Charity clampdown to curb terrorist financing leads to more kidnappings

The federal government's success in cutting off terrorist financing through phony or diverted charitable contributions has pushed cells to resort to kidnapping for ransom and novel Web-based payments, Obama administration officials said on Wednesday.

Potential attackers are turning to new funding sources, as well as continuing to solicit money from deep-pocket donors in the Middle East, officials said Wednesday at a hearing of the Senate Judiciary Subcommittee on Crime and Terrorism.

"We have made it costlier, riskier [and] less efficient for terrorist organizations to raise funds and move their funds around the world," said Daniel Glaser, Treasury's assistant secretary for terrorist financing. "One of the results of that success has been to transform the problem . . . Other pillars of financial and logistical support remain."

Subcommittee Chairman Sen. Sheldon Whitehouse, D-R.I., asked, "What are those pillars and in what way are they resistant to our previous efforts. What do we need to do to bring them down?"

The emergence of al Qaeda affiliates, particularly the group al Qaeda in the Arabian Peninsula, has been accompanied by an increased reliance on community funding, such as kidnapping for ransom and local taxes, according to Glaser. "You have groups that are controlling territory who raise funds the way the U.S. government does, through taxation," he said.

One solution Glaser suggested is to forge a common approach to paying ransom sums with European partners.

He also noted online payments -- another new method of financing -- present both advantages and disadvantages for counterterrorism efforts. The data trail from those exchanges helps U.S. officials pinpoint money laundering. "Prepaid cards, mobile payments and funds transfers via the Internet can bring added transparency to the financial system when they replace cash and transactions made through unlicensed service providers," Glaser said in his written testimony.

At the same time, government officials are powerless to stop some of those digital transactions because they are not yet covered by counterterrorist financing regulations. "To address that, we are working domestically and through [international forums] to ensure that our safeguards keep pace with payment system innovations," Glaser added.

Recently, the U.S. government has had success cooperating with some Gulf governments on such monetary policies. Saudi Arabia, for example, has been and remains a primary source of funding for al Qaeda and its adherents, Glaser said. To cut off money -- the lifeblood of terrorist operations, the United States has wielded specific sanctions, with support from Saudi Arabia, and worked with the Saudi government to share information on threats. As a result, the Gulf nation cracked down on illicit charitable donations to ensure funds for humanitarian purposes are not diverted to extremist groups.

Fellow witness Ralph Boelter, FBI acting assistant director for counterterrorism, said, "To some extent we've moved them in [the local crime] direction by shutting down the formal financial network. That's a product somewhat of what we've done. I wouldn't suggest that engaging in kidnappings would be their first choice because that's a high-risk activity."