AL TAQWA BANK

______

A Thesis

Presented to the

Faculty of

San Diego State University

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In Partial Fulfillment of the Requirements for the Degree

Master of Science

in

Homeland Security

______

by

Jason Jonathan Vaught

Summer 2011

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Copyright © 2011 by Jason Jonathan Vaught All Rights Reserved

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DEDICATION

This thesis is dedicated to my mother, for all of her love and support—both emotional and financial—during these challenging times.

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Prescribed for you is fighting, though it be hateful to you. Yet it may happen that you will hate a thing which is better for you; and it may happen that you will love a thing which is worse for you. God knows and you know not. —K. 2:216

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ABSTRACT OF THE THESIS

Al Taqwa Bank by Jason Jonathan Vaught Master of Science in Homeland Security San Diego State University, 2011

This study examines the banking activities of Al Taqwa Bank and investigates the reasons why the government, the United Nations and the concluded that it was a major financier of terrorist organizations after the events of September 11th. This study analyzes literature, interviews and government documents in order to portray accurately the events and actions that this bank and its affiliate members undertook to fund . This study also covers the philosophy that lies beneath the creation of Al Taqwa Bank, including the integration of Nazi ideals with that of Arab nationalism after the defeat of in World War II. It considers not only how this helped Al Taqwa come into fruition, but also the ramifications this has had on the international community in the past and may have in the future. This study also examines the individuals who had the greatest influence within Al Taqwa Bank. It considers the links among members and their philosophies, most notably their affiliations with Nazi Germany and with The , in searching for a common agenda among its members. In addition, this study reviews the clientele served by the bank—a clientele that evidently included both terrorists and “regular” citizens. This study delves into the different banking mechanisms that allowed this financial transfer of illicit funds to occur, such as , the use of shell companies, trade diversions, and other illicit activities, and examines what the international community has done to combat this presence as a security threat. Individuals involved in the creation and operation of Al Taqwa Bank either have died or been found not guilty, due to lack of evidence and due to major connections within the political world of Swiss and Italian entities. Even so, there is much to learn about the operation of the bank and the environment in which it was able to operate with apparent impunity. Issues of “bank secrecy” and dual-criminality are discussed, as well as the continuing efforts to revise international agreements in order to remove the shroud of secrecy behind which terrorist activities may flourish. Finally, this study examines the extent to which established protocols of secrecy—and prominent figures—stood in the way of a crucial investigation. This study touches on key elements of international diplomacy and the overlap of states’ interests and businesses’ interests. Sometimes these interests seem indivisible and, when that is the case, new approaches to diplomacy are indicated.

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TABLE OF CONTENTS

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ABSTRACT ...... vi LIST OF FIGURES ...... ix ACKNOWLEDGEMENTS ...... x CHAPTER 1 INTRODUCTION ...... 1 2 THE PEOPLE OF AL TAQWA ...... 4 Arab Nationalism ...... 4 Franςois Genoud ...... 7 Ahmed Albert Friedrich Armand Huber ...... 18 Ali bin Mussalim (aka Mussalem) ...... 21 Ahmed Idris Nasreddin ...... 23 Youssef Moustafa Nada ...... 25 3 HISTORY OF AL TAQWA BANK...... 29 The Muslim Brotherhood, and the origins of Al Taqwa ...... 29 Roots of the Muslim Brotherhood: Hassan al-Banna ...... 30 The Rise of Said Ramadan ...... 31 Al Taqwa ...... 32 Al Taqwa Comes Under Suspicion ...... 35 9/11: All Eyes on Al Taqwa...... 36 The Investigation of Al Taqwa ...... 37 Epilogue ...... 42 4 AL TAQWA’S AFFILIATES ...... 45 5 SWISS BANKING SECRECY ...... 51 Swiss Banking Secrecy: A Brief History ...... 53 Swiss Secrecy Under Attack ...... 56 Money Laundering and the FATF ...... 57 The New Front: Tax Evasion and “Double Criminality” ...... 59

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6 PREVENTION ...... 62 New Laws Limiting Bank Secrecy and Financing of Terrorism ...... 65 Analysis of Laws...... 69 7 RECOMMENDATIONS ...... 73 8 CONCLUSION ...... 80 9 METHODOLOGY ...... 83 BIBLIOGRAPHY ...... 85

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LIST OF FIGURES

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Figure 1. Cost of terrorist attacks...... 65 Figure 2. Comprehensive counter-terror strategy...... 73

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ACKNOWLEDGEMENTS

This course of study would not have been possible without the encouragement and wisdom of my excellent instructors, mentors and friends who compose the faculty of San Diego State University, and especially Professors Eric Frost and Jeff McIllwain, whose devotion to their field is an ongoing inspiration. Certainly I could not have completed this thesis without the support of my mother, whose strength and encouragement have inspired me always to try and reach my full potential. I would also like to thank all the teachers who are too numerous to name for always challenging me to excel through my academic career. Finally, I would like to thank my family at large for their understanding during all the times that I was unable to show up at social gatherings, knowing I was trying to better myself.

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CHAPTER 1

INTRODUCTION

Allah is our goal; the Qur’an is our constitution; the Prophet is our leader; Struggle is our way; and death in the path of Allah is our highest aspiration. —Credo of the Muslim Brotherhood

The events of 9/11 galvanized the United States in pursuit of those who had played any role in the planning and execution of the attack. The world knows well what happened militarily, with the attack upon Afghanistan’s , the subsequent occupation of and the ousting of Saddam Hussein. Even prior to 9/11, of course, the United States and its interests suffered casualties as a result of terrorist attacks. Embassies had been bombed; suicide bombers attacked the Marine barracks in Beirut. Terrorists attacked the U.S.S. Cole in a Yemeni harbor, and exploded a bomb in the underground garage of the World Trade Center. Efforts already were underway to identify the network of organizations and their financiers that were conspiring against the interests of the United States, endangering its citizens and its military personnel. Many of the world’s nations considered and implemented international agreements and protocols; intelligence agencies endeavored to infiltrate terrorist networks and intercept their communications. After September 11, 2001, however, these efforts instantly accelerated. Agencies collated and compared existing intelligence; the U.S. President informed the world that there were only two choices: “You’re either with us or against us in the fight against terror.” The U.S. called upon the United Nations to summon its members and take action. Resolutions were passed demanding cooperation and insisting that Al Qaeda’s leaders be brought to justice. Counter-terrorism experts and military strategists, in the midst of these diplomatic and military efforts, pursued another course of action that sought to uncover the answers to these questions: Who had paid for this operation? What was the source of the funding, and how did it find its way into the hands of the hijackers? Suspicion immediately focused on a conglomerate of banks and their affiliates known as Al Taqwa Bank. Al Taqwa,

2 incorporated in various regions of the world considered “tax havens” due to their commitment to bank secrecy, had been established by a group of men with odd connections and allegiances. Included among them were Nazi sympathizers and Swiss bankers, Muslim Brotherhood members and wealthy businessmen. What were the connections among these men? What were these apparent links between the Third Reich and extremist Islamic aggression? Who were the depositors to Al Taqwa, and whither the proceeds? The rise and fall of Al Taqwa is a lesson in world history, as adherents to the legacy of Hitler’s National Socialism movement were to be found among its founding members. The Muslim Brotherhood, founded and later outlawed in , would be well represented among Al Taqwa’s constituent members. Members of the world’s loosely knit amalgamation of jihadis and Islamic nationalist extremists would cross paths wherever an Al Taqwa office resided. It is a lesson in archaic banking procedures, as long-standing protocols dating back to the 17th Century continue to be closely guarded and vigorously defended. The Swiss Bankers Association and the government that hosts them would find themselves under an international microscope, with questions being raised as to the true meaning of “neutrality” in the context of the world’s new realities. And, in the process, old wounds would be reopened, as the role of the Swiss during and after World War II would be illuminated and disparaged. It is a lesson in law enforcement: Despite all of the allegations against Al Taqwa Bank and its principles, not a single prosecution was successfully concluded. The principle figures of Al Taqwa protested their innocence throughout, and combined international forces were unable even to commence a trial against them. It is a lesson in international relationships. Laws intended to help countries cooperate in the apprehension and extradition were seen to be inadequate and vague; “double criminality” provisions provided a defense for those accused of crimes in one country, when those accused were taking refuge in a country that did not recognize the subject acts as criminal behavior. It is a lesson in Middle Eastern politics. An examination of the Muslim Brotherhood and its beliefs brings into sharp relief the divisions between “church and state” in the Muslim world. Youssef Nada and the other principle members of Al Taqwa—members of the Muslim Brotherhood--stand in absolute defiance of the secular governments of nations such as Egypt and , even as wealthy citizens of those societies funnel aid and support to the Muslim Brotherhood. For the Muslim Brotherhood, the goal is to eliminate the

3 barriers of nations and to establish a pan-Islamic caliphate. It is also a lesson in separation, just as Islamic terrorists are a small part within Islam the Muslim brotherhood and the Nazi influences are a small part within Arab nationalism. Finally, the study of Al Taqwa Bank is a lesson in the history of Islam itself, stretching from the earliest imperialist goals of its 7th Century forefathers to the present extremist reenactment of its past glory.

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CHAPTER 2

THE PEOPLE OF AL TAQWA

This section contains the biographies of the higher officials of Al Taqwa bank. They had led rich and diverse lives prior to the formation of Al Taqwa—lives that were an amalgam of financial success, religious and political fervor and controversy. The intersection of these issues illustrate both the true force and the true face of Al Taqwa Bank; the success of Al Taqwa and its many affiliate organizations reflected an agenda of the greater collective consciousness to which its members subscribed. However, before we go into the specific biographies of the parties involved with Al Taqwa we must first go into the nationalist movements of the Arab world during World War II, as this will help with framing the thought of the individuals at Al Taqwa, the greater extremist fundamentalist movement that this bank is associated with, but the greater Arab community as a whole.

ARAB NATIONALISM Before we go into the history of the individuals within Al Taqwa Bank this study will first go into a brief history of the Arab Nationalist movement. First, and foremost, the Arab Nationalist movement consisted of more people, ideologies, and faiths than those that surrounded the Grand Mufti and the fundamentalist extremism that fuels the current terrorist activities of entities such as Al Qaeda and . It is a large and diverse group with different ideological thoughts consisting of Muslims and Christians alike, as well as differentiating their hatred between the Zionists, whom they felt were occupying their land in Palestine and the more innocent Jew refugees, whom were being murdered by the Third Reich and seeking Palestine as one of their destinations of refuge. It is important to note this time in history because so much of the ’s current nationalist ideologies spring from this time. This modern movement of Arab-nationalism started off as an anti-colonial independence movement, and according to Gilbert Achar in his book, The Arabs and the

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Holocaust: The Arab-Israeli War of Narratives, consisted of four basic ideological current during the 1930s and 1940s: The Liberal Westernizers, The Marxists, The Nationalists, and The Reactionary and/or Fundamentalist Pan-Islamists.1 They are not exclusive unto themselves, many of these ideologies may share the same thought, such as liberal Westernizers and pan-Islamists sharing the same views of independence, though the pan- Islamists seek to do so through a purely religious form rather than a secular democracy; or the Westernizers and Marxists whom share the same liberal values. The distinction that is made between these groups is the political position and reference each chose to adapt to in the contemporary position in which they lived in. With that being stated each group held the Nazis and their ideologies in different regards. The Westernizers, with their liberal view of creating a society of secular conception and rational-humanitarian values, opposed the ideas of National Socialism from the outset. They even went so far as to claim that the Nazis and the Zionists held the same colonial qualities within each other, and stated the Zionists used the abominations done by the Nazis as an excuse to legitimize their own enterprise. They never sided, as many of the other groups, with the "enemy of their enemy", that being siding with the Nazis because the Zionists were their enemies as well as being enemies with the Westernizer’s colonial leaders in Great Britain.2 The Marxists were also hostile to Nazism until their ideological leader, Stalin, signed the Stalin-Hitler pact, which lasted from 1939-19413. This cost them a lot of ridicule as they then had to try to legitimize their changed stance. The Marxists took a step beyond the Westernizers by not only relating Nazism and Zionism to each other, but by branding the Zionist movement to a racist one, thus equating the two ideologies: "Zionism = Nazism"4. The movement itself was hindered a great deal when the Soviet-Union helped sign into existence in the UN, as well as giving military support and arming Israel. This lead to the

1 G. Achcar, The Arabs and : The Arab-Israeli War of Narratives (New York: Metropolitan Books, 2010), 15. 2 Ibid., 22 3 Ibid., 34 4 Ibid.

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Marxists looking like hypocrites in the Arab world, as their leaders helped manifest the Zionist agenda of creating Israel even as they spouted to be against it. The Nationalists are a little more contributing to current Arab nationalist thought. The Nationalists saw Nazis primarily as the enemy of the British, and perceived their anti-Semitic views as a potential to become an ally against the Zionists. These nationalists, however, were secular like the Ba'ath party that ruled Iraq and Syria. Though some of the nationalists showed interest in the Nazi party and some of its ideologies, most of the Nationalists considered the Nazis to be racist and nearly saw them as an enemy to their enemy, though they didn't actually ally with them or use their fascist ideologies at this time5. The Nationalist movement also helped with forming the non-secular anti-West movement. However, they still saw the relevance between the Zionists and the refugee Jews that came due to the holocaust. In short, the ideologies present within this movement help drive some of the Islamic fundamentalist movement that Al-Taqwa is a part, such as the Muslim Brotherhood which still sees Israel and the United States as modern day occupiers similar to their colonizers of the past. The most relevant nationalist movement to this thesis is the Fundamentalist Pan- Islamists. This movement did not start during this time, as trying to create a Muslim society has been around since the time of Mohammed, with the first Caliphate being created shortly after the prophet’s death. The violence and disregard for life that many associate with the current manifestation of Islamic extremism has come from different periods throughout Islamic history. The leaders of these extremist sects find inspiration from past individuals, such as Ibn Taymiyyah, whom created a jihad against the invading Mongols and made a fatwa to kill other Muslims, Mongolian Muslims, during 13006. One of the more inspiring individuals to this ideology during the time of World War II is the Grand Mufti of Jerusalem, Amin el-Husseini. He is dually important for this thesis, not just for his actions historically influencing Islamic extremism, but also for personally influencing many of the senior members of Al Taqwa Bank, which will be explained in greater detail in the biographical sections.

