New York Times
October 20, 2001


U.S. Seeking a Stronger Role for Banks on Terrorists' Cash


By KURT EICHENWALD and JOSEPH KAHN

WASHINGTON -- Government and banking industry officials are working on a plan to allow banks to serve as a front line for law enforcement in detecting financial transactions by terrorist groups, people involved in the effort have said.

While the talks are at a preliminary stage, the two sides met last week in Midtown Manhattan to discuss ways to have the banking industry take part in detecting and stopping the transactions. If successful, the effort would represent a fundamental shift in the relationship between law enforcement and the banking industry, which until now has been responsible for submitting data to the government that is mostly used for investigations after a crime has occurred.

Most of the 20 chief executives who participated in the session, including those from banks like Citigroup and Bank of America, said that blocking terrorist financing before an attack would require them to overhaul their efforts to battle money laundering, a participant in the meeting said.

Terrorists tend to use the banking system to distribute relatively small amounts of money from large deposits overseas. Banks are geared to monitor accounts for the opposite type of activity, as when drug cartels collect relatively small proceeds from drug sales, disguise the origin of the money and move it into large accounts offshore.

Being on guard for terrorist activity will require new computer programs, new personnel and much more coordination with law enforcement, participants said.

"It will require significant investment," said a federal official who attended the meeting, "but everyone in that room agreed that it just had to be done."

Until now, the primary mechanism for dealing with financial transactions of terrorists and criminals has been reports filed by financial institutions on suspicious activities. The system generates hundreds of thousands of suspicious-activity reports each year, as well as 12 million currency- transaction reports for any transfer of more than $10,000.

The volume is so large, a senior government official said, that law enforcement officials mostly use the accumulated paperwork for retrospective investigations, not for blocking accounts or tracking suspects while terrorists are planning an attack.

The discussions between the government and the banking industry are intended to devise new red flags that can move through the system more quickly, as well as to allow banks to cooperate more fully to detect patterns of illicit activity, officials involved in the discussions said.

Already, the Treasury Department has set up a toll-free phone number so banks can report concerns more quickly. Some 15 to 20 banks are calling each day, government officials said.

"They are giving us much better information than we get" from the standard suspicious activity report, one official said. "We want all the red flags they see."

Financial institutions have been a major source of information in the investigation of the terrorist attacks on Sept. 11. Industry officials said the banks had been receiving an array of subpoenas from federal prosecutors investigating the case in different jurisdictions, including New York and New Jersey. In some cases, they have received subpoenas requesting the same information about the same individual from different federal prosecutors. Those subpoenas are seeking financial information about people who investigators believe have some connection to the hijackings.

Other government agencies have sent to banks lists of individuals and organizations with financial ties to Al Qaeda, the terrorist organization of Osama bin Laden. The government has demanded that the financial institutions freeze the accounts of any name on those lists.

The assorted demands from so many different government agencies has led to some confusion in the industry, officials said.

"There was a sense that we should do this in a more organized way," said Alan Sorcher, associate general counsel of the Securities Industry Association, a trade group. "There was some confusion on our part as to what they wanted."

To help overcome those difficulties, industry officials said, the Federal Bureau of Investigation has stationed agents in the offices of banks and securities firms. There, they work with the institution's compliance and legal departments to obtain relevant data quickly.

"It just helps in the coordination and allows us to get things done much more quickly," an industry official said.

People who have reviewed the collected information said that many of the names on government subpoenas have been matched with bank and credit card accounts, and investigators have obtained reams of related data. The banks have also found accounts linked to names on lists of individuals and organizations that the government says have financial ties to the terrorists.

But, in fact, people who apparently have no connection to Al Qaeda or the hijackings have found their accounts caught up in the financial dragnet. So far, officials said, at least two banks have frozen accounts of people with names that are similar to those on the government lists, but who apparently have no other connection to the case.

For example, Mohammad Ahmad, a Maryland employee of Lockheed Martin, had his account at Citibank blocked for several days after the first list of names of people with suspected financial ties to Al Qaeda came out on Sept. 24. One person on that list, a suspected financial agent of Mr. bin Laden, is Shaykh Sai-id. The Treasury Department said the person was also known as Mustafa Muhammad Ahmad.

Mr. Ahmad said he had to appeal to Citibank for several days before he was told why his account was frozen. Then, he said, he was required to prove that he was not on the government's asset-freeze list by submitting documentation to show that his name was different.

Copyright 2001, New York Times Company. All rights reserved.

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