Small Scams Probed for Terror Ties

Muslim, Arab Stores Monitored as Part of Post-Sept. 11 Inquiry
Washington Post, Aug. 12, 2002
http://www.washingtonpost.com/wp-dyn/articles/A6565-2002Aug11.html
By John Mintz and Douglas Farah
Washington Post Staff Writers
Monday, August 12, 2002; Page A01

Authorities are quietly investigating more than 500 Muslim and Arab small businesses across the United States to determine whether they are dispatching money raised through criminal activity in the United States to terrorist groups overseas.

The investigation into Arab businesses, many of them convenience stores, is part of a sprawling inquiry launched after Sept. 11, when law enforcement agents dramatically stepped up scrutiny of small-scale scams that they think are generating tens of millions of dollars a year for militant groups, federal officials said.

The criminal activity includes skimming the profits of drug sales, stealing and reselling baby formula, illegally redeeming huge quantities of grocery coupons, collecting fraudulent welfare payments, swiping credit card numbers and hawking unlicensed T-shirts.

Some of the criminal rings have operated in this country for decades. But until recently, law enforcement agencies paid only scant attention to the schemes because they are difficult to crack and time-consuming to prosecute. Since the Sept. 11 terrorist attacks, however, they have deployed hundreds of investigators to pursue the plots.


A number of law enforcement task forces involved in the crackdown are searching for similarities in the convenience stores’ financial practices and money transfer methods to determine whether their activities are centrally directed.

As part of the overall effort, a U.S. Customs Service supercomputer program has been diverted from analyzing the flow of drug money to tracking terror funds. That effort has led to raids on Pakistani operators of jewelry kiosks in seven states, authorities said.

“It wasn’t until after September 11th that we understood the magnitude of the [terrorist] fundraising from our own shores,” said John Forbes, a former U.S. Customs Service official who directed a financial crimes task force in New York. “We were always looking to catch the big rats” in terror financing, he added. “But in looking for rats, thousands of ants got by.”

Investigators suspect that some of the money has gone to Palestinian groups that use suicide bombings to kill Israeli civilians, including the Islamic Resistance Movement, or Hamas, and the Popular Front for the Liberation of Palestine, federal officials said.


Senior U.S. officials said they are concerned that the inquiry might be seen as ethnic profiling but are simply going where leads take them.

“The fact is that al Qaeda, Hezbollah and Hamas are Middle Eastern groups that are financed from the Middle East, and groups here send money back to the Middle East. So of course we have to look at them,” a senior official said.

Arab and Muslim civil rights activists said they were unaware that officials had launched a large and coordinated investigation into small businesses in their communities.

“It wouldn’t surprise me that authorities are singling out Arab and Muslim businesses for scrutiny, given the presumption of guilt we’ve confronted from government since September 11th,” said Ibrahim Hooper, spokesman for the Council on American-Islamic Relations, a civil rights group.
[…]

The FBI does not think the domestic schemes under investigation were used to finance the Sept. 11 attacks, which were funded by about $500,000 sent from abroad. But the $20 million to $30 million officials say is raised annually through scams in this country is a substantial portion of the estimated hundreds of millions of dollars that Middle Eastern terror groups raise and spend annually, authorities said. The annual budget of the al Qaeda terrorist network has been estimated at $100 million in recent years.


In an effort to track the militants’ money, officials are using sophisticated “data mining” software to discern subtle patterns in the habits of financial scammers, and of participants in some key industries, that could indicate surreptitious money movement.

In recent months, the U.S. Customs Service has shifted its supercomputer program, known as the Numerically Integrated Profiling System (NIPS), away from tracking drug money to finding patterns that suggest commercial fraud undertaken to fund militants.

The program, which traces commodities entering and leaving the country, helped pick up telling anomalies — such as the contrast between gold imports to the United States and the amount of jewelry sold — that led to nationwide raids on more than 70 mostly Pakistani-owned jewelry shops in late June.
[…]

But sometimes, money is moved the old-fashioned way.
[…]

On July 17, officials charged Alaa Al-Sadawi, an Egyptian-born imam at a Jersey City mosque, with currency reporting violations. He had allegedly arranged for his parents to smuggle a suitcase stuffed with $20, $50 and $100 bills on a flight to Egypt. Officials are investigating the origin of the funds.

The groups move their money, officials say, by every conceivable conveyance, including wire transfers of less than $10,000, the figure that banks must report to federal authorities; by money-belted couriers; by suitcase and trunk; and by envelopes of cash sent through FedEx, DHL Worldwide Express and UPS courier companies.

In the past eight months, the Customs-led Operation Green Quest has seized $16 million in currency and monetary instruments such as cashier’s checks that were being sent out of the country illegally.
Although some of the money is related to the drug trade and other criminal activity, officials traced much of it to bank accounts in Lebanon and elsewhere that were directly controlled by Hezbollah.

To predict how terrorist groups might raise funds in the United States, officials also are analyzing militant organizations’ financial scams overseas.

U.S. officials are scrutinizing a panoply of crimes committed by Hamas and Hezbollah in the relatively lawless “tri-border” region where Brazil, Argentina and Paraguay join, including drug trafficking, counterfeiting U.S. currency and manufacturing bogus software and CDs.

Some groups are known to engage in schemes to fund terror activities in the United States. Associates of al Qaeda operative Ahmed Ressam eked out a living in the United States and Canada by shoplifting, stealing luggage from tourist hotels and picking pockets as they planned the unsuccessful effort to bomb Los Angeles International Airport during the 2000 millennium celebration.
[…]

In another case, some participants in a massive methamphetamine ring allegedly sent millions of dollars to Hezbollah.
[…]

The massive methamphetamine smuggling investigation, dubbed Operation Mountain Express, resulted in the January arrests of about 100 people in 10 cities. It also found evidence of close ties between Mexican drug trafficking organizations and Arab American organized-crime groups in New York, Michigan and Canada.

Arab gangs in Canada truck millions of tablets of pseudoephedrine — an over-the-counter cold medicine ingredient that is legal in that country — into the United States, where it is sold to Mexican gangs that use it to manufacture methamphetamine, officials said. Authorities have tracked $10 million in the gang’s profits to the Middle East. The government has traced a portion of that money to accounts that are used by Hezbollah, officials said.

Also among the schemes that agents are scrutinizing is coupon fraud, which offers enormous profits in increments of 10 or 20 cents at a time.

Criminals hire underlings to scour trash bins and recycling centers for bundles of newspaper inserts containing retail coupons. The coupons are brought to neighborhood store owners who are part of the scheme. They redeem the coupons without selling products. In the end, the store owner and the coupon gang split the money.

In the early 1990s, investigators found evidence of coupon fraud by the group that committed the first bombing of the World Trade Center in 1993. Mahmud Abouhalima, a key planner of the bombing, helped run a video store in Brooklyn that redeemed thousands of dollars of food coupons, though it sold no groceries.

The Egyptian-born Abouhalima — a top aide to Sheik Omar Abdel Rahman, the blind cleric who later was sentenced for plotting to bomb other New York City landmarks — was convicted for his role in the bombing and sentenced to 240 years in prison.

About $3.5 billion in coupons are redeemed each year, and industry leaders say that nearly 10 percent of that — about $300 million — is fraudulent. Although it is unknown how much money extremist groups divert from the scam, experts estimate it is at least several million dollars each year.
[…]

Another scam under active investigation is mass production of counterfeit name-brand clothing. Easy to manufacture and highly profitable, knockoff clothing is a multibillion-dollar industry in the United States.

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