5 Ibid., 42

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It is important to note the differences of each ideology to realize that within this thesis the Nazi movement did not influence all of the nationalistic movements within the Middle East, nor was it a catalyst in their independence, Within some groups, notably the fundamentalists, there are similarities, such as rhetoric and propaganda used, as well as direct involvement but that is just part of the greater Middle Eastern thought. However, this thesis pushes on the ideas of different extremist ideologies coming together. One of those ideologies is fundamental extremism which also happens to be a part of the Arab nationalist movement, though it is not the epitome of Arab nationalist thought.

FRANςOIS GENOUD Born: 1915 Lausanne, Died: May 30, 1996 Pully, Switzerland In a hotel in Bad Godesberg, Germany, a young teenager would meet his hero who would shape the rest of his life. The 16-year-old teenager’s name was François Genoud, and the hero he met on that fateful day in 1932 was . Sixty years later he would tell a London newspaper, “My views have not changed since I was a young man. Hitler was a great leader, and if he had won the War the world would be a better place today.”7 Genoud’s father, a wealthy wallpaper manufacturer, had sent François to Germany to learn discipline, and one certainly could argue that the plan was a success. From that moment, François Genoud became a lifelong disciple of National Socialism. Genoud returned to Switzerland in 1934 and joined the pro-Nazi National Front. He traveled to Palestine in 1936 where he met the grand Mufti of Jerusalem, who was also the pro-Nazi religious and political leader of Palestinian Muslims. The Grand Mufti, Amin el- Husseini, spent most of his time during World War II in Germany and according to Gitta Sereny, “would consider [Genoud] a confidant until his death in 1974.”8 Husseini, who also would figure prominently in the life of Ahmed Huber, worked closely with the Third Reich in developing support in the Arab world. He was profoundly anti-Semitic, and was an ardent supporter of the extermination of Jews. In 1942, ordered 10,000 Jewish

7 D. L. Preston, “Hitler’s Swiss Connection,” Philadelphia Inquirer, January 5, 1997, http://www.writing.upenn.edu/~afilreis/Holocaust/swiss-and-hitler.html. 8 Ibid.

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children sent from to Theresienstadt, the concentration camp located in what now is the Czech Republic. The Red Cross offered to broker a trade, in which German prisoners of war would be exchanged for the children, but Husseini learned of the plan and protested to Heinrich Himmler, warning him that the “little Jews” would soon become “big Jews.” The proposed swap was cancelled, and the 10,000 children perished at Theresienstadt.9 During his time in Berlin during the War, Husseini helped recruit Balkan Muslims for the infamous SS "mountain divisions" that endeavored to annihilate the Jewish communities throughout the region.10 Husseini and the Third Reich had agreed to cooperate on a plan that would be executed upon the successful defeat of Allied forces in . Husseini would marshal Arab support for the Third Reich and, in exchange, he would be granted the authority to exterminate all Jews living in the Middle East.11 Testifying at the Nuremberg Trials, Adolf Eichmann’s deputy director Dieter Wisliceny stated: The Mufti was one of the initiators of the systematic extermination of European Jewry and had been a collaborator and adviser of Eichmann and Himmler in the execution of this plan. ... He was one of Eichmann's best friends and had constantly incited him to accelerate the extermination measures. I heard him say, accompanied by Eichmann, he had visited incognito the gas chamber of Auschwitz.12 Wisliceny was executed following the trials. The Grand Mufti fled from Germany to Egypt at the end of the war in 1945, where he was welcomed as a hero of the Islamic world. Although indicted by Yugoslavia as a war criminal, Husseini escaped prosecution as the victorious Allies feared an Arab uprising should their “hero” be so targeted. Husseini was not alone among former Nazis and their sympathizers in Egypt: A great many high-ranking Nazi leaders made their way to Egypt and became advisors and leaders to the Egyptian monarchy.13

9 J. E. Katz, “Haj Amin al Husseini,” accessed on April 26, 2010, http://www.eretzyisroel.org/~jkatz/ husseini.html. 10 “Grand Mufti Haj Amin al-Husseini,” Palestine Facts, accessed on April 26, 2010, http://www.palestinefacts.org/pf_mandate_grand_mufti.php. 11 A. Bogle, “Haj Amin al-Husseini and Nazi Racial Policies in the Arab World,” accessed on July 26, 2010, http://hubpages.com/hub/Husseininationalsocialism. 12 Ibid. 13 “Dossier: Les Liens Privilegies Entre Nazis et Palestiniens,” Union des Patrons et des Professionels Juifs de , May 20, 2003, accessed on April 26, 2010, http://www.upjf.org/.

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The Grand Mufti had earlier entrusted François Genoud with the management of his enormous financial resources. Genoud then traveled extensively around the Middle East since he now also worked for the Swiss and German Intelligence agencies, using Husseini’s fortune to pay for his travels. When Genoud returned to Lausanne, Switzerland from Germany in 1940, he opened a night club called the “Oasis Nightclub.”14 This club served as a covert operation center for the counter-intelligence service in Germany known as the Abwehr. The Abwehr would then send Genoud into Germany, Czechoslovakia, Hungary, and Belgium. In the process, Genoud befriended many top Nazis, including SS Gen. Karl Wolff, who has been Heinrich Himmler’s personal adjutant and who by 1945 would be “Supreme SS and police leader” in .15 Wolff was an exuberant and committed Nazi. According to a document submitted to the Nuremburg court in 1946, Wolff had responded "with particular joy" upon hearing that "for two weeks now a train has been carrying every day five thousand members of the ‘Chosen People’ from Warsaw to the killing center of Treblinka.”16 Karl Wolff gave an interview to Swiss journalist David Garbely just prior to Wolff’s death in 1984. According to Garbely, Wolff spoke of how much former Nazis everywhere owed to François Genoud. Wolff said that Genoud acted as an intermediary for the former Nazis after the war, while they were in prison or in hiding.17 The Abwehr agent who directed Genoud on his international missions was Paul Dickopf. Genoud would later reminisce about Dickopf, telling a London newspaper: It was a tit for tat between me and my Abwehr contact [Dickopf]. I was dealing in all kinds of things including currency, diamonds and gold, and Dickopf liked dealing too. So I pushed things his way, and he pushed things my way…It was all very satisfactory, everybody was happy. We were all friends.18 Later, with Genoud’s help, Dickopf would go underground, hiding in Belgium and eventually emerging in Switzerland. With the war over, Dickopf returned to Germany in

14 Preston, “Hitler’s Swiss Connection.” 15 Ibid. 16 H. Arendt, Eichmann in Jerusalem (New York: Viking Press, 1963), 15. 17 E. Paris, Unhealed Wounds: France and the Affair (New York: Grove Press, 1986). 18 Preston, “Hitler’s Swiss Connection.”

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1947 and joined the Federal German Police, progressing to the head of the Bundeskriminalamt, Wiesbaden. The former Abwehr agent and member served as the President of Interpol from 1968 to 1972, and died in 1973.19 Genoud would represent the Swiss Red Cross in Brussels after the war. After his work at the Red Cross, according to the documents from Nazi-hunter Serge Klarsfeld of Paris, Genoud soon used his banking contacts to set up a network that became known as the “Organisation Der Ehemaligen SS-Angehörigen” or, more simply, ODESSA.20 Toronto author Erna Paris stated, “the money, most of which was stolen from European Jews, was deposited in numbered bank accounts through a clandestine club of former SS officers called Die Spinne (The Spider) which was the successor to the ODESSA organization.”21 The ODESSA organization functioned principally for the transfer of millions of Marks from Germany into Swiss Banks. It was also being used for the evacuation of key Nazi leaders into Egypt, Morocco, Spain and Latin America.22 Genoud also acquired all posthumous rights to the writings of Hitler, Bormann, and Goebbels from the families of these men. These rights made Genoud a fortune when the volumes were published. According to Gitta Sereny of the London Observer, Genoud’s personality was the deciding factor. “To the surprise of many people,” she wrote, “he invariably comes across as a sympathetic and honest man.”23 Genoud used more of his contacts to become an advisor, researcher, and banker to the cause of Arab nationalism. He set up AraboAfrika in 1955, an import-export company that served as a cover for the dissemination of anti-Israeli and anti-Jewish propaganda, as well as being the catalyst to deliver weapons to the Algerian National Liberation Front. He would also use it to hide ex-Nazi officials amongst the Arab world. The Central Intelligence

19 AIM25, “Dickopf, Paul,” accessed April 26, 2010, http://www.aim25.ac.uk/cgi-bin/vcdf/detail?coll_id =8538&inst_id=104&nv1=browse&nv2=repos. 20 Preston, “Hitler’s Swiss Connection.” 21 Ibid. 22 “Odessa,” Jewish Virtual Library, accessed on April 26, 2010, http://www.jewishvirtuallibrary.org/ jsource/Holocaust/odessa.html. 23 Preston, “Hitler’s Swiss Connection.”

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Agency (CIA) helped Genoud and other ex-Nazis during this time, seeking to offset the Soviet influence in the Middle East, according to documentation by Christopher Simpson.24 Genoud’s activities in managing “Nazi Gold” were well known: It has long been known in various European circles that "a Swiss citizen who lives in Lausanne" has managed the Nazi treasury since the fall of the Third Reich. The money, most of which was stolen from European Jews, was deposited in numbered bank accounts through a clandestine club of former SS officers called Die Spinne (the Spider), the successor to the ODESSA organization. In March 1965, Le Monde indirectly identified this individual as François Genoud. In 1969, the Centre d'information et de documentation moyen-orient in Brussels confirmed the identification.25 Genoud managed not only the finances of the Grand Mufti al Husseini and the treasures looted by Nazis during the war, he also handled the investments of Hjalmar Schacht, the former Nazi Reichsminister of Finance and president of the Reichsbank who served as a post-war intermediary between Germans and Arabs.26 François Genoud was a Nazi and made no apologies for being one, telling the London Independent, “'I personally have the highest regard and admiration for Hitler. He was a great man.”27 Genoud paid for the legal defense of Adolf Eichmann, Klaus Barbie and “Carlos the Jackal,” defenses provided in part by the controversial attorney Jacques Verges. “Everyone has his hobbies,” Genoud reportedly said about his contributions to the legal defense of Barbie, known as the “Butcher of Lyon.”28 Genoud assisted in the 1972 hijacking of a Lufthansa flight by “Victorious Jihad.” Palestinian jihadis under the direction of Wadi Haddad hijacked the flight, bound for Frankfort from Bombay. In the end, the plane was diverted to , the passengers (including the 19-year-old Joseph Kennedy, son of the late Robert Kennedy) were freed, and $5 million in “used bills” were delivered to the Popular Front for the Liberation of Palestine. Genoud later admitted his involvement to French journalist Pierre Pean—after the expiration

24 Ibid. 25 Paris, Unhealed Wounds. 26 Preston, “Hitler’s Swiss Connection.” 27 R. Waterhouse and M. Sheridan, “Paper May Face Legal Action on Copyright to Goebbels Diary,” The Independent, July 12, 1992, http://www.independent.co.uk/news/paper-may-face-legal-action-on-copyright-to- goebbels-diary-1532799.html. 28 Paris, Unhealed Wounds.

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of the statute of limitations—and reported that he and his wife had driven all night to so that he could deliver the ransom note that included the $5 million demand and explicit instructions for its delivery.29 On May 30, 1996, in the presence of family and friends, Genoud drank a lethal cocktail of poison dissolved in water that a close friend had made for him with the full knowledge of its intent. Genoud had explained that he was in poor health and that psychological illness had made his life unbearable since his wife had passed away in 1991. It was reported that he had become a member of the suicide-assistance organization Exit a year earlier.30 Some, however, speculate that there were other reasons for the timing of Genoud’s suicide. Genoud’s suicide came four weeks after Jewish leaders and Swiss banking officials were setting up a commission to examine funds that were deposited in Switzerland from Holocaust victims. The Swiss government’s own probe into Nazi plunder was underway at the same time, and might have implicated Genoud in a Swiss collaboration with Nazi Germany to hide gold looted from both Holocaust victims and governments.31 Also, Genoud had run afoul of new Swiss laws that outlawed racial incitement, and was being investigated for anti-Semitic comments he’d made in a recently aired documentary. A Lausanne attorney had been hired by the Swiss Federation of Jewish Communities and, on May 28, 1996, the lawyer sought a search warrant for Genoud’s residence. Two days later, Genoud was dead.32 Daniel Lack, a Geneva attorney, said this: It stands to reason he [Genoud] must be implicated in the illegal transfer of Nazi assets to Switzerland and concealing it. I dare say that the man realized this. All these inquiries into the opening of the records of Nazi assets in Swiss banks may have compromised him in more ways than one. It’s not improbable, his connections being what they were and his sympathies being what they were.”33 The allegations that Genoud had been an administrator of funds looted from Holocaust victims and from the countries conquered by the Third Reich were damning not only to

29 Preston, “Hitler’s Swiss Connection.” 30 D. Lester, Suicide and the Holocaust (Hauppage, NY: Nova Science Publishers, 2006), 177. 31 Preston, “Hitler’s Swiss Connection.” 32 Ibid. 33 Ibid.

