Tough trail of terror's money

Such moves are a top priority for Western governments joining in the war on terrorism. "Those who finance terror are as guilty as those who commit it," says British Finance Minister Gordon Brown this week, introducing new measures to crack down on money laundering.

"Our response to the funding of terrorist acts must be every bit as clear, as unequivocal, and as united as our response to the terrorist acts themselves," he told Parliament. "If fanaticism is the heart of modern terrorism, finance is its lifeblood."

That opinion is not universally shared, however. "Choking off the funds is not the real issue," argues Alex Standish, editor of the authoritative Jane's Intelligence Weekly. "It is erroneous to think that terrorist acts are very expensive - most terrorism is very low-budget."

Planning, preparing and carrying out the Sept. 11 attacks, he estimates, cost only a few hundred thousand dollars.

Tracking those sorts of sums is especially complicated if they are moved through an informal banking network known as hawala, which is commonly used throughout Asia.

Under the centuries-old system, which is almost paperless, an Asian worker who wants to remit money to his family back home simply hands the cash to a hawala banker, who faxes or phones a colleague in Asia with the code word that the worker's relative will use to collect the money. Hawala bankers settle their debts among themselves.

When it comes to legitimate, above-ground channels, bin Laden and other terrorist groups have been able to exploit the international financial system, with its easy and almost instantaneous capital flows.

It can take less than a day to move hundreds of thousands of dollars around the world, between several bank accounts in a financial system that has made globalization possible. International businesses depend on such ease of movement, and any steps to restrict it would meet with stiff resistance.

"There is a limit to the fight against terrorist financing, and that is the freedom of business," says Mr. Marret. "At a certain point, they are in contradiction with each other."

Until Sept. 11, for example, Washington opposed international efforts to clamp down on tax havens, where financial controls are weak, despite evidence that criminals take advantage of them. US officials argued that tighter controls would restrain legitimate competition among countries to attract capital.

European guarantees of the free movement of capital are also an obstacle to Washington's call for asset freezing. Though some individual countries have blocked funds belonging to people or institutions on the US lists, the European Union has no power to ban the movement of capital among its members unless there is a threat from a third country, which is not currently the case.

"We would like to act quickly alongside the United States, but at the moment it is not always possible," says Gunnar Wiegand, spokesman for the EU External Affairs commissioner Chris Patten. Mr. Patten is urging new EU legislation that would allow "things like this to be adopted immediately, at the same time as in the United States," so that suspected terrorists do not have time to move their funds, Mr. Wiegand adds.

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