CUTTING OFF THE FUNDS FOR TERROR

We are at a critical juncture in the fight to cut off the funding for Osama
bin Laden's Al Qaeda network and other terrorist groups. Both the United
States Senate and the House have taken important steps by passing
anti-money-laundering measures that are now being considered in relation to
broader antiterrorism legislation. The danger is that this badly needed
money-laundering legislation will be killed by potent special interests,
including the American Bankers Association, that oppose it. They are
keeping a low profile, but their tactic is to separate the money laundering
provisions from others in the omnibus antiterrorism bill and then stall
them to death. If that happens, the government will be deprived of a
powerful weapon in this fight.

Large enterprises with thousands of employees cannot exist without cash.
That is as true for Osama bin Laden's operation as any other. A private
army with associates around the world cannot be maintained on a shoestring
budget. Mr. bin Laden needs money for weapons, food, clothing, travel and
training, and to pay off local leaders who allow him to remain in power.
Reliable sources estimate that Al Qaeda and its associates require $35
million to $40 million per year to remain intact.

Where does the money come from? Some is profit from the heroin trade.
Additional resources are contributed by wealthy sympathizers in the Middle
East and elsewhere, and by charities and foundations with donors throughout
the world. If that money can be identified, isolated and seized before it
buys what terrorists need, they will be crippled. Some potential donors
would not give if they knew their identities could be discovered and disclosed.

But for now the money can be transmitted and laundered in secret and spent
in secret. That is true largely because the so-called off-shore
jurisdictions maintain confidential banking centers that are plugged into
the financial systems of the United States and other industrialized countries.

To get a sense of the problem, one need only consider the curious example
of the Cayman Islands, a Caribbean nation with a population of about
35,000. Banks in the islands have deposits of about $800 billion. That is
nearly 20 percent of dollar deposits in the United States, and represents
over $22 million for each person in the Caymans.

Under current law, it is extremely difficult to find out who the owners of
the offshore accounts are. And that creates huge obstacles for law
enforcement officials who wish to prevent terrorists and other criminals
from using these accounts. In the Bank of Credit and Commerce International
case, for example -- the bank was involved with drug-money laundering, the
illegal shipment of arms and bribery of government officials -- the
majority of money transfers went through B.C.C.I. Overseas, chartered in
Grand Cayman. Osama bin Laden was himself a B.C.C.I. customer. To date,
President Bush has ordered that the accounts of 66 individuals and
organizations thought to be tied to terrorism be frozen. That list means
nothing if we cannot identify the accounts.

Some opponents of changes that would require transparent banking
transactions express concern for privacy. Whose privacy are they out to
protect? American law already requires that you and I disclose our
identities when we conduct a financial transaction. There is no reason
offshore account holders who tie into the American financial system should
be better shielded than domestic account holders are. There is no reason
why their transactions should not also be open to scrutiny.

The Senate has passed a broad antiterrorism bill that would combat
financial secrecy. The bill would expose the true ownership of accounts
used by foreigners, especially offshore accounts; regulate underground
banking systems; and prevent depositors in foreign "shell" banks, which
have no physical existence anywhere, from establishing correspondent
accounts in the United States. The Senate bill would strike hard blows
against terrorism -- and, not incidentally, do damage as well to the drug
dealers, tax cheats and swindlers who take advantage of bank secrecy.

The House is considering separate anti-money-laundering and antiterrorism
bills, rather than covering both issues in a single bill. Some in the
Senate have warned that there is much potential for political mischief if
these two matters are considered separately, giving opponents of the Senate
money-laundering legislation a chance to hobble our government's ability to
penetrate bank secrecy.

This is no time for that kind of politics. It is critical that Congress's
antiterrorism legislation contain anti-money-laundering provisions at least
as strong as those in the Senate bill. Congress needs to give the president
the weapons he needs to fight terrorism on all fronts.