The Money: TERROR MONEY HARD TO BLOCK, OFFICIALS FIND

In Afghanistan, the hunt for Osama bin Laden is narrowing. But on the war's
financial front, the government is only now beginning to come to grips with
Al Qaeda's money-raising apparatus, which officials say is so far-flung and
diversified that it could survive even if Mr. bin Laden is captured or killed.

Delving into a network that generates millions of dollars a year, yet often
trafficks in small amounts, the inquiry has uncovered at least $238,000
sent to the Sept. 11 hijackers in the United States through a dozen wire
transfers from the United Arab Emirates. Several transfers are linked to an
Al Qaeda official who used various aliases, United States government
officials said in recent interviews.

Investigators have also found that the hijackers and some of their
acquaintances declared about $40,000 in cash when entering the United
States, the officials said, and law enforcement officials are trying to
determine if that cash also aided the attacks.

Despite progress in unraveling the finances of the September attacks,
government officials say dismantling the overall financing of Al Qaeda is
proving more difficult, in part because it hinges far less on Mr. bin
Laden's fortune than was once believed.

During the last few years, government officials have concluded that Mr. bin
Laden's inheritance, once estimated at $300 million, was actually more in
the range of $25 million. Instead, Al Qaeda uses an amalgam of private
enterprises, corporate shells and charities that are structured like a
financial archipelago with connections hidden beneath the surface.

To support Al Qaeda, some operatives work like organized crime crews.
Government officials exploring Al Qaeda's operation in Bosnia found that
operatives skimmed money from relief charities and linked up with Bosnian
crime bosses. The success in Bosnia made it a model for Al Qaeda to use in
embattled countries around the world.

The description of the expansive and self-sufficient structure of the
network is based on interviews with current and former officials of many
American government agencies, as well as from court records and other
official documents. The Bush administration's attempt to break up this
financial network is as vital as the military action in Afghanistan,
experts say.

"A military success would not be sufficient without an attack on the
financial infrastructure" of Al Qaeda, said Michael Zeldin, former head of
the money-laundering section at the Justice Department. "If that stays in
place, then you may chase them from one geography to the next, you may be
disruptive, but you haven't gotten to the root of the problem."

Since Sept. 11 the Bush administration has taken three public steps to
block dozens of individuals, companies, charities and other organizations
with Al Qaeda connections from the international banking system.

But out of public view, the effort is far broader, government officials
say, involving diplomatic and covert actions. Working with governments in
the Middle East and Europe, officials have privately confronted several
international charities with accusations that terrorists had infiltrated
their organizations and were diverting money to Al Qaeda.

United States officials, working with foreign counterparts, have monitored
back transactions trying to track down Al Qaeda supporters. So-called "jump
teams" of American forensic accountants, lawyers and other experts have
descended on foreign countries to review records in search of Al Qaeda
connections.

Evaluating progress on the financial front is far more difficult than it is
in military battles. Much of the effort is only now getting under way, and
the Bush administration has made public virtually none of the evidence it
says it has linking individuals and private groups to Al Qaeda.

Success in this fight will be hard-won, experts say, primarily because Mr.
bin Laden has fundamentally changed the nature of terrorist financing. In
effect, at a time when state sponsorship for terrorism was in decline, Mr.
bin Laden undertook a privatization of terror, creating a far more diffuse
network than any faced in the past.

"The decline in state-sponsored terrorism means that the private support
for terrorist groups has become the most essential element in
fund-raising," said Reuven Paz, former academic director with the
International Policy Institute for Counterterrorism in Herzlia, Israel.
"That means any attempt to cut the money flow into Al Qaeda or other
similar organizations will prove far more difficult than it has been in the
past."

Invasion Prompts Money Flow

It all began -- as with most things Al Qaeda -- with the Soviet Union's
invasion of Afghanistan in 1979.

As devout Muslims trooped there to defend the Islamic nation, wealthy Saudi
businessmen funneled millions of dollars to support the effort through
assorted charities. Among those businessmen was Mr. bin Laden, an heir to a
Saudi construction fortune.

With the Afghan war playing out on the geopolitical chessboard of the cold
war, the Central Intelligence Agency was directing even larger sums of cash
toward the Afghan rebels, known as the mujahedeen. As the charities gained
influence, American officials watched with little concern -- and indeed,
with approval.

"The lion's share of the money for the mujahedeen came from the United
States," one former senior intelligence official said. "We knew there was
money coming from Arab states, primarily Saudi Arabia, that was being
funneled through charities. But as long as we were all on the same side, it
was welcome. It wasn't looked on as a threat that you needed to monitor."

When the Afghan war end in 1989, officials said, Mr. bin Laden tapped those
fund-raising contacts to support his idea of a wider jihad, or holy war,
against the West. By 1991, he had a base in Sudan, where a militant Islamic
government was in power, and Al Qaeda's financial operation took root.

Using his inheritance and donations channeled through charities, Mr. bin
Laden expanded his economic base. According to records in the Manhattan
trial of Al Qaeda members who were convicted of bombing American embassies
in Africa, he formed a company in Sudan called Wadi al-Aqiq, which managed
investments in at least nine businesses, including a furniture company, a
bakery and a cattle-breeding concern.