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Genoud and his associates, but also to the vaunted neutrality and practiced secrecy of the Swiss and their bankers. An investigation into the disposition of these assets would prove to be pivotal in the eventual weakening of the Swiss banking laws that had been in place since 1934. That October, in 1996, the world Jewish Congress had released a once-secret U.S. Army document from 1945. This document stated that the Allied soldiers had found bags of gold fillings from human teeth among stacks of gold bars, gold coins, silver, Passover candlesticks, paintings and other assets looted by the Nazis and hidden in a salt mine in Merkers, Germany.34 Oswald Pohl, who was head of the SS Economic and Administrative Main Office, was interrogated by the United States Army and confessed to having worked with Reichsbank Vice President Emil Puhl in the development of a financial plan. Pohl confirmed that he had worked with Puhl “in the utmost secrecy in arranging for gold, jewelry, and foreign currency to be deposited in the Reichsbank—while gold teeth and crowns taken from concentration camp victims were to be melted down and the gold ingots transferred to the Reichsbank.”35 “Efficient utilization of the prisoner’s body at the end of nine months increases this profit by the return of dental gold. It is possible at times to obtain additional revenue from the utilization of bones and ashes,” Pohl added.36 The specter of teeth, bone and ashes being harvested by the Third Reich in support of its aims is particularly chilling, even though one could note that the victims at least were at peace by the time these valuables were taken from them. But these were the final products of the : The Nazis had systematically plundered conquered territories and the occupants of those territories of their gold, currency, jewelry, art, clothing, furniture—every item that had value or could be converted to value was confiscated by the Third Reich in support of their war effort. This is not news, of course. The systematic extermination of Jews, gypsies, Poles, trade unionists, homosexuals and others has been thoroughly documented; equally documented has been the theft from these individuals of their belongings. The story that still

34 Ibid. 35 G. Caropozi, Jr., Nazi Gold (Far Hills, NJ: New Horizon Press, 1999), 46. 36 Ibid.

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is being told, however, is of the ultimate disposition of these treasures. What makes this issue relevant to this thesis is the documented involvement of the “neutral” Swiss in accepting and shielding these stolen valuables, as well as their role in resisting examination of their records (citing banking secrecy) and impeding efforts to return valuables to their original owners or heirs. Perhaps the Swiss had reason to believe that their complicity accounts were settled when, in 1946, they and the Allied powers signed the Washington Agreement in which the Swiss agreed to pay $58.1 million to a commission established to help rebuild . In exchange, the Allies would give up further claim to gold purchased from Germany by the Swiss during the war.37 The Swiss promptly paid the $58.1 million, but they also were obligated under the terms of the agreement to identifying dormant accounts that were “heirless,” and could be used for the benefit of Nazi victims. During the war, fearing that their savings were going to be impounded, millions of Jews and others established accounts in Swiss banks, believing that they would be safe in the vaults and records of those venerable institutions. Millions of these accounts went unclaimed after the war, as the depositors had been the victims of the Third Reich. But the Swiss would not comply, raising objections to the process. United States mediators reported in 1950 that the Swiss “had no intention of ever implementing the 1946 Washington Accord.”38 On December 20, 1962, upon being prompted by Israel and by Jewish agencies, the Swiss Bankers Association asked its member banks to examine their accounts to determine if they could identify those belonging to victims of the Holocaust. A total of 9.5 million Swiss francs were paid out.39 But advocates and historians believed that there was much more--not only were there more accounts belonging to victims, they said, but the accounts deposited by fleeing Nazis during the run-up to the War’s conclusion should be identified and seized. These, of course, would include the accounts managed by François Genoud.

37 “Nazi Gold: A Report on Switzerland’s Wartime Actions as a Neutral Nation and its Role as Banker and Financial Broker for Nazi Germany,” Frontline, June 1997, http://www.pbs.org/wgbh/pages/frontline/shows/ nazis/. 38 Carpozi, Jr., Nazi Gold, 118. 39 Frontline, “Nazi Gold: A Report on Switzerland’s Wartime Actions.”

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The Swiss Bankers Association announced in February 1996 the results of a new internal review, and that an additional $32 million had been found in 775 dormant accounts. Advocates still were not mollified.40 Investigations, lawsuits and Congressional Hearings ensued. Jewish leaders and the Swiss Bankers Association agreed in 1996 to create a committee to investigate claims; headed by Paul Volcker, the former Chairman of the Federal Reserve, the “Independent Committee of Eminent Persons” commenced its investigation, to include an audit of Swiss banks by three international auditing companies.41 A class action suit was filed later in 1996 by Gizella Weisshaus, a Holocaust survivor, and the Swiss Federal Department of Foreign Affairs appointed a task force to investigate the Holocaust assets controversy. Not everyone was pleased: “The attempt to reopen this settlement a half- century later is scandalous,” said Hans Schaffner, who was head of the Swiss Federal Office of War Economy from 1939 to 1946 and later served as Switzerland’s President. “I’m confident that current investigations will show that only a tiny fraction of those accounts (exist)….In any case, those records are available for inspection.”42 Problems persisted. Swiss banks invoked “bank secrecy” protections, and shielded accounts from inquisitors’ view. Swiss insurers demanded to see a “death certificate” of the holder of a life insurance policy before paying claims to an heir—knowing that the did not issue such certificates.43 Former Swiss president Jean-Pascal Delamuraz stated on New Year’s Day, 1997 that Jewish advocacy groups were practicing “blackmail.”44 From all indications, this pronouncement did not help negotiations move more smoothly. But it may have been nothing compared to what occurred less than two weeks later when, on January 14, 1997, the Union Bank of Switzerland--the country’s largest—was caught red-handed in an apparent cover-up: A bank guard for the Union Bank of Switzerland, twenty-nine-year-old Christopher Meili, came across bushelsful of records at the bank’s shredding machines and carried them out of the room to safety. The documents contained

40 Ibid. 41 Ibid. 42 Carpozi, Jr., Nazi Gold, 124. 43 Ibid., 323. 44 Frontline, “Nazi Gold: A Report on Switzerland’s Wartime Actions.”

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listings of thousands of depositors from World War II days who were Jewish refugees who had fled to Switzerland and deposited their life savings in accounts with…Union Bank.45 Meili went public with his find, became the subject of death threats and, along with his family, was granted asylum in the United States.46 Pressure increased upon the Swiss government and its banks. New lawsuits were filed, other countries began inquiries; three Swiss banks established a “humanitarian fund” of 100 million Swiss francs to benefit Holocaust victims and Swiss high school students even commenced a collection to aid Holocaust victims.47 One by one, the Commissions and Task Forces released their reports, and the results were damning. The Independent Committee of Eminent Persons—also known as the Volcker Commission—found millions of dormant accounts, and noted that some banks had charged fees on these dormant accounts even though the banks knew that the account holder was dead or had disappeared. On some of these accounts, the accumulation of fees and charges debited the accounts into exhaustion.48 Additionally, the Volcker Commission identified “questioned actions” including: …at the least, a widespread lack of diligence in searching for victims’ accounts. In a few banks, deliberately misleading statements about closed accounts were made to claimants by bank officials. Earlier inquiries used excessively narrow research criteria. Many banks placed little or no emphasis on the work, and there was inadequate follow-up. In two egregious instances, the (Swiss Bankers Association) itself appeared to counsel limited (and, therefore, incomplete and, consequently, misleading) responses.49 The report of the United States State Department, prepared by William Z. Slany and coordinated by Stuart E. Eizenstat (the “Eizenstat Report”) went farther. While it noted that several nations—including the United States, in the early years of World War II—had declared themselves either as neutral or non-belligerent, their “neutrality collided with

45 Carpozi, Jr., Nazi Gold, 279. 46 Ibid., 281. 47 Frontline, “Nazi Gold: A Report on Switzerland’s Wartime Actions.” 48 Independent Committee of Eminent Persons, Report on Dormant Accounts of Victims of Nazi Persecution in Swiss Banks (Berne: Staempfli Publishers, 1999). 49 Ibid.

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morality; too often being neutral provided a pretext for avoiding moral considerations.”50 The report noted that, in the second phase of the War, when the Axis powers were in retreat, “The Neutrals continued to profit from their trading links with Germany and thus contributed to prolonging one of the bloodiest conflicts in history.”51 And the Eizenstat Report singled out the Swiss for their role: …in addition to its critical banking role for the Nazis, Switzerland’s industries engaged in direct production for the Axis and helped protect Axis investments; Swiss shipping lines also furnished Germany with a large number of boats for the transport of goods. Switzerland also allowed an unprecedented use of its railways to link Germany and Italy for the transport of coal and other goods. Switzerland provided Germany with arms, ammunition, aluminum, machinery and precision tools, as well as agricultural products. Swiss convoys carried products from Spain across France through Switzerland to Germany. Swiss banks serviced Nazi markets in Latin America. This conduct continued even as the Germans retreated and the threat of invasion evaporated. As late in the War as early 1945, Switzerland vitiated an agreement it had just reached with the United States to freeze German assets and to restrict purchases of gold from Germany.52 The report overtly ridiculed any claims by the Swiss banks that they did not know the source of Nazi gold that was being deposited in their accounts. It overtly criticized the Swiss government for being obdurate and legalistic in its negotiations, “regardless of the moral issues also at stake.” The report noted that the Swiss opposed returning any Nazi gold to those from whom it was stolen, and even denied receiving such gold.53 Clearly, Switzerland’s cherished self-image of pristine neutrality was tarnished. The “Alpine Kingdom” would be accused of helping to supply the Third Reich, as noted above, but also would be accused of turning away Jewish refugees (as had the United States); asking the Third Reich to stamp a “J” on the passports of Jews for easier identification; requiring the families of Jewish refugees admitted to Switzerland to support them, though other refugees were exempt from such requirement.54 A later story would emerge that accused the “neutral”

50 S. E. Eizenstat, U.S. and Allied Efforts to Recover and Restore Gold and Other Assets Stolen or Hidden by Germany During World War II [The Eizenstat Report] (Washington, DC: U.S. Department of State, 1997), accessed on April 26, 2010, http://www.state.gov/www/regions/eur/ngrpt.pdf. 51 Ibid., v. 52 Ibid., vi. 53 Ibid., vii. 54 Ibid., v-x.

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Swiss of turning their backs as trains traveled from Italy to Germany, passing through Switzerland, carrying cattle cars full of Italians bound for slave labor in Germany, and Italian Jews bound for death in the camps.55 Ultimately, an agreement was reached in August 1988 between the Swiss, their banks, and others. The “global settlement” resulted in outstanding claims being settled in the amount of $1.25 billion—a long ways from the $58.1 million amount that had been paid at the end of World War II.56 The damage, however, had been done. The self-congratulatory Swiss claims of “neutrality” had been compromised in the world’s view; the Swiss banks reputation as guardians of secrecy came to be seen in a different light, a light in which “secrecy” equated to conspiracy. The stage had been set for the suicide of François Genoud, who had been accused of administering Swiss accounts full of Nazi gold—including the gruesome image of dental gold contained within those ingots. The stage had also been set for a new look at the role of Swiss banks and their traditions of secrecy in the context of countering the financing of terrorism. Momentum was building that would keep the Swiss on the defensive. In the end, it is very difficult to learn about Genoud’s activities. The State Department has yet to declassify 16 documents relating to Genoud; 29 other documents relating to his application for a visa or permit to enter the U.S. remain classified.57

AHMED ALBERT FRIEDRICH ARMAND HUBER Born: 1927 Switzerland Died: 2008 Switzerland Achmed Huber was one of the founding members of Al Taqwa Bank. Born “Albert” to Protestant parents, he changed his name to Ahmed after converting to Islam in 1962. He originally became a convert to Sunni Islam in Switzerland, then traveled to Egypt where he again recited the shahada, this time at the Al-Azhar mosque in Cairo. The Swiss mosque had close ties to the Muslim Brotherhood; the Egyptian mosque clearly did not. The Muslim

55 Frontline, “Nazi Gold: A Report on Switzerland’s Wartime Actions.” 56 “Swiss Banks Settlement: In re Holocaust Victim Assets Litigation,” accessed on April 26, 2010, http://www.swissbankclaims.com/Overview.aspx. 57 Preston, “Hitler’s Swiss Connection.”

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Brotherhood was overtly rejected by Egypt’s President , whose Arab nationalistic beliefs were in opposition to the Brotherhood’s views of pan-national Islam. Enmity between Nasser and the Muslim Brotherhood was mutual: Muslim Brotherhood members were instructed upon Nasser’s death to "not pray for the faithless Nasser."58 Huber had considered himself an Arab nationalist, but the Islamic Revolution in Iran under Khomeini shifted his thinking to more of a pan-Islam stance. Huber, though still a Sunni, believed that the Shi’a revolution in Iran should be a model of Islamic uprising, control and dominance. The revolution played into his anti-colonial beliefs, beliefs that had been strengthened both by his time spent in Egypt and by his earlier involvement with Algerian rebels fighting French colonialism. In 1959, the Swiss Social Democratic Party, of which Huber was a member, asked for his help in providing refuge to Algerians who were being hunted for their involvement in illegal weapons shipments through Switzerland. Huber allowed them to stay in his home, and engaged them in conversations both about their faith and their struggle against the French colonialists.59 Huber worked as a journalist for various Swiss news services until being relieved of his duties when he came out publicly in favor of the Ayatollah Khomeini’s fatwa against Salman Rushdie in 1989. This was the latest in a series of statements and actions that embarrassed Huber’s employer, Ringier AG. Earlier, members of the German Parliament had forbidden access by Huber to the press areas, following statements by Huber that denied the Holocaust. The Swiss Socialist Party expelled Huber in 1992, following a series of similar anti-Semitic, anti-feminist and pro-Khomeini pronouncements.60 To truly understand Ahmed Huber, one must first revisit Amin Al Husseini, (1895 - 1974), the “Grand Mufti of Jerusalem,” who likely was the greatest influence on Huber. Recall that Amin Al Husseini was a close associate of Adolf Hitler and had been influential

58 S. K. Aburish, Nasser, the Last Arab (New York: St. Martin's Press, 2004). 59 A. Morgan, “Exclusive: The Muslim Brotherhood: Islam, Anti-Semitism and Totalitarianism,” Family Security Matters, December 11, 2009, http://www.familysecuritymatters.org/publications/id.4995/ pub_detail.asp. 60 Global Muslim Brotherhood Daily Report, “Obituary: Swiss Neo-Nazi/Islamist Tied to Muslim Brotherhood Dies at Age 80,” last modified May 27, 2008, http://globalmbreport.com/?p=886.

