

“These cases take a lot of people, a lot of investigation, a lot of stakeouts, and all this is resource-intensive,” explains Robert C. Scott, Congressional Representative from Virginia and chairman of the Subcommittee on Crime, Terrorism, and Homeland Security. Even with razor-sharp scrutiny, it’s nearly impossible to permeate “family” bonds.
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The act of moving money around to finance a large-scale terrorist attack also benefits from family relationships. In some cases, money laundering can be equally dangerous to homeland security and retail stores. This is what we will examine next.

7. Money Laundering 2.0

As Faisal Shahzad sits in a cell in the Metropolitan Correctional Center in New York City awaiting trial, he passes the time by reading and eating specially prepared kosher meals in lieu of halal meals.
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Pir and Aftab Khan, his accomplices in connection with the Times Square bombing, sit in a jail 400 miles away in Massachusetts. Pir, who is being held in the Plymouth County House of Correction in Massachusetts, maintains that he has never met Shahzad and has never had any contact with him. Aftab, a former gas station attendant in Brookline, also maintains his innocence by claiming he has never met Shahzad. He sits alone in his holding cell in the Suffolk County House of Correction in Boston. He receives few visits from friends or family. When authorities searched Aftab’s apartment on May 18, 2010, they found an envelope with Shahzad’s name scribbled on it and a phone number beginning with the 203 area code. It was Shahzad’s cell phone number.

“It’s possible both Shahzad and the Khans tapped into the informal banking network also known as a ‘hawala’ to transfer the funds from one place to another,” said an authority working on the case. “[Aftab] Khan claims he doesn’t know what is going on or why he is in jail, and that may be true, but the fact of the matter is, the money that was transferred was used to potentially harm the citizens of the United States, and that is a federal offense.”
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Historically, terrorist groups funded their operations through money laundering. The most popular means of raising money were
drug trafficking, smuggling and selling illegal weapons, selling narcotics and gold, and conducting kidnappings.

Terrorist organizations have a primary mission: to fly under the radar while executing a plan to further their political objectives and staying well funded. That is why historically, terrorist groups such as Avanguardia Nazional (otherwise known as the National Guard in Italy), the Ordine Nuovo (New Order), the Red Brigade (another neofascist group out of Italy), and the Irish Republican Army (IRA) all obtained funding by laundered methods through shady sales of product. Terrorist cells were not immune to the global recession of 2007–2009 that wreaked havoc on U.S., European, Asian, and Russian markets. Al Qaeda, Hamas, and Hezbollah in the Middle East were major organizations affected by funds running out more quickly than had been anticipated. Raising capital and, more importantly, obtaining cash became crucial.
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The most talked-about and seemingly best-known method of terrorist financing is the opium trade or “poppy fields” of Afghanistan. The Taliban used it to finance kidnappings, the theft of contraband weapons, and the recruitment and training of al Qaeda members. But as the post-9/11 world started to evolve, these once strong terrorist organizations became less in control and less centralized, allowing subgroups to pop up in countries all over the world, says Bill Martel, a professor at the Fletcher School of Law and Diplomacy at Tufts University and an expert in terrorist financing. This meant the splinter groups were independently operated and had to find their own way of financing, similar to how a fast-food franchise operates. Financing for jihad comes from various sympathizer means, especially when dealing with smaller cells in different parts of the country where the cell may have roots. There are the donors (whom we’ll talk about in later chapters) and the “passive sympathizers,” who provide material support by giving funding through the sale and resale of stolen merchandise.
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“The global network for terrorism, and especially al Qaeda if you look at it, is ubiquitous, resilient, adaptive, and evasive. Using illegal
funds is their bloodline to train, recruit, and attack, and most of this funding comes from money laundering. And we, as people who monitor this activity, need to be extra careful. Our experience is that they are very adaptive, and they pop up somewhere else and generate funding,” says Martel.

Prior to 9/11, laundering funds through the American banking system was considered fairly simple. Terrorist organizations with recruits in the U.S. and Canada relied on the passive approach of bankers when it came to transferring large sums of money from one account to another. But as banks cracked down, terrorists and their organizations were forced to get creative when it came to laundering money. If going through a bank would set off a red flag, other means had to be found.

The Three Stages of Money Laundering

The International Monetary Fund (IMF) estimated that between $600 billion and $1.5 trillion is laundered every year globally.
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Out of that amount, 20–30% is funding terrorism.
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According to John A. Cassara, formerly detailed to the Department of the Treasury’s Office of Terrorism Finance and Financial Intelligence and author of
Hide & Seek: Intelligence, Law Enforcement, and the Stalled War on Terrorist Finance
, money is laundered from the U.S. to other countries in three stages. The first is placement, in which dirty money must be deposited into a financial institution. Criminals risk getting flagged by depositing large sums of money into accounts or by purchasing monetary instruments with illegitimate funds. Therefore, they try to distance themselves from the money by “layering” the cash. They move it around via wire transfers in multiple accounts in different jurisdictions, or through money orders; this is the second stage. The third and final stage is integrating the laundered funds back into the system. Here criminal organizations create an air of legitimacy by reinvesting laundered funds into a “tangible good” such as a business or property.
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Hawalas: An Ancient System Posing a Global Threat

Even with the most sophisticated of money-laundering schemes, transferring funds to remote areas of the world is not easy, especially if you do not have a Social Security number to open a legitimate bank account, or if you want to transfer money rapidly. Faisal Shahzad, also known as the “Times Square Bomber,” used hawalas (a way to transfer money overseas between two people without creating a money trail) to finance his plot. This prompted U.S. Representative Stephen F. Lynch to call for a congressional probe on the use of Islamic informal banking networks.

Shahzad became an American citizen by marrying a woman from Colorado. He came from an educated family (his father was a retired vice air marshal in Pakistan). He owned his own home and had a master’s degree from an American university. But to get money to fund his foiled plot, he dodged the banking system and used an informal way of transferring money to go unnoticed. To execute the money transfer, Shahzad enlisted the help of Pir and Aftab Khan, said to be distant relatives of Shahzad, both located in Watertown, a small town outside of Boston. According to court documents, the transfer was for a minimal amount, a couple thousand dollars. However, what it was funding could have had devastating consequences.