The organization also expanded contacts with charitable front groups, and
formed some of its own. Supporters of Al Qaeda approached Arab businessmen
for contributions. Often, they paid, either out of conviction or concern.
"A lot of people gave money as part of the cause, and a lot of people gave
money so terror wasn't directed at them," said Jack Devine, former acting
director of operations with the C.I.A. and now president of the Arkin
Group, a New York investigations firm. "You can give honorably or you can
give out of fear."

Government officials also believe that Al Qaeda used seemingly independent
companies as fronts. For example, earlier this month, President Bush
blocked the accounts of a financial network called Al Barakaat, which owns
an international collection of hawalas, an informal remittance system that
moves millions of dollars around the world with virtually no paper trail.
According to law enforcement information provided to the Treasury
Department, the network is controlled by Al-Ittihad Al-Islamiya, an
extremist Somali militia designated by President Bush as a terrorist
organization.

Officials at Al Barakaat's headquarters in Mogadishu have denied that their
money-transfer operation has any connection to Al Qaeda.

However, the information suggests that the connection to the terrorist
groups works like this: Somali emigrants around the world use Al Barakaat
to send money back home. That money is sometimes commingled with the
illicit proceeds from welfare and insurance frauds and transferred to
accounts in Dubai, where terrorist operatives siphon off a portion of it
for Al Qaeda and the Somali militia group. Sometimes that portion is used
to buy arms. The balance makes its way to Somalis back home.

Terrorists also benefit from fees on the transaction. Law-enforcement
officials have also found that a fee of about 5 percent is charged on each
transfer; in Dubai, operatives pass a piece of the fee to the Somali
militia group, which then gives a cut to Al Qaeda.

Great effort goes into disguising these connections. For example,
government officials said, people at Al Barakaat arranged for an arms
shipment to people linked to Al Qaeda. In records, the officials said, the
shipment was recorded as containing only blankets.

Al Qaeda both produces and profits from mayhem. After the organization's
creation in Afghanistan, Mr. bin Laden recognized that global unrest
presented it with opportunities to expand its influence, as well as pump
its financial machine.

Years of bloodletting in Bosnia, for example, allowed Al Qaeda to establish
a beachhead in central Europe, government officials said. When the United
States guided three rival Balkan states to a peace accord at a meeting in
Dayton, Ohio, in 1995, the stage was set for Al Qaeda and other militant
groups. "Various very militant groups who were mujahedeen-connected were
involved in the Bosnia campaign and took advantage of the Dayton peace
accords to set up shop" in the Balkans, one former intelligence official
said. "They found a very hospitable environment" when a portion of Bosnia
was placed in the hands of Muslims.

The bin Laden financial machine blossomed, according to officials who have
been informed of intelligence information on the matter. Charities around
the Arab world proclaimed that they were raising money for humanitarian
purposes in Bosnia, but in fact portions benefited Islamic extremist groups
in the area, including Al Qaeda.

Militants linked to Al Qaeda also established connections with Bosnian
organized crime figures. The officials said Al Qaeda and the Taliban found
a route for the trafficking of heroin from Afghanistan into Europe through
the Balkans.

Their presence in Bosnia proved so successful for Al Qaeda operatives,
officials said, that it became an "off-the-shelf" model for fund-raising
and recruitment used by the terrorist organization again and again -- in
Kosovo, Albania and Chechnya.

"There is a vast criminal network of these operating throughout Europe,
that provides these groups with the financial revenue to buy military
equipment," one former intelligence official said. "It is narco-terrorism
all intertwined with organized crime."

By 1996, Mr. bin Laden was expelled from Sudan. He moved to Afghanistan and
ingratiated himself with the ruling Taliban by pouring millions of dollars
into the country. His group gained new financial powers; even the country's
national airline, Ariana Afghan Airlines, became Al Qaeda's "Fed-Ex system"
for shipping arms and personnel, officials said. This financial system
transformed the nature of international terrorism. Al Qaeda offered
amateurs dedicated to destruction at any cost a source of cash with no
strings attached.

But that source could be stingy. While millions were available for
recruitment and training, sometimes only a few thousand dollars were
disbursed for particular attacks, leaving Al Qaeda cells struggling to
support themselves with petty crimes, like credit card fraud.

"The organization writ large has a lot of money," said William Wechsler,
who headed counterterrorism for the National Security Council in the
Clinton administration. "But go to any portion of it, and it is scraping by."

Faltering Attack on Finances

After Al Qaeda's deadly bombings of embassies in Kenya and Tanzania in
1998, the Clinton administration began the first major effort to disrupt
the network's financing.

President Clinton ordered the freezing of assets linked to Al Qaeda,
including the funds of Ariana Afghan Airlines. His administration enlisted
the support of Arab and Asian nations against Ariana, and Russia helped
push through a resolution against the airline at the United Nations. Within
a short time, the airline could no longer land outside Afghanistan. Other
efforts to disrupt Al Qaeda's finances were less successful. Beginning in
1999, midlevel Clinton administration officials traveled to Saudi Arabia,
Kuwait, Bahrain and the United Arab Emirates seeking information about
charities aiding Al Qaeda.

