ASSET FREEZES AGAINST TERRORISM HAS WEAK TRACK RECORD

WASHINGTON (AP) -- It sounds like tough, determined action: President
George W. Bush's order to choke off the money flowing to terrorist
operations by freezing the assets of people and groups linked to Islamic
militant Osama bin Laden.

Yet as a tool for combatting international pariahs and drug traffickers,
the freezing of assets has delivered less than resounding success.

It has in the recent past failed to seriously affect intended targets such
as Saddam Hussein and Colombian drug traffickers - and will depend now,
more than ever, on the willingness of the international community to
tighten banking regulation.

Case in point: Previous efforts to cut off bin Laden from funds, including
U.N. and U.S. steps in 1998 to freeze his assets after the U.S. embassy
bombings in Africa. Washington calls bin Laden, a Saudi exile with a
personal fortune estimated at $300 million, the prime suspect in those
bombings as well as in the Sept. 11 attacks on the World Trade Center and
Pentagon.

"An asset freeze will only go so far because you can't imagine someone
named Osama bin Laden opening an account at Merrill Lynch," said Jack Blum,
an attorney and former Senate investigator dealing with money laundering
and terrorism.

If the financial network of a terrorist or criminal organization is an
octopus, only one of its slim tentacles may be planted in the United States
and cooperation from other countries is crucial.

Another twist: Terrorist cells are engaging increasingly in lucrative petty
crimes such as credit card fraud and identity theft to finance their
operations - making them less dependent on funding from a network.

For the newest freeze on bin Laden assets, Bush on Monday introduced a new,
more stringent element: a threat to shut down U.S. operations of foreign
banks that do business with him or his associates.

"It first and foremost has to be global, to the maximum extent possible,"
said Don Vangel, a former vice president of the Federal Reserve's New York
operation.

Foreign ministers from the seven leading industrialized nations - the
United States, Japan, Germany, Britain, France, Italy and Canada - agreed
Tuesday to produce a coordinated plan to freeze the assets of terrorist
organizations.

To better get at those financial networks, however, banking laws will have
to be changed in some countries.

Switzerland has enacted a series of laws in recent years that removed its
traditional veil of bank secrecy. But financial and money-laundering havens
remain in the Caribbean and other parts of the world, and some newer "hot
spots" have been added, such as the remote islands of Nauru and Niue in the
South Pacific.

An asset freeze directed against Saddam Hussein, who remains firmly in
power in Baghdad, appears to have had little effect.

In April 1991, the U.S. Treasury publicly named 52 "front" companies as
part of his worldwide financial and arms trading network, used to buy
weapons, tools, spare parts and raw materials for Iraq's war effort.
Another 37 individuals acted as middlemen for the Iraqi government in using
the companies to hide billions of dollars that Saddam's family skimmed from
Iraq's oil revenues, Treasury said.

But only two of the companies were American, and none of the individuals
named were based in the United States.

In recent years, the Treasury Department also has blocked the assets of
several Colombians that the U.S. government identified as drug kingpins.
But most experts say progress against the Cali cartel and other traffickers
resulted mainly from law-enforcement efforts rather than financial sanctions.

The financial hunt against Colombia traffickers has been complicated by
their use of a sophisticated money-laundering system, known as the
black-market peso exchange.

Similarly, bin Laden is believed to use an underground, nearly paperless
network of money brokers throughout south Asia and east Africa - and
possibly the United States -known as "hawala," or "in trust" in Hindi,
India's national language.

Money is deposited with a broker in one place and intended recipients get a
code or token that lets them collect the same amount somewhere else,
usually from a small merchant belonging to the same clan. The actual cash
never leaves the country.

Jeffrey Robinson, a London-based expert on international crime and money
laundering, sees the new U.S. list as a good start that could eventually
generate an equally long list of people and organizations behind each one
now listed.

"This is a multi-headed Hydra," he said.