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in the 1936-1939 uprisings against the British.61 He was fiercely anti-Zionist, to be sure, but had to be considered anti-Semitic as well, given his documented complicity in consigning Jews to the death camps. Husseini spoke on Radio Berlin on March 1, 1944: “Arabs, rise as one man and fight for your sacred rights. Kill the Jews wherever you find them. This pleases God, history, and religion. This saves your honor. God is with you.”62 Huber spent time in Egypt with Al Husseini, whose experience with the Third Reich provided a more sympathetic view of Nazism. He also met Al Husseini’s close friend, (1902-1965), who had written "Juden Sehen Dich An”—or, “The Jews are Watching You”—a very popular anti-Semitic tract published by the Third Reich. Von Leers had fled Germany in 1945, spending five years in Italy and another five years in Argentina before moving to Egypt, converting to Islam and working in Egyptian President Nasser’s government as political advisor to the Information Department.63 In Al Husseini and Johann von Leers—now “Omar Amin”—Huber found men whose charisma and biographies were intriguing. Both had connections to the Third Reich; both were staunchly anti-Zionist and anti-colonialist. These connections later would be strengthened by Huber’s associations with another Nazi-sympathizer, Swiss banker François Genoud, a confidante of (and banker for) Al Husseini. Here, then, was the recipe for Al Taqwa: The Muslim Brotherhood, sympathy with the Third Reich, and access to the Swiss banking system. Huber, it should be noted, also was a key leader in the Avalon Gemeinschaft, an organization that celebrates the ancient Celtic-Germanic pagan rituals associated with the summer solstice but, more importantly, serves as the Swiss umbrella organization seeking to rewrite the history of the Holocaust. To that end, Huber had associations with Holocaust “revisionists” both in Europe and in the United States--The Institute for Historical Review, located in Orange County, California. Here, too, Huber and Genoud found common ground: David Irving, the British Holocaust denier, includes on his website multiple samples of

61 T. Swedenburg, “The Role of the Palestinian Peasantry in the Great Revolt (1936–1939),” in The Modern Middle East, edited by A. Hourani, P. Khoury, and M. C. Wilson (New York: I.B. Tauris, 2005), 467– 503. 62 M. Pearlman, Mufti of Jerusalem: The Story of Haj Amin el Husseini (London: V Gollancz, 1947). 63 I. Sedar and H. J. Greenberg, Behind the Egyptian Sphinx: Nasser's Strange Bedfellows; Prelude to World War III? (Philadelphia: Chilton, 1960).

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correspondence between Genoud and himself, in which they describe Joseph Goebbels affectionately as “the Little Doctor” and “a great man.”64 Kevin Coogan is an investigative journalist who has written volumes on Huber, Genoud, and the links between unrepentant Nazis, Swiss bankers, and Islamic jihadists. Coogan accuses Huber of being involved in gun-running, citing an Italian investigation that revealed Huber’s role of transferring weapons from the collapsed Red Army to Al Qaeda factions in Pakistan and elsewhere. Coogan writes: During the investigation of Nasreddin and Nada’s circle, Milan investigators were no more amazed when on September 30, 2000, a Tunisian named Habib Waddani surfaced with the information about Ahmet Huber and his central role with his Islamic friends. Habib Waddani in the spring of 1996 had gone with Rodolfo M., a Zurich-living attorney from Sicily, and met a businessman from the Baltic who made a tempting offer, namely access to the weapons surplus of the former Red Army. There was even talk of possibility of widening the deal to nuclear material from the former USSR. What was lacking was a buyer. The Sicilian brought in an Islamic attorney Kamil B. living in Zurich for advice and he, in turn, called in his good friend Huber. And there was not only an interest in Russian weapons but also a quick solution ready for the logistics part.65 In 2008, Huber died at his home in Muri bei Bern, Switzerland.

ALI BIN MUSSALIM (AKA MUSSALEM) Born: ? Died: June 2004, in Lausanne Switzerland Ali bin Mussalim was a key member of Al Taqwa Bank, and a figure who had been subject to earlier investigation by the U.S. Government for his role in the Hunt brothers’ attempts to corner the world’s silver market in the 1980’s. Mussalim, according to reports published in the Financial Times, carried a Saudi diplomatic passport. He had been a key figure in negotiating an agreement between France and the Saudis in 1994 that resulted in the

64 D. Irving, “Documents on Swiss Banker François Genoud,” accessed on May 9, 2010, http://www.fpp.co.uk/Hitler/Genoud/letters1.html. 65 K. Coogan, “Report on Islamists, The Far Right and Al Taqwa,” Nachricten Heute, accessed May 10, 2010, http://oraclesyndicate.twoday.net/stories/557998/.

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French selling frigates to supply the Saudi navy, for which he is alleged to have earned a commission of 50 million Euros.66 Earlier, in the 1980s, Mussalim was investigated by U.S. authorities for his role in the attempt by Nelson Bunker Hunt and Herbert Hunt to corner the world’s silver market. The Hunts, members of the right-wing John Birch Society, sought to make a fortune by restricting others’ access to silver (used primarily at that time in the photograph development industry), and approached both the Shah of Iran and King Fahd of Saudi Arabia to determine if they were interested in participating in the scheme.67 Ultimately, the Hunt brothers set up the “International Metals Investment Company,” with headquarters in Bermuda, with four principals: Nelson Hunt, Herbert Hunt, Mohammed Aboud al-Amoudi, and Ali bin Mussalim. The four—along with Mahmoud Fustock, a businessman and the brother-in-law of the crown prince of Saudi Arabia—were found liable by a Federal jury in August 1988 on racketeering charges brought against them by an investment company that had lost millions in the scheme.68 At one point, fearing a government confiscation of their silver holdings, the Hunts “chartered three 707 jets from Texas to Chicago and New York—in the dead of night—and loaded them with forty million ounces of silver to be whisked away to Switzerland for safe keeping.”69 The U.S. Treasury’s deputy general counsel, George Wolfe, sent a letter to Swiss authorities in January 2002 asking for their help in investigating Mussalim. According to that letter, Mussalim “has been providing indirect investment services for al-Qaeda, investing funds for bin Laden, and making cash deliveries on request to the al-Qaeda organization,” and the letter went on to link Mussalim to Youssef Nada and the Al Taqwa Bank.

66 S. Fidler, “Swiss Based Al Qaeda Suspect Had Saudi Passport,” Financial Times, April 27, 2005, accessed on April 20, 2010, http://www.guillaume-dasquie.com/index2.php?option=com_content&do_pdf =1&id=16. 67 Ibid. 68 H. Hurt III, “Sheik to Sheik: Let’s Make a Deal,” Pittsburgh Press, July 9, 1981, http://news.google.com/newspapers?nid=1144&dat=19810709&id=xPMdAAAAIBAJ&sjid=KF0EAAAAIBAJ &pg=6934,2979440; T. J. Lueck, “Hunts are Ruled Part of Scheme to Control Silver,” New York Times, August 21 1988, http://www.nytimes.com/1988/08/21/nyregion/hunts-are-ruled-part-of-a-scheme-to-control- silver.html?pagewanted=all. 69 J. D. Seagraves, “Bunker Hunt’s Attraction to Silver: A History of Cornering the Silver Market” Silver Monthly, July 17, 2007, http://www.silvermonthly.com/182/bunker-hunts-attraction-silver-history-cornering- silver-market/.

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According to the Los Angeles Times, Mussalim had held Saudi ministerial status as an “advisor at the Royal Court” for many years both before and after 9/11, and was “a close confidant of Saudi King Fahd.”70 Ali bin Mussalim was found dead in his home in Lausanne, Switzerland, in June 2004.

AHMED IDRIS NASREDDIN Born: November 22, 1929 Adi Ugri, Died: (Still living as of July 26, 2010) Less than two weeks after the attacks of 9/11, U.S. President George W. Bush issued Executive Order 13224, “Blocking Property and Prohibiting Transactions With Person Who Commit, Threaten to Commit or Support Terrorism.” A lengthy list of companies and individuals was included in the order, and prominent among those individuals was Ahmed Idris Nasreddin, an avowed member of the Muslim Brotherhood and close associate of Youssef Nada.71 Born in Ethiopia, Nasreddin became a wealthy businessman, working for the Bin Laden family businesses in Saudi Arabia. He would later move his operations to Milan, Italy, and would serve as ’s honorary consul in Milan.72 Nasreddin helped establish the Islamic Cultural Institute of Milan, a mosque just across the border from Lugano, Switzerland. Some European intelligence agencies believed that the Cultural Institute was a center for recruiting and supplying terrorist groups, including Al Qaeda. The Center’s imam—Anwar Shaban—was a follower of the “blind cleric,” Omar Abedl Rahman, who was convicted of planning to destroy landmarks in New York and remains in a U.S. prison.73 Nasreddin and Youssef Nada were close associates and cofounders of the Al Taqwa Bank. Nasreddin’s Akida Bank and holdings were virtually inseparable from Bank Al

70 S. Henderson, “The Saudi Royals and Al Qaeda,” Los Angeles Times, June 26, 2005, http://articles.latimes.com/2005/jun/26/books/bk-henderson26. 71 Exec. Order No. 13224 (Sept. 23, 2001). 72 M. Hosenball, “Attacking the Money Machine: Today's Police Raids Were the Result of Long-Running Investigations into Terror Funding in the United States and Abroad,” November 7, 2001, http://www.newsweek.com/id/76145/page/1. 73 M. Hosenball, “Terror’s Cash Flow: Is Al Taqwa, A Shadowy Financial Network, A Secret Money Machine For ?” Newsweek, March 15, 2002, http://www.newsweek.com/id/153583/page/1.

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Taqwa, with common employees and common addresses. It was believed that these not only were “shell companies,” but also part of a massive shell game in which assets would move from place to place, lost in a labyrinth of deliberately misleading record-keeping.74 Nasreddin founded MIGA, the Malaysian Swiss Gulf and African Chamber, in 1984. MIGA was a society ostensibly created to promote business relationships between the Gulf States and Asia, Europe and Africa.75 It later would be considered an organization involved in the financing of terrorist activities: The United Nations Security Council issued a notice on May 15, 2007 listing both MIGA and Nasreddin as “belonging to or associated with the Al-Qaida organization,” and listing Ahmed Nasreddin as the “president of this entity.”76 In an interesting side note, MIGA was suspected by some of being connected to the oil-for-food scandal. A co-founder of MIGA was Abdul Rahman Hayel Saeed, an Arab businessman born into a wealthy Yemeni family that owns the Hayel Saeed Anam Group of Companies, or HSA. Saeed serves in a leadership position for HSA, operating in Jeddah, Saudi Arabia. As one of the four co-founders of MIGA, Saeed granted power-of-attorney to Nasreddin to run MIGA.77 HSA, according to Rosett and Russell, “boasts a far-flung business empire, including a Yemen-based Islamic bank, and a host of business subsidiaries, affiliates and regional trading offices in places ranging from the United Kingdom to Egypt, Morocco, , Ethiopia, , , Russia and China.” The conglomerate sold $400M worth of goods to Saddam Hussein between 1996 and 2003 under Iraq’s monitored oil-for-food program, with a large percentage of those sales originating in the Pacific Interlink division of HAS.78 Pacific Interlink sold $20M worth of palm oil to Saddam in 2001. That single contract--according to estimates made by U.S. Defense Contract Management Agency (DCMA)--resulted in an estimated mark-up of 15% over the standard market rate for palm oil

74 Coogan, “Report on Islamists.” 75 C. Rosett and G. Russell, “Possible Saddam-Al Qaeda Link Seen in U.N. Oil-for-Food Program,” FOX News, September 20, 2004, http://www.foxnews.com/story/0,2933,132682,00.html. 76 U.N. Security Council, Department of Public Information, “Security Council Approves Amendments to Identifying Information of Two Individuals, One Entity on Consolidated List (SC/9017),” May 15, 2007, http://www.un.org/News/Press/docs/2007/sc9017.doc.htm. 77 Rosett and Russell, “Possible Saddam-Al Qaeda Link.” 78 Ibid.

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at the time, suggesting that it may have been another example of the Saddam method of underpricing oil and overpricing purchased commodities, the process by which he was able to divert oil-for-food funds to his own purposes. Rosett and Russell speculate that these funds may have found their way to terrorist activities, either through MIGA or from Saddam, directly.79 There can be little question about the connections between MIGA and Nasreddin, however. MIGA closed its offices in Lugano, Switzerland in 2003. According to Rosett and Russell, a phone call placed to MIGA in 2004 was answered not in Switzerland, but in an office in the Hotel Nasco in Milan, Italy. The Hotel Nasco is owned by Ahmed Nasreddin.80 Nasreddin moved from Lugano to Tangiers, Morocco in 1994, according to the records of the United Nations Security Council.81 He continued to operate his multiple business ventures from this location with apparent impunity: An MSNBC report showed viewers the active operation of Nasreddin’s business ventures in Nigeria, despite the ongoing resolution requiring that Nasreddin’s assets be frozen. In a note of amusing irony, the MSNBC reporter noted that Nasreddin’s Nigerian Nasco operation ought not be difficult to locate, since it is located on Ahmed Nasreddin Road.82 Only six months after issuing a notice that Nasreddin and his operations were affiliated with Al Qaeda, on November 14, 2007 the United States and the United Nations quietly dropped Ahmed Idris Nasreddin from their lists of designated terror financiers, citing as their only justification that Nasreddin had submitted sworn statements that he no longer had any affiliation with Youssef Nada or the Al Taqwa Bank.83

YOUSSEF MOUSTAFA NADA Born: May 17, 1931 Alexandria, Egypt Died: (Still living as of July 26, 2010)

79 Ibid. 80 Ibid. 81 U.N. Security Council, Department of Public Information, “Security Council Approves Amendments.” 82 L. Myers, and A. Roston, “Alleged Terror Financier Operates in Plain Site: Bush Vowed to Freeze His Assets Years Ago, so Why Is He Still in Business?” MSNBC, June 30, 2005, http://www.msnbc.msn.com/id/ 8421366/. 83 J. Meyer, “When is a Terrorism Figure No Longer One?” Los Angeles Times, November 28, 2007 available at http://articles.latimes.com/2007/nov/28/nation/na-financier28 accessed on April 25, 2010.