But Saudi Arabia and the U.A.E. provided no assistance, American officials
said, and with the embassy bombings receding into memory, the
administration largely moved on. "These visits were not followed up by
senior-level intervention by the State Department, or for that matter by
Treasury, to those governments," said Stuart Eizenstadt, a former Treasury
official and a participant in the trips. "I think that was interpreted by
those governments as meaning this was not the highest priority."

When terrorists struck on Sept. 11, the assault on Al Qaeda's finances had
largely fallen by the wayside. The American government had developed a good
deal of information about Al Qaeda's finances, but it was not widely shared
among agencies.

To coordinate government action, the Bush administration created a Policy
Coordinating Committee, bringing together officials from Treasury, State,
Justice, the National Security Council, the F.B.I. and the C.I.A. Two
interagency groups, the Foreign Terrorist Asset Tracking Center and
Operation Green Quest, were created to identify sources of cash for terrorists.

More Muscle for Authorities

Presidential authority has also been expanded. Until now, a president could
block assets of foreign entities if a finding was made that they threatened
the Middle East peace process. President Bush's Executive Order 13224
expanded the power of the Treasury's office of foreign asset control to
block the property of individuals and entities that commit, threaten to
commit or support terrorism.

The executive order "put the backers of terrorism on an equal footing as
those who issue the orders," said David Aufhauser, the general counsel at
the Treasury Department. Officials said the new rules allowed the
administration to freeze the assets of a wide array of individuals and
groups by better using some information, much of which the government has
had for years.

But, even with the broader powers, the government has frequently chosen not
to issue blocking orders on some organizations with apparent ties to
terrorism. Instead, many of them are allowed to continue running, not
realizing that the administration, working with foreign governments, has
begun covert efforts to disrupt their operations and to trace the
activities of other individuals and groups who do business with them.

Eventually, officials said, some of those organizations have been shut down
once the covert efforts were completed. "It would be easy to put 120 names
on the list," Mr. Aufhauser said. "The standards are accessible, and our
library is full. The question is, is that the intelligent way to proceed?"

For example, officials said, the Bahamas, which has strict bank-secrecy
laws, allowed American investigators to sift through records of a closed
operation there of Al Taqwa bank, a financial network suspected of
providing support to Al Qaeda.

This month, Al Taqwa was cited with Al Barakaat by the United States in an
order blocking their assets.

That same day, Swiss authorities detained principals of Al Taqwa, officials
in Dubai seized assets and records of Al Barakaat, and coordinated
enforcement actions were taken throughout Europe, the Middle East and Africa.

In the basement of F.B.I. headquarters, more than 178,000 financial
documents have been stamped with identification numbers and filed away.
Many are in foreign languages, with financial information in currencies
other than dollars. But each potentially contains another bit of evidence
on the financing of the Sept. 11 attacks.

The government believes that the attacks cost about $500,000. Just under
half that -- $238,000 -- was sent to the hijackers in more than a dozen
wires from the United Arab Emirates, officials said. Four wires have
received particular attention. They were sent in June and July of last year
under three different names -- Mustafa Ahmed Al-Hisawi; Almohtaram, an
Arabic honorific; and Fawor Trading. But officials believe each of the
transfers, totaling $110,000, came from Mr. Ahmed, whose name appears in
numerous Al Qaeda records.

Government officials said additional money appeared to have been provided
to the hijackers in cash. Investigators have tracked down Customs records
showing that, on arriving in the United States, the hijackers and some of
their acquaintances declared about $40,000 in cash. It is not clear if any
of those other people had prior knowledge of the plot.

Also, the hijackers had "maxed out" all of their credit cards to help
finance the operation, one official said.

While they were living in the United States, at least one of the hijackers
appears to have received financial assistance from the American office of a
Middle Eastern organization that helps people traveling overseas, officials
said.

In addition, officials said, at least one entity cited in the President's
blocking orders has turned out to have a direct financial connection with a
hijacker.

As the inquiry proceeds, government officials said, the effort is as much
directed at detecting financial patterns that could signal another
potential attack as it is at unraveling the financing of the Sept. 11 attacks.

Despite the progress that has been made, there are some frustrations among
law enforcement officials about the pace of the financial investigation,
government officials said, largely resulting from the complexity of
obtaining and analyzing a huge volume of foreign records.

Those difficulties have as yet prevented investigators from analyzing
financial records from Germany, a focal point in the hijacking conspiracy.

Also, government officials said, until early November, the United Arab
Emirates seemed to be dragging its feet on providing documentation -- a
problem officials said has dissipated.

Foreign and American officials said the level of cooperation between law
enforcement worldwide has been unusual.

Still, experts said, quick victories on the financial front are unlikely.

"We have been going after organized crime's financial network since we put
Al Capone away," said Mr. Wechsler, the former National Security Council
official. "And while the Mafia is a shell of what it once was, we haven't
stamped it out yet."