When police raided a London mosque three years ago in their pursuit of a radical Islamic preacher, they found forged passports, laminating equipment, and bundles of cash.

The haul, details of which were only recently made public, speaks volumes about a remarkable evolution in the funding of terrorism. What was once a global network financed by elusive donors and administered by Al Qaeda "fund- managers" has now fragmented into a constellation of franchises that sustain themselves primarily through crime.

This, experts say, is partly a result of the vigorous multinational effort since 9/11 to break up the Al Qaeda network and stanch the cash flows that sustained terror attacks. But it's also due to the reduced cost of mounting terror attacks, they say.

Estimates suggest that the 9/11 attacks may have cost as much as $500,000 to stage. By contrast, the Madrid bombings of 2004 are believed to have cost no more than $15,000, and last year's London attacks perhaps $2,000.Four bombs, four rucksacks, some train tickets, a little gasoline, and a few phone calls.

"Terrorist financing is very different today," says Loretta Napoleoni, author of "Modern Jihad: Tracing the Dollars Behind the Terror Networks." "Five years ago, we had large movement of funds which went through the international financial system.

"Now we are just talking about four friends who raise £1,000 to stage an attack," she adds. "The unit cost of terrorist financing has crashed to the floor. They [terrorists] don't need another 9/11. They can do a small thing and create the same hysteria."

But those who track terror financing haven't adjusted their strategies accordingly, says Gus Hosein, an antiterrorism expert at the London School of Economics: "What we are seeing is terror done on the cheap and yet all the regulations to monitor financial transactions and crack down on this are looking for larger sums."

The 9/11 attacks startled the world into action to combat terror finance. More than 130 countries have signed on to a UN convention requiring legislative action and financial supervision to spot the dirty money. Scores of charities and individuals have been blacklisted both by the UN and by individual jurisdictions.

Hundreds of millions of dollars of assets have been frozen. Many countries set up dedicated terrorist finance units to coordinate action, like the US Treasury's Office of Terrorism and Financial Intelligence. Some passed laws to make financing terrorism a specific crime.

Many of the ideas emanated from a set of recommendations issued by the Paris-based think tank Financial Action Task Force [FATF], in October 2001.

Vincent Schmoll, a senior policy analyst at FATF who says the recommendations have taken on a certain "moral authority" with countries that might otherwise drag their heels, lists the main areas where progress has been made: freezing assets, notification of suspicious transactions by financial institutions, and growing efforts to tackle the informal money transfer system, known as hawala, which operates below the official financial system's radar.

But there have been problems with some initiatives. Banks desperate to avoid a black mark for letting suspect money through the net have zealously filed their "suspicious activity reports," resulting in an avalanche of paperwork for overwhelmed financial investigators. Some estimates put the number of filings in the US alone at 13 million a day.

Islamic charities, meanwhile, complain bitterly about being singled out for attention. One London-based charity that helps fund Palestinian social projects, Interpal, protests that it was blacklisted by America even though it had been cleared in Britain. "It means we cannot take any donations in US dollars, which is obviously a major obstacle to getting funds," complains one employee.

While charity forms an important pillar of the Islamic faith, intelligence chiefs have long suspected that alms sometimes end up financing terrorists.

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