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No one is more closely associated with Al Taqwa Bank than its President and founding member, Youssef Nada. An articulate self-promoter, Youssef Nada has not shunned publicity to the extent that the other Al Taqwa principals have; he maintains his own website84 and has not hesitated to challenge the charges that have been leveled against him. Youssef Nada is considered one of the most influential leaders of the Muslim Brotherhood, often being described as the Brotherhood’s “foreign minister.” Nada’s role is enigmatic: He publicly rejects the tactics of Al Qaeda, even as he is suspected of helping to fund their efforts. In an interview on the Muslim Brotherhood’s English language website, for example, Nada compares Al Qaeda to the Ku Klux Klan, to Germany’s Badmeinerhof and to Italy’s Red Brigades; he dismisses Al Qaeda’s tactics as “adolescent:” What raises eyebrows is that they were convinced that they can change the countries and defeat their armies through the use of knives, pistols, and Kalashnikov. Therefore, they are trained on using them. I see that it is a stage of religious adolescence which has been fueled by the material, social and moral injustice, of tyranny rulers and their use of oppression and violence and sidelining the judiciary.85 Information on Youssef Nada’s youth and early adult life is difficult to confirm, and some allegations can easily be dismissed. One popular story, for example, claims that Nada was employed by the Nazi military intelligence during World War II, and was instrumental in helping the Grand Mufti of Jerusalem escape.86 Of course, simple math reveals that Nada would have been 13 years old at this time, casting fairly quick doubt on the veracity of the story. What is more certain is Nada’s rise as leader in the Muslim Brotherhood, as a successful businessman and ultimately as one of the controversial founders of Al Taqwa Bank. He has been linked to “The Project,” the document described as the blueprint for the Muslim Brotherhood’s plan to advance its aims through persuasion, infiltration and Machiavellian machination. Born in Egypt to a dairyman, Nada initially pursued the family’s business in his studies. He joined the nascent Muslim Brotherhood in 1947, and participated in resisting the

84 Official Website of Youssef Nada, http://www.youssefnada.ch/index.html. 85 S. Abadi, “Youssef Nada’s Interview with Ikhanweb,” accessed May 10, 2010, http://www.ikhwanweb.com/article.php?ID=13968&LevelID=2&SectionID=68. 86 R. Labeviere, Les dollars de la terreur-Les Etats-Unís et les islamistes (Paris: Grasset & Fasquelle, 1999), 148.

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British occupation of the Suez Canal region in the 1950’s.87 Nasser’s government arrested Nada in 1954 as part of the Egyptian government’s round-up of Muslim Brotherhood members following the failed assassination plot against the Egyptian President. He served two years in prison, and was released in 1956. He resumed his agricultural studies in Alexandria, working on a plan to develop powdered . After this business venture failed, Nada left Egypt in 1960, moving first to and later to .88 During the 1960’s, Nada became a major supplier of cement projects for the booming industry in Libya, where he made his fortune using floating barges as cement silos. He escaped Libya during the 1969 Al-Fateh Revolution, traveling first to Greece and ultimately landing in Campione d’Italia.89 From this point forward, the story of Youssef Nada is virtually indistinguishable from the story of Al Taqwa Bank. Nada is at the root of its controversies; he is listed along with his various business ventures on the U.N.’s list of financiers of terror, only to see his name later removed from the U.N.’s list. Among the key Al Taqwa figures, he is the only one still living who remains on the U.S. list of terror financiers (See Al Taqwa section, in the following Chapter). His troubles with Egypt are not over. In 2007, fearing the growing influence of Muslim Brotherhood members in Egypt’s political processes, President Mubarak ordered the trial of forty top members of the Brotherhood including, in absentia, Youssef Nada. The Egyptian government sentenced Nada and five other Muslim Brotherhood members in 2008 to 10 years imprisonment.90 Nada steadfastly denies any connections to terrorism, but makes no apologies for his membership in the Muslim Brotherhood, telling the interviewer from Ikhanweb: “I still adopt like others the ideology of the Muslim Brotherhood, a thought which is mainly emerging

87 IkhanWeb, “Profiles of Some MB Members Referred to Militarily [sic] Courts,” February 11, 2007, http://www.ikhwanweeb.com/article.php?id=2454. 88 Ibid. 89 IkhanWeb, “Profiles of Some MB Members.” 90 “Prominent Global Muslim Brotherhood Leaders Sentenced in Absentia by Egyptian Military Tribunal,” The Global Muslim Brotherhood Daily Report, April 21, 2008, http://globalmbreport.com/?p=782.

28 from the pure sources of Islam which was sent by Allah. We adopted and still adopt this ideology, vowing to live, struggle and die for the sake of this movement.”91 These, then, are the men of Al Taqwa. What is the story of Al Taqwa, and how did the investigation of Al Taqwa’s activities proceed? In the next Chapter, the history of Al Taqwa Bank is examined in detail.

91 Abadi, “Youssef Nada’s Interview.”

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CHAPTER 3

HISTORY OF AL TAQWA BANK

The birth of the Al Taqwa Bank—along with its multiple subsidiaries and parallel organizations—represents the convergence of two streams. One stream flows from Nazi Germany, with its legacy of confiscated treasures from the victims of the Third Reich’s Holocaust. The other stream flows from the Grand Mufti of Jerusalem, whose resistance to Western colonialism and militant promotion of Islam found full manifestation within the precepts of the more extremist personnel within The Muslim Brotherhood. Representatives of these ideologies came together, and found full bloom of their partnership in the establishment and operations of the Al Taqwa Bank. It is also important to note that the leaders of the Arab world, during the time of World War II, often had a viewpoint of anti- imperialism aimed at the British. This led to the common mistake of allying with the enemy of an enemy making them a friend, hence, the Nazis helping Arab Nationalism take root even though their ideologies are not analogous.

THE MUSLIM BROTHERHOOD, AND THE ORIGINS OF AL TAQWA The Security Council of the United Nations issued a notice on March 10, 2010 in which it announced that The Security Council Al-Qaida and Taliban Sanctions Committee approved the deletion (de-listing) of the three entries specified below from its Consolidated List. The assets freeze and arms embargo set out in paragraph 1 of Security Council resolution 1904 (2009) therefore no longer apply…92 The three entries specified included the various divisions of Waldenberg AG, the Youssef Nada & Gesellschaft MBH, and the individual Youssef M. Nada. This move, shrouded in

92 U.N. Security Council, Department of Public Information, “Security Council Al-Qaida and Taliban Sanctions Committee Removes Names of Three Entities from Consolidated List (SC/9877),” March 11, 2010, http://www.un.org/News/Press/docs/2010/sc9877.doc.htm.

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mystery amid finger-pointing by multiple parties, closed what is at least the first chapter in the history of Al Taqwa Bank.

ROOTS OF THE MUSLIM BROTHERHOOD: HASSAN AL- BANNA The Muslim Brotherhood had been founded in 1928 by Hassan al-Banna, an Egyptian whose beliefs advocated for a more “pure” application of Islamic thought. He reportedly was appalled at the foreign presence in Egypt, at the foreign ownership of utilities, at the contrast between the luxurious residences of executives of the Suez Canal Company and the shacks occupied by the common workers.93 The Muslim Brotherhood advocated for a pan-Islamic government, from “Spain to Indonesia,” based solely on the Koran and the Sunna.94 The Muslim Brotherhood’s influence and membership grew rapidly, attracting members from all classes of Egyptian society. The Brotherhood recruited and deployed members to battle during the Palestinian conflict of 1948. Concerned that the Brotherhood’s influence—and, now, military presence—represented a growing potential threat to the central Egyptian governmental authority, Prime Minister Mahmoud an-Nukrashi Pasha disbanded the Brotherhood in December, 1948, sent many of its members to jail and seized its assets. Less than three weeks later, in response, an-Nukrashi Pasha was assassinated by a Brotherhood member. Hassan al-Banna issued a statement condemning the assassination, but was himself assassinated in Cairo on February 12, 1949 while at a meeting that purportedly was for the purposes of negotiating the continuing existence of the Muslim Brotherhood. It was reported that the hospital was directed not to treat al-Banna’s wounds, and that he died in great agony. The Muslim Brotherhood continued to grow because of its inherent popularity, and found adherents in other countries. Hassan al-Banna’s close associate and secretary, Said Ramadan, became the de facto leader of the Brotherhood following al-Banna’s death. Said Ramadan had been dispatched by al-Banna to Palestine, where he helped to establish a foothold for the Brotherhood. Later, after the establishment of the State of Israel in 1948, al-

93 R. P. Mitchell, The Society of the Muslim Brothers (London: Oxford University Press, 1969), 7. 94 L. Davidson, Islamic Fundamentalism (Westport, CN: Greenwood Press, 1998), 97–98.

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Banna sent Ramadan to Pakistan as his ambassador. Ramadan married the daughter of Hassan al-Banna, becoming his son-in-law.

THE RISE OF SAID RAMADAN Ramadan represented the Muslim Brotherhood at the World Islamic Conference in Karachi. The 1950’s saw Ramadan’s growing influence in Pakistan: According to the Middle East Media Research Institute’s A. Dankowitz: “Even Abu Al-A’la Al-Mawdudi, who later became one of the great theoreticians of terrorist jihad, thanked Said Ramadan for ‘awakening his (religious) consciousness.”95 A failed assassination attempt upon Egypt’s President Gamal Abdel Nasser in 1954 resulted in the outlawing of the Muslim Brotherhood in that country.96 Nasser rescinded Said Ramadan‘s passport and, along with other key figures in the Brotherhood, Ramadan fled the country. He moved to Saudi Arabia, where he founded the World Islamic League. He moved to Geneva, Switzerland in 1961, where he founded the Islamic Center of Geneva. Ramadan’s World Muslim League, established in 1962, was a harbinger of things to come. The World Muslim League was funded by the Saudi elite and, according to Robert Dreyfuss: With vast Saudi funding, the league sent out missionaries, printed propaganda, and doled out funds for the building of Wahhabi-oriented mosques and Islamic associations from North Africa through Central Asia, even outside the Islamic world. According to Gilles Kepel, a noted French scholar of Islam, it also served as a conduit for Saudi money to radical Islamists, from the ultraright Islamic Society in Pakistan to Afghan jihadists to the Muslim Brotherhood itself.97 From his new home in Switzerland, Said Ramadan would be instrumental in establishing the Al Taqwa Bank—the financial instrument with which the Muslim Brotherhood would carry out its worldwide promotion of Wahhabi promotion.

95 A. Dankowitz, Tariq Ramadan – Reformist or Islamist? (Inquiry & Analysis Series Report No. 266), February 17, 2006, http://www.memri.org/report/en/0/0/0/0/0/0/1613.htm. 96 Aburish, Nasser, the Last Arab. 97 R. Dreyfuss, “Cold War, Holy Warrior,” Mother Jones, January/February 2006, http://motherjones.com/ politics/2006/01/cold-war-holy-warrior?page=4.

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AL TAQWA While working out of Germany and Switzerland in 1960, Ramadan took control of a commission that was engaged in the construction of a mosque in Munich. He had been invited to participate in the commission by Ghaleb Ali Himmat, a Syrian by birth who had enjoyed great financial success as a merchant in Germany. Ramadan and Himmat worked closely together; they went abroad on fund-raising trips and ultimately transformed the commission into the Islamische Gemeinschaft in Deutschland (IGD)—the foundation of the Muslim Brotherhood in Germany. It was during this period that Himmat met Youssef Mustafa Nada. Nada was a member of the Muslim Brotherhood, living in Austria. He had joined the Brotherhood in the 1940s, and had been arrested during the Egyptian sweep that followed the 1954 assassination attempt on Nasser. Nada had worked in the family dairy business and, in 1960, went to Austria to enhance his knowledge of production.98 When the cheese production business failed to thrive, Nada considered other options. He developed a business relationship with the Libyans; Nada established a close relationship with the court and was able to secure a concession exporting building materials from Austria. This business eventually became a major supplier of cement not only to Libya but also to other countries, including Saudi Arabia.99 When Himmat and Ramadan sought contacts in Libya for their fund-raising efforts on behalf of the Muslim Brotherhood, Youssef Nada provided the introductions.100 The 1969 coup in Libya drove Nada and his business out of that country. He ended up in Campione d’Italia, an Italian enclave in Switzerland near Lake Lugano, where his relationship with Himmat blossomed. Himmat asked Nada to join the Islamic Society of Southern Germany. Nada joined in 1971. Later, in 1978, Nada appointed Himmat to the board of his newly

98 S. Merley, “The Muslim Brotherhood in the United States,” Research Monographs on the Muslim World 2, no. 3 (April 2009): 1-71. 99 Ibid. 100 Ibid.

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established Nada International in Liechtenstein, a company that served as the center of Nada’s Saudi business operations.101 Said Ramadan, Ghalib Ali Himmat and Youssef Nada comprised the three legs of the stool that became Al Taqwa. All active members of the Muslim Brotherhood, they also comprised a nucleus of financial acumen and leadership. They shared a common vision of pan-Islamic governance in opposition to the secular governmental model represented by Egypt under Nasser, as well as by Iran under the Shah. They were joined in the Switzerland Islamic milieu by three more men who would be instrumental in the development and growth of Al Taqwa: François Genoud, Achmed Huber and Achmed Idris Nasreddin. Recall that François Genoud was an established banker who was implicated in the Odessa project, in which millions in stolen Jewish treasures were hidden in Swiss accounts. He had been the financial manager for Amin Al Husseini, the Grand Mufti of Jerusalem— another colleague from the Third Reich. Achmed Huber was another associate of the Grand Mufti; he was an unrepentant Nazi sympathizer who was implicated in gun-running and advocacy on behalf of anti-Israeli causes. Achmed Idris Nasreddin was an Ethiopian-born businessman, financier and banker, operating out of Milan, Italy. Also a member of the Muslim Brotherhood, Nasreddin operated the Akida Bank and had close tie to Italian political circles. Nasreddin’s Akida Bank and holdings were virtually inseparable from Bank Al Taqwa. According to Kevin Coogan’s “Report on Islamists, The Far Right, and Al Taqwa,” Nasreddin’s “connections to Al Taqwa were so close that their employees worked at the same time in the business affairs of both operations.”102 These men became founding directors of the Al Taqwa Bank in 1988, headquartered as an offshore tax haven in the Bahamas with operations out of Switzerland, Italy, and Liechtenstein. In some ways, Al Taqwa operated as a hawala, lacking much of the formal record-keeping of traditional banks. In the end, this lack of traditional records may have protected its principals from prosecution. A hawala, from the Hindu word for “trust,” is a comparatively informal value transfer system in place throughout much of the world where banks are not easily accessible or equally trusted. A common use of the system is to remit

101 Ibid. 102 Coogan, “Report on Islamists.”

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funds earned by an individual in one country to his family members in his home country, through a network of associates and intermediaries.103 One might consider “Western Union” as an example of a value transfer system—albeit more formal—in which we trust Western Union—not a bank—to receive funds from us at one location and ensure that that may be retrieved by another individual in a different location. Al Taqwa established correspondent accounts that provided it with access to other banks in Europe and in the United States, allowing it to move large sums of cash with little risk of discovery. Correspondent accounts may take many forms; for some very small domestic banks, for example, the establishment of a correspondent account with a larger domestic bank allows them to offer services to their customers that they might not otherwise be able to provide, given their lack of infrastructure. In this case, however, correspondent accounts refer to “banking agreements” with institutions in other countries, thereby negating the need for a bank to establish its own corporate presence in those other countries. The USA Patriot Act defines correspondent accounts as follows: … a correspondent account broadly (includes) any account established for a foreign financial institution to receive deposits from, or to make payments or other disbursements on behalf of, the foreign financial institution, or to handle other financial transactions related to such foreign financial institution. While this is a relatively broad definition, it requires a formal relationship through which the financial institution provides regular services.104 Al Taqwa’s key correspondent account was with the influential Swiss Banca del Gottardo which, like other Al Taqwa operations, also is located in Lugano. Gottardo’s former president was Claudio Generali, a vice president of Switzerland’s ruling Liberal Radical Party. Gottardo, in turn, has correspondent accounts in New York with both Citibank and the Bank of New York.105

103 T. J. Biersteker and S. E. Eckert, Countering the Financing of Terrorism (Oxford, UK: Routledge Press, 2007), 10 104 United States Department of the Treasury, Financial Crimes Enforcement Network, “Fact Sheet,” December 2005, http://www.fincen.gov/news_room/rp/rulings/html/312factsheet.html. 105 L. Komisar, “Shareholders in the Bank of Terror?” Salon, March 15 2002, http://dir.salon.com/story/ tech/feature/2002/03/15/al_taqwa/print.html.

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AL TAQWA COMES UNDER SUSPICION Al Taqwa appeared to be operating “under the radar” until the mid 1990s, when Egyptian authorities became suspicious of Ahmed Idris Nasreddin’s links to terrorism. Nasreddin had helped establish the Islamic Cultural Institute of Milan, a mosque just across the border from Lugano. Some European intelligence agencies believed that the Cultural Institute was a center for recruiting and supplying terrorist groups, including Al Qaeda. In fact, the Center’s imam—Anwar Shaban—was a follower of the “blind cleric.” Omar Abedl Rahman, the so-called “blind cleric,” was convicted of planning to destroy landmarks in New York and remains in a U.S. prison, serving his sentence.106 The Division of General Intelligence and Special Operations (DIGOS)—the Italian anti-terrorist agency—reported to Swiss federal prosecutor Carla Del Ponte in 1995 that "The Nada group comprises the most important financial structure of the Muslim Brotherhood and Islamic terrorist organizations."107 The presence of Achmed Huber on Al Taqwa’s Board of Directors—along with Switzerland’s jealously guarded “banking secrecy” laws—appears to have helped in impeding any aggressive investigation by the Swiss. DIGOS again asked for Swiss intervention in 1997 on the heels of a 1996 DIGOS report that concluded, as reported by Lucy Komisar, that Al Taqwa handled financing for a number of Arab and Islamic political and militant groups, including the Palestine Liberation Organization, Hamas, the Algerian Armed Islamic Group (GIA) and the Egyptian Gama'a al-Islamiya, as well as former Afghan mujahedin in bin Laden's camps. It said the network aided terrorist groups in Kuwait, Yemen, Libya, , and Sudan.108 Again, however, the Swiss took no apparent action after Youssef Nada’s attorney, Pier Felice Barchi, contacted the Swiss authorities and requested that they desist.109 Under pressure from Jordanian, French, and American authorities who believed that Al Taqwa was serving as the financial branch of the Muslim Brotherhood and helping to finance terrorist activities by transferring funds to Al Qaeda from sources in Kuwait and the

106 Hosenball, “Terror’s Cash Flow.” 107 Komisar, “Shareholders in the Bank of Terror?” 108 Ibid. 109 Ibid.

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United Arab Emirates, the charters of Bank Al Taqwa and Akida Bank were revoked by Bahamian officials in April, 2001.110 Ongoing Al Taqwa and related operations continued, however, in Switzerland, Italy, and Liechtenstein.

9/11: ALL EYES ON AL TAQWA After years of percolating investigations into Al Taqwa—including U.S. investigations during the 1990s that would not be revealed until 2001—the hammer came down upon Youssef Nada, Ahmed Idris Nasreddin, and their network of financial institutions after the attacks of 9/11. Ahmed Huber would be quoted within days of the attacks as describing them as “counterterror against American-Israeli terror”; he also denounced the World Trade Center a “the Twin Towers of the godless,” and the Pentagon as “a symbol of Satan.”111 On November 7, 2001—less than two months after 9/11—Youssef Nada, Ali Ghaleb Himmat, and the Bank Al Taqwa were designated financiers of terror by the United States. The United Nations similarly designated them on its list, just two days later. Ahmed Idris Nasreddin earned his designation from the G7 on April 19, 2002, and the United Nations followed suit on April 24, 2002.112 The assets of Youssef Nada and of Ahmed Huber were frozen. The United States Department of Treasury issued an announcement on August 29, 2002 designating fourteen additional entities controlled by Nada and Nasreddin as financiers of terror, and reported seizure of their assets. The allegations were damning: (Nada and Nasreddin) have been involved in financing radical groups such as the Palestinian Hamas, 's Islamic Salvation Front and Armed Islamic Group, Tunisia's An-Nahda, and Usama bin Laden and his Al Qaida organization. Bank Al Taqwa was established in the Bahamas and is a close affiliate of the Al Taqwa Management Organization, which changed its name in the spring of 2000 to the Nada Management Organization. In 1997, it was reported that the $60 million

110 M. Perelman, “Terror Fund Trail Leads to Alpine Kingdom,” The Jewish Daily Forward, October 17, 2003, http://www.forward.com/articles/6853/. 111 M. Reynolds, “Virtual Reich,” Playboy, February 2002, http://vanguardnewsnetwork.com/v1/ index181.htm. 112 “The United States and Italy Designate Twenty-Five New Financiers of Terror,” United States Department of the Treasury’s Office of Public Affairs, Press Release PO-3380, August 29, 2002, http://www.ustreas.gov/press/releases/po3380.htm.

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collected annually for Hamas was moved to Bank Al Taqwa accounts. As of October 2000, Bank Al Taqwa appeared to be providing a clandestine line of credit to a close associate of Usama bin Laden and as of late September 2001, Usama bin Laden and his Al Qaida organization received financial assistance from Youssef M. Nada.113 The belief was that Bank Al Taqwa and its affiliates were the financial arm of the Muslim Brotherhood. In that role, it was funneling funds from unknown benefactors to terrorists, with the beneficiaries including not only Hamas—the Palestinian organization considered the prime terrorist organization threatening America’s Israeli ally—but the most wanted terrorist of them all: Osama bin Laden. An aggressive investigation was sure to ensue, or so it seemed.

THE INVESTIGATION OF AL TAQWA The homes and offices of Nada, Huber and Himmat were raided on November 7, 2001, with multiple records confiscated. Youssef Nada was detained briefly, and then released. It was later reported that a 14-page document entitled “The Project” and dated December 1, 1982 was discovered in Nada’s home, though Nada claimed never to have seen it.114 The document, translated from Arabic, revealed plans for achieving the Muslim Brotherhood’s ultimate goals, including the establishment of a new caliphate that would exert control over all of Islam and—some believe—the world. The Project outlines a process that relies less on violent confrontation--even urging that Muslim Brotherhood members not align themselves with suspected terrorist organizations--and more on the gradual insertion of believers into mainstream Western society. The Project warns that there may be a temporary need to “battle one evil with a lesser evil,” noting the need to associate with individuals and entities that otherwise would be antithetical to the Brotherhood’s vision.115 Some individuals quickly pointed to current activities by the Brotherhood and its presumed sympathizers as manifestations of the provisions of The Project. Patrick Poole writes: “What is startling is how effectively the Islamist plan for conquest outlined in The

113 Ibid. 114 P. Poole, “The Muslim Brotherhood ‘Project,’” FrontPage Magazine, May 11, 2006, http://archive.frontpagemag.com/readArticle.aspx?ARTID=4476. 115 Ibid.

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Project has been implemented by Muslims in the West for more than two decades.”116 This can be seen as having created a no-win situation for Nada and others: If Nada denounced the 9/11 attacks—as he did—it could be seen as part of The Project’s plan to gain credibility by disassociating the Brotherhood from “major confrontations,“ as outlined in the Project’s “8th Point of Departure,” in which adherents are advised “(t)o avoid the Movement hurting itself with major confrontations, which could encourage its adversaries to give it a fatal blow.”117 With his assets frozen and the accusing eyes of the world upon him, Nada took steps in January, 2002 to dissolve Al Taqwa. Nada expressed anger at the Swiss government that he felt had betrayed him: “It is sad that Switzerland has been involved in that [probe] because it ruined their reputation in a lot of circles,” Nada said.118 An earlier investigation by Claude Nicati, the Swiss deputy federal prosecutor, had not uncovered any links between Al Taqwa and terrorist activities. Since that time, however, Nicati had visited Washington D.C. to examine new evidence possessed by the United States.119 In winding up the activities of Al Taqwa, Nada noted that the company had neither creditors nor debt, but that he had several other businesses that were unaffected by the probe. “We have to do this. What do you expect after all that [attention]?” he said.120 In fact, those “other businesses unaffected by the probe” would be the subject of additional scrutiny from the United Nations. The Security Council issued a letter on December 2, 2003 that was critical of Swiss efforts to comply with earlier agreements, claiming that both Youssef Nada and Ahmed Idris Nasreddin continued to operate businesses and control assets that should have been frozen, and that Nada continued to travel between Switzerland and Liechtenstein in defiance of travel restrictions. “Apparently, local authorities had no knowledge of their current whereabouts,” the report stated. “This can only make the task of regulating their

116 Ibid. 117 Besson, S. La conquête de l'Occident: Le projet secret des Islamistes. Paris: Le Seuil, 2005. Translated by S. Burgess as “The Project,” The Daily Ablution, December 2005 (site discontinued). Reprinted by P. Poole as “The Muslim Brotherhood ‘Project,’” FrontPage Magazine, May 11, 2006, http://archive.frontpagemag.com/ readArticle.aspx?ARTID=4475. 118 “Swiss Firm Shuts Down After Terrorism Probe,” SwissInfo, January 9, 2002, http://www.swissinfo.ch/ eng/index/Swiss_firm_shuts_down_after_terrorism_probe.html?cid=2474350. 119 Ibid. 120 Ibid.

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business activities more difficult.”121 The report also referred to “limited weapons- smuggling” still underway in Switzerland.122 Swiss diplomat Peter Helg responded, telling the UN that his government was surprised by the accusation and that it had no basis in fact.123 Youssef Nada, too, has denied every accusation—including even the claims that he had traveled outside Campione d‘Italia. Nada traced his difficulties to an article written by Guido Olimpio article in Corriere Della Sera in October, 1997: “The lies of Guido were spread everywhere,” Nada writes on his own website. “Everyone was used to spread the fabricated stories through the means which he have whether newspapers, films, televisions, books, internet, security reports, and testimonies in the House of Representatives.”124 More accusations against Al Taqwa and its principals followed. Newsweek reported in March 2004, however, that the campaign against Al Taqwa and its attendant investigation “appears to be losing steam amid waning support from some foreign governments,” even though reports continued to surface that Nada was continuing to manage business interests in Switzerland, Italy and Liechtenstein, and that Nasreddin continued to operate in Milan, Italy.125 Victor Comras, a former leader of the U.S. State Department’s program on foreign policy trade control and sanctions and, later, a member of the UN Security Council’s appointed international monitors in charge of implementing and monitoring sanctions against the Taliban and al Qaeda126, expressed his frustration with the apparent flagging interest in prosecuting the case. Comras opined that too many loopholes and weaknesses remained in the overall system, and that the cooperation of international partners was lagging. He also

121 U.N. Security Council Committee, Second Report of the Monitoring Group Established Pursuant to Resolution 1363 (2001) and Extended by Resolutions 1390 (2002) and 1455 (2003), on Sanctions against Al- Qaida, the Taliban and Individuals and Entities Associated with Them (S/2003/1070), December 2 2003, http://nefafoundation.org/miscellaneous/FeaturedDocs/UN1267_Dec2003.pdf. 122 Ibid. 123 “Switzerland Denies Being Soft on al-Qaeda,” SwissInfo, December 16, 2003, http://www.swissinfo.ch/ eng/Switzerland_denies_being_soft_on_al-Qaeda.html?cid=3678646. 124 Official Website of Youssef Nada, http://www.youssefnada.ch/index.html. 125 M. Isikoff and M. Hosenball, “Terror Watch: Nobody’s Nagging,” Newsweek, March 3, 2004, http://www.newsweek.com/id/53191. 126 “Victor D. Comras,” HGExperts, accessed April 24, 2010, http://www.hgexperts.com/expert- witness.asp?id=40885.

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expressed frustration with American leadership on the issue: “This is an issue that requires constant nagging,” Comras stated, “and nobody’s nagging.”127 The same article provided a portent of what was to come: Much of the evidence against Nada and other accused terrorist financiers is still based on secret intelligence that U.S. authorities have been extremely reluctant to share with foreign governments. U.S. Treasury officials have pushed those governments, in Europe and the Middle East, to act on looser standards, saying it is simply unreasonable to expect judicial standards of proof when dealing with the shadowy world of terrorist financing, said one former U.S. official who was involved in the antiterror campaign. But governments in Europe and elsewhere have been reluctant to adopt the lower U.S. standards, leading to a dialogue in which the communications are "lost in translation," (Comras) said.128 There would be more: “Alleged Terror Financier Operates in Plain Site” was the title of a story run by NBC News on June 30, 2005.129 In this story, reporter Lisa Myers noted the number of businesses still being conducted openly by Ahmed Idris Nasreddin, despite the earlier UN directive that his assets be frozen. Myers provided the example of Nasco Nigeria, a company engaged in the production and distribution of food and beauty products, and suggested that investigators and those charged with enforcing UN sanctions ought to be aware of Nasco: “(It’s) not that Nasco Nigeria is hard to find. It's located on Ahmed Nasreddin Road, named after the alleged terrorist financier.”130 Victor Comras was interviewed as part of the NBC story, and again expressed his concerns about Nasreddin‘s ability to continue business operations with impunity: “This isn't a loophole, this is failure to implement the sanctions appropriately,” Comras stated. “He's been involved in terrorist financing. Let's put him out of business.”131 This apparent inaction on the investigatory, enforcement, and prosecutorial fronts must be considered surprising, given the contents of the letter sent to Swiss authorities on January 24, 2002 by George B. Wolfe, the U.S. Department of Treasury’s general counsel. That letter informed Claude Nicati—the Swiss deputy chief prosecutor—that illicit funding

127 Isikoff and Hosenball, “Terror Watch: Nobody’s Nagging.” 128 Ibid. 129 Myers and Roston, “Alleged Terror Financier Operates in Plain Sight.” 130 Ibid. 131 Ibid.

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“pours in” to Al Taqwa offices in Lugano and Malta, intended for Osama bin Laden. The letter claims that the funds are coming from Kuwait and the , and that both Youssef Nada and Ali bin Mussalim provided “indirect investment services for Al Qaeda, investing funds for bin Laden, and making cash deliveries on request to the Al Qaeda organization.”132 The same letter also addressed Ahmed Huber’s association with Al Taqwa, noting Huber’s defense of the 9/11 hijackers and stating that Huber was known for “extreme anti-Israeli views.”133 Whither the investigation? Most--though clearly not all--of the assets of Al Taqwa organization and its principles were frozen, and Youssef Nada was complaining that he was confined to “a small Italian enclave of 2 square kilometres surrounded by Swiss territory,” without opportunity to seek medical treatment for injuries and illnesses.134 Nada complains: And now I liquidated my bank and companies and found myself stripped from all my human rights, wealth, and health, smeared in the media all over the world, prevented from movement denied permission to pay taxes, legal expenses, health insurance, and even the money I had in my pocket was confiscated by the London police in the street with action which the pickpocket are used to do. The difference is that this was done by the order of the UN Security Council.135 In early May, 2005, Switzerland’s Federal Criminal Court in gave Swiss prosecutors until the end of the month to either bring charges against Youssef Nada and the Al Taqwa associates or drop the charges. Swiss prosecutors conceded on June 1, 2005 that they did not have sufficient evidence to go forward, and halted their investigation. They were ordered to pay 3,000 Swiss francs—about $2,514—to Youssef Nada in damages.136 Although the criminal charges were dropped, the assets of Nada, his associates and their companies remained frozen due to ongoing UN sanctions. The three-and-a-half year criminal investigation had not been a waste of time, according to Mark Wiedmer, the Swiss attorney general’s spokesman, and he was not prepared to pronounce Nada et al as “innocent,

132 M. Isikoff and M. Hosenball, “Terror Watch: Paying for Terror,” Newsweek, May 12, 2004, http://www.newsweek.com/id/105037. 133 Ibid. 134 Official Website of Youssef Nada, http://www.youssefnada.ch/index.html. 135 Ibid. 136 “Prosecutors Drop Terror Investigation,” SwissInfo, June 2, 2005, http://www.swissinfo.ch/eng/ index/Prosecutors_drop_terror_investigation.html?cid=4538006.

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and indicated that the investigation could resume and charges filed in additional information were developed. Wiedmer stated that prosecutors now know “what's the matter [with Al Taqwa], we know what's not the matter and we know where we don't know what's the matter."137

EPILOGUE Why had the investigation failed? Wiedmer of the Swiss attorney general’s office told Newsweek that his office had been satisfied with the assistance and cooperation of the United States, but not with governmental authorities in the Bahamas, who had not responded adequately to official requests.138 Claude Nicati, the deputy prosecutor, agreed that "The Bahamas never gave a usable response to Swiss requests for judicial assistance," and also noted that he’d made two trips to Riyadh, Saudi Arabia in search of bank records that reportedly had been transferred there, according to one of the suspects. His inquiries in Saudi Arabia had been fruitless.139 The United States and the UN removed Ahmed Idris Nasreddin from its designated financiers of terrorism without explanation on November 14, 2007. In a statement, the U.S. Treasury Department said Nasreddin "no longer fits the criteria for designation” and that he had submitted signed statements to the Office of Foreign Assets Control certifying that he has terminated any business relationships with Nada, Bank al Taqwa and would have no further dealings with them.140 Youssef Nada and his holdings also were “delisted” by the UN Security Council on March 10, 2010—though not by the United States. Because actions of the Security Council must be unanimous, it is clear that the United States voted in favor of removing Nada et al from the list of financiers of terrorism, yet the U.S. itself retains him on its own list. Swiss authorities confirmed that they officially had requested that the United Nations take the action.141

137 M. Isikoff and M. Hosenball, “Terror Watch: Probe Closed,” Newsweek, June 1, 2005, http://www.newsweek.com/id/49767. 138 Ibid. 139 Meyer, “When Is a Terrorism Figure No Longer One?” 140 Ibid. 141 M. Hosenball, “Swiss Government Asked United Nations to Drop Muslim Brotherhood Figure from

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In a curious sidebar to the case, a former Bush administration official indicated that the administration had been having second thoughts about the entire listing process. Juan Zarate, who served as assistant Treasury secretary for terrorist financing and as head of the counterterrorism office of Bush's National Security Council, told Newsweek that concerns had been raised about the indefinite nature of listing suspects and freezing their assets, and that they had been considering a process in which all named suspects and institutions would be reviewed every two years.142 Zarate also speculated that the United States might be trying to ease tensions between the United States and Switzerland—tensions related both to the failed Al Taqwa investigation and to the recent accusatory exchanges among the Swiss government, its banks and the United States over Swiss banking secrecy, and the U.S.’s demands for the names of American account-holders who might be evading America’s tax laws.143 In the end, it is not clear what agreements may have been reached, what terrorist financing schemes may have been thwarted or what may have been withheld. Did the Bahamian government refuse information that would have moved the investigation forward? Did Saudi Arabia? Did the Swiss prosecute with full vigor? Did the United States seek prosecutions on a lower threshold of proof than would be the standard in its own criminal courts? These questions remain unanswered. But the saga of Al Taqwa resurrected lingering concerns about the Swiss banking industry’s complicity in shielding Nazi treasures, as well as the connections between the ideologies and activities of the Third Reich and the Muslim Brotherhood. It also raised questions about the fundamental nature of bank secrecy laws, not just in Switzerland but also in other countries that are considered “tax havens” and, perhaps, terrorist “safe havens.” And, certainly, questions have been raised about the various methods

Terror Sanctions List,” Declassified (blog), Newsweek, March 19, 2010, http://blog.newsweek.com/blogs/declassified/archive/2010/03/19/swiss-government-asked-united-nations-to- drop-muslim-brotherhood-figure-from-terror-sanctions-list.aspx. 142 M. Hosenball, “Bush Administration Was Concerned about Sanctions Used against Alleged Terror Financiers,” Declassified (blog), Newsweek, March 18, 2010, http://blog.newsweek.com/blogs/declassified/ archive/2010/03/18/bush-administration-was-concerned-about-sanctions-used-against-alleged-terror- financiers.aspx?obref=obnetwork. 143 Ibid.

44 of countering the financing of terrorism—as well as the sometimes unintended consequences of those methods.

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CHAPTER 4

AL TAQWA’S AFFILIATES

To evaluate the international impact of Al Taqwa Bank, one must look in different places. Who were Al Taqwa’s customers, and who benefited from the resources placed in Al Taqwa’s hands? For what reasons were investors depositing funds in this bank, and why did they seek to be affiliated with Al Taqwa? It is again important to note that Al Taqwa was a bank in name only, which then raises the larger question of why exactly these individuals would put money into this organization if not to support either the terrorist organizations--as charged by the U.S. and Italy--or to support the Muslim Brotherhood. Moreover, if support was for the latter, then why wouldn’t individuals simply support the Brotherhood in a legitimate fashion, since the Brotherhood is not sanctioned as a terrorist organization by U.S. or U.N.? Why go through the trouble of going through Al Taqwa? This study’s purpose is not to answer that question, but it would be foolish not to look at the clientele known to have been served by Al Taqwa Bank. Due to lack of information about the entirety of the clientele, however, this section easily could fall prey to word-of- mouth allegations, or assumptions that would apply to all depositors based solely on evidence as to the identity of some key Bank members. Treasury deputy general counsel George B. Wolfe sent a letter on January 4, 2002, in which the Treasury Department claimed that Al Taqwa Bank set up a secretive line of credit for Al Qaeda and that this line of credit was known to exist up until October 2000, with its status being unknown after that point. According to the letter, [Al Taqwa] appeared to be providing a clandestine line of credit for a close associate of [Osama] Bin Laden. This Bin Laden lieutenant had a line of credit with a Middle East financial institution that drew on an identical account number at Bank Al Taqwa. Unlike other accounts-even accounts of private banking customers-this account was blocked by the computer system and special privileges were required to access it.144

144 S. Emerson, Testimony of Steven Emerson Executive Director, The Investigative Project Before the House Financial Services Committee Subcommittee on Oversight and Investigations (Washington, DC: The

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The letter calls the circumstance “highly unusual” and insinuates that it was set up in this way in order to conceal any affiliation this bank, and by extension the Muslim Brotherhood, had with Al Qaeda. According to the testimony of Steven Emerson, Executive Director of the Investigative Project before the U.S. House of Representatives’ Financial Services Subcommittee, “al-Taqwa and other terrorist institutions exist specifically to design means of circumventing government controls”145 (Emphasis in the original). Another document retrieved from Al Taqwa reveals that the clandestine account had been set up for Mamdouh Mahmoud Salim, an al-Qaeda leader who was arrested in Germany. It is believed that other al-Qaeda figures continued to access the account after Salim’s arrest.146 Days after 9/11, Al Taqwa principal Ahmed Huber called the 9/11 attacks “counter-terror against American-Israeli terror,” the World Trade Center “the Twin Towers of the godless,” and the Pentagon “a symbol of Satan,” yet he claimed to have no ties to the attackers.147 At least two relatives of Osama bin Laden were among the shareholders of Al Taqwa Bank, including Osama’s brother, Ghalib Mohammad Binladin. Ghalib sued Al Taqwa in 1999, claiming that the bank had failed to pay him the $2.5 million owed to him from an Islamic investment account known as a mudaraba.148 Islamic law prohibits charging or paying interest on loans, but a mudaraba provides an investment scheme in which both a lender and investment manager may profit, yet only the lender suffers a loss. Some Qu’ranic purists, it should be noted, believe that “interest” compared to “profit” in this matter is a distinction without a difference, and have declared mudaraba to be unlawful.149 After the suit was dismissed by the court, a Binladin family spokesman said: Nothing about the minute investments in bank shares by two family members, or the investment account of a third—who sued the bank to recover his investment in

Investigative Project, 2004), accessed on May 10, 2010, http://www.steveemerson.com/docs/testimony/2004- 05-18%20Testimony.pdf. 145 Ibid. 146 Isikoff and Hosenball, “Terror Watch: Paying for Terror,” 1. 147 Reynolds, “Virtual Reich.” 148 Hosenball, “Attacking the Money Machine.” 149 F. Aziz and N. M. Jamali, “Is Mudaraba’a Lawful?” Journal of Management and Social Sciences 4, no. 2 (Fall 2008): 82-88.

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1998—can rationally be imputed to connote any hint of support for Osama. The family has repeatedly stated that Osama was ostracized and cut off from family contact and support nearly eight years ago.150 The U.S. Treasury Department raided the offices of the SAAR and SAFA network in Virginia in March, 2002. Dubbed “Operation Green Quest”, the Treasury raid was intended to investigate alleged terrorist financing directed out of the SAAR network of charities and affiliates.151 SAAR, the acronym for its wealthy Saudi founder Suleiman Abdul Al-Aziz al- Rajhi, reportedly received $1.7B in donations in 1998, and the Treasury Department suspected SAAR of moving those donations to support terrorist activities committed by Hamas, Hezbollah, Palestinian Islamic Jihad and al Qaeda.152 Yaqub Mirza Soliman Biheiri is the former head of BMI Inc., a New Jersey-based investment firm. Biheiri had left the U.S. immediately after the raid of the SAAR network and was arrested upon his return. Agents searched his computer, uncovering ties to Hamas leader Mousa Abu Marzouk Youssef Nada and Ghaleb Himmat. Biheiri was convicted in 2004 for lying to Customs Agent David Kane about his ties to Marzouk during his interview.153 According to Douglas Farah, US officials [later say] they had tracked about $20 million from [SAAR] entities flowing through Nada’s Bank al Taqwa, but said the total could be much higher. The ties between Nada and [SAAR] leaders were many and long-standing, as were their ties to other [Muslim] Brotherhood leaders.… For a time, Suleiman Abdel Aziz al-Rajhi, the SAAR Foundation founder, worked for Nada” at Al Taqwa’s Liechtenstein branch.154 In December 1999, the FBI discovered a list of 745 shareholders in the Al Taqwa Bank. Al Taqwa President Youssef Nada stated that the list “is genuine…You can ask Mr.

150 Ibid. 151 S. Schwartz, “Wahhabis in the Old Dominion,” The Weekly Standard, April 8, 2002, http://www.weeklystandard.com/Content/Public/Articles/000/000/001/072kqska.asp. 152 “Saar Foundation (SAFA Trust Group),” Discover the Networks, accessed on May 10, 2010, http://www.discoverthenetworks.org/groupProfile.asp?grpid=6397. 153 T. Jackman, “Man Gets 13 Months in Terror Probe Case,” Washington Post, January 14, 2005, A05, http://www.washingtonpost.com/ac2/wp-dyn/A8150-2005Jan13?language=printer. 154 D. Farah, Blood from Stones: The Secret Financial Network of Terror (New York: Broadway Books, 2004), 154-55

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Nicati [the Swiss deputy attorney general]. He investigated all these things four months ago. The FBI knows since 1997. I talked to them."155 The list included key names: • Yousuf Abdullah Al-Qaradawi, the grand mufti of the United Arab Emirates and Muslim Brotherhood member, along with five members of his family. Qaradawi is known as the “Theologian of Terror,” inciting violence against Jews and Israel. For example, during a January 2009 sermon that aired on Arabic satellite channel Al- Jazeera TV, Qaradawi said, "I will shoot Allah's enemies, the Jews, and they will throw a bomb at me, and thus I will seal my life with martyrdom."156 • Huta and Iman bin Laden, sisters of Osama bin Laden, living in Saudi Arabia. • Ghalib Mohammad Binladin, a brother of Osama. • Unnamed members of Hamas, which the US declared a terrorist group in 1995 • Mariam Al-Sheikh A. Bin Aziz Al-Mubarak, a member of Kuwait’s royal family • Members of the prominent Khalifeh family of the United Arab Emirates • Hassan el-Banna, a leader of the Muslim Brotherhood.157 Juan Carlos Zarate of the U.S. Treasury Department, in testimony provided before Congress, reported that “$60 million collected annually for Hamas was moved to accounts within Bank al-Taqwa.”158 DIGOS, the Italian intelligence agency, claimed in a 1996 report that Al Taqwa managed financing for Hamas and other Palestinian groups, the Algerian Armed Islamic Group (GIA) and the Egyptian al-Gama’a al-Islamiyya (Islamic Group).159 Prior to the invasion of Iraq, the Bush administration tied the Saddam regime to Al Qaeda. Many people concluded that this link suggested by the Bush administration was tenuous at best, and some even suggested that this link was manufactured in pursuit of a greater agenda to invade Iraq, taking advantage of the current fear of Al Qaeda and future terrorist attacks. As the speculation goes (as well as what I am able to ascertain without a security clearance): Al Taqwa Bank and Delta Services, a Saudi oil company close to the

155 Komisar, “Shareholders in the Bank of Terror?” 156 “Sheik Yusuf al-Qaradawi: Theologian of Terror,” Anti-Defamation League, accessed on May 10, 2010, http://www.adl.org/NR/exeres/788C5421-70E3-4E4D-BFF4-9BE14E4A2E58%2CDB7611A2-02CD-43AF- 8147-649E26813571%2Cframeless.htm. 157 Komisar, “Shareholders in the Bank of Terror?” 158 M. Levitt, “Eradicating Evil: Cracking Down on Terrorist Financing,” Harvard International Review, May 6, 2006, http://hir.harvard.edu/intelligence/eradicating-evil. 159 Komisar, “Shareholders in the Bank of Terror?”

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Taliban in Afghanistan—both of which were buying oil from Saddam Hussein under the United Nations’ oil-for-food program—had ties to Al Qaeda, as mentioned above.160 This oil-for-food program allowed the Iraqi government to buy food and medicine under the oil proceeds within U.N. supervision. The oil sales themselves were legal and approved under UN supervision; however, several observers say that the system involved kickbacks and was then used by Saddam to buy political support as well as to fund intelligence agencies within Iraq and even to support terrorist activities.161 Although this is tenuous and speculative, it is important to note this happening because it was one of the major catalysts for the war. Liechtenstein, like Switzerland, is a tax haven known for hosting thousands of shell companies. The Galp International Trading Establishment, a subsidiary of Portugal‘s main oil company, was based in Liechtenstein and had been a customer of Iraqi oil since 1997. Galp had chosen Asat Trust to be its legal representative: Asat Trust, designated by both the U.S. and U.N. as a possible financier of Al Qaeda, was founded by Al Taqwa’s Youssef Nada.162 Was Iraq funneling funds to terrorist groups through this arrangement? One finds it difficult not to dismiss these connections as merely coincidental. As noted earlier, Iraq’s manipulation of the oil-for-food program involved a complicated scheme of skimming funds from padded invoices, and it is not a great leap of faith to believe that Galp and Delta Services participated knowingly in a pricing scam that resulted in the diversion of funds to Asat Trust, and into the hands of Youssef Nada and associates. But Al Taqwa’s complicated financing schemes also looped United States institutions into financially supporting America’s own enemies. Al Taqwa’s founders registered their financial network as an offshore bank in the Bahamas; in doing so, they were protected by the secrecy laws in the Bahamas that would protect transactions from those that would try to investigate them. It had another benefit in Switzerland, where the Bahamian license allowed for these founders to open commercial correspondent accounts with already established European Banks, which

160 M. Perelman, “Oil for Food Sales Seen as Iraq Tie to Al Qaeda,” The Jewish Daily Forward, June 20, 2003, http://freerepublic.com/focus/f-news/1125899/posts?page=8. 161 Ibid. 162 Ibid.

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also had already had correspondent accounts with established U.S. banks, such as CITIBANK and Bank of New York. These correspondent accounts enabled Al Taqwa to pay the larger institution’s fees to make cash transfers around the world, and to do this secretly under the guise of the larger bank without the attention of investigators. This is a classic money laundering technique. In essence, with the network that Al Taqwa created, they could fund organizations through transfers and distributions made by a European bank, which in turn could access their correspondent accounts in U.S. banks. American dollars and American institutions helped to fund terrorist organizations.163 Utilizing this type of financial aptitude, Al Taqwa Bank apparently helped to fund almost every major terrorist act endured by the United States since the Bank’s inception, certainly excluding the actions by home-grown terrorist organizations such as those who orchestrated the Oklahoma City bombing. This includes the embassy bombing in Africa during 1998, the Mujahedin during the Bosnian War in the mid-90s, both of the bombings on the World Trade Center, and the attack on the U.S.S. Cole.164 The widely accepted and institutionalized nature of bank secrecy had provided the foundation for Al Taqwa’s “shadowy financial network.” Al Taqwa was able to operate in the shadows only because those shadows had been deliberately created and doggedly protected by international banking systems and their host countries, and no country boasted a larger international banking system than Switzerland.

163 Hosenball, “Terror’s Cash Flow.” 164 Hosenball, “Attacking the Money Machine.”

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CHAPTER 5

SWISS BANKING SECRECY

Switzerland is famous—some would say infamous—for its banking infrastructure. People from around the world flock to these banks for many different reasons, including security; inherent to security, of course, is secrecy. Some may use these banks as a means to launder income, others use them as tax havens; a few utilize Swiss banks due to their mistrust of other banks. In fact, so many individuals use Swiss banking that these banks contain and control almost 40 percent of the world’s private wealth.165 With so many people having a vested interest in Swiss banking, it is unlikely that the Swiss would simply waive their Banking Secrecy Act at the simple behest of a foreign sovereign. International pressure upon the Swiss is increasing, however: The Swiss role in protecting the Al Taqwa Bank, its affiliates, and principal players is documented within this thesis, as is the Swiss history of receiving and protecting “Nazi Gold.” Pressure also was brought to bear to release the accounts of Holocaust victims to their heirs, and the Swiss suffered significant damage to their international reputation upon the release of reports that criticized their cooperation. More recently, myriad governments have been applying pressure to Swiss banks, wanting to collect receipts from tax evaders despite Switzerland’s hair-splitting laws that distinguish “tax evasion” from “tax fraud,” compromising the dual- criminality agreements that assume international cooperation in pursuing criminal acts. Will the Swiss bankers and the government institutions that oversee them buckle under the international pressure, or look to retain what they see as a sovereign right to financially enrich themselves and govern under their own laws and sovereignty? Will they hold steadfast to their legacy of secrecy, at the risk of impeding other nations’ rights to tax their citizens? And, ultimately, will the Swiss risk being seen as the ongoing facilitators for

165 H. Barber, Secrets of Swiss Banking: An Owner’s Manual to Quietly Building a Fortune (Hoboken, NJ: John Wiley & Sons, 2008), ix.

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financiers of terrorism, claiming their historic neutrality as a shield against international criticism? This study’s purpose isn’t to browbeat Swiss banking activities or to ridicule Swiss law, but to examine the impact of the historical structure of Swiss banking upon the international community. One must conclude, upon such an examination, that Swiss banking has served as a conduit for illicit activities. One must also conclude that “neutrality” may be an empty claim, when a foreign government serves to shield perpetrators from their victims, as will be seen. So how can the Swiss keep their banks for legitimate use while still helping the authorities of other nations apprehend national and international criminals, or terrorists? This question leads to others: What is a legitimate reason for one to have a Swiss bank account? Does the Constitution guarantee “privacy” for U.S. citizens’ assets? There is a reason that Switzerland is known as “bankers to the world.” Swiss banks have handled the business of people from all over the world through different crises and world wars; Switzerland itself is also well known for its alleged neutrality, which would imply that the Swiss and their banks treat everyone fairly as long as one has money to deposit. Many who invest see the Swiss as having great expertise in managing assets, investments and in conducting estate planning. Others invest in Switzerland in order to get a perceived stronger currency that what they may have at home. Certainly, Switzerland’s reputation has been strong enough to keep the world’s richest people coming back for more. There are many different types of banks in Switzerland: There are the big banks, private banks, cantonal banks, and loan associations. There are also Universal Banks, which serve as a mixture of these different types. Al Taqwa Bank appeared to be none of these, operating in some ways more as a hawala, yet many of the richest people in the Middle East continued to do business with Al Taqwa. What Al Taqwa lacked in infrastructure, it compensated with correspondent accounts. Given the cascade of bad publicity that the Swiss have faced in recent years, one may well wonder why the Swiss and their banks continue to resist international efforts to increase transparency, international reporting agreements, and cooperation. First, as mentioned above, Swiss banking has been available to all sides, due to the proud neutral stance of the Swiss. The Swiss were willing to deposit the assets of frightened Jews and others who were

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hoping to flee the Third Reich, and were just as willing to accept the stolen assets that the Nazis took as war collateral, including the riches from Holocaust victims. This made it easier for François Genoud, the German banker of Nazi assets, to be able to spread this money around to further the agenda of Nazi Germany even after its defeat. As stated previously, Genoud was one of the founders of Al Taqwa Bank and a supporter, of the Fundamentalist ideology of Arab nationalism. The facts of Genoud being a Nazi sympathizer, Holocaust profiteer, and banker to terrorists were well known: Is it unreasonable to expect that the Swiss banks--as well as other international banks—should not do business with those associated in international war crimes? When does neutrality equate to complicity?

SWISS BANKING SECRECY: A BRIEF HISTORY Contrary to popular opinion, the tradition of Swiss banking secrecy did not begin with the Swiss Federal Banking Act of 1934. Following the Revocation of the Edict of Nantes by Louis XIV in 1685, Protestants fled France to safer havens.166 Among those who fled were bankers, who established themselves in Geneva and, unbeknownst to the people of France, continued to provide banking service to the Kings of France. The Kings, of course, could not let it be known that they were engaged in commerce with heretics. To further secure the confidentiality of bank records, the Swiss Great Council of Geneva (cantonal council) adopted legislation in 1718 that directed banker to "keep a register of their clientele and their transactions. They are, however, prohibited from divulging this information to anyone other than the client concerned, except with the expressed agreement of the City Council".167 This created the broad civil directive that sought to assure clients--whether French Kings or others--that their financial dealings would not be subject to disclosure. Noblemen and others who fled the continental revolutions found safe haven for their treasures in Switzerland. Napoleon Bonaparte himself was a client of Swiss banks168

166 J. J. Spielvogel, Western Civilization — Volume II: Since 1500, 5th ed., (Belmont, CA: Wadsworth, 2002), 410. 167 S. C. Guyer, “Numbered Swiss Bank Account Another Way to Hide Money,“ Denver Business Journal, April 2, 2004, http://www.bizjournals.com/denver/stories/2004/04/05/smallb5.html. 168 “The King’s Swiss Bankers,” Switzerland.isyours, accessed on May 8, 2010, http://switzerland.isyours.com/e/banking/secrecy/origins.html.

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There were no criminal consequences, however, until the events of the 1930s led the Swiss to enact tougher rules. In the wake of the worldwide economic depression, capitalism was held in low regard in some quarters—certainly including France, where the Socialists in support of the leftist government of Edouard Herriott were preparing in 1932 to battle a proposed budget that would reflect an austerity program, cutting back on services and supports to the citizens of France. The Basler HandelBank declared bankruptcy in the midst of this debate, further depleting the national treasury.169 The President and Vice-President of HandelBank, headquartered in Basel, were arrested by the French police. In valises found in the trunk of their car, Parisian officers discovered a list of 2,000 French customers who had placed their funds in Swiss banks. Among these customers were representatives of French high society, including senators, a former Minister of State, bishops, generals, and entrepreneurs.170 The French Parliament was not amused and, under the leadership of Socialist Leader Fabien Albertin, the Chamber of Deputies demanded and published the list of names and took steps to impose confiscatory rules on French assets held outside the country. The HandelBank executives were summoned to testify, but asserted a defense based upon federal banking confidentiality rules. The Herriot government proposed law changes that would impose new reporting requirement on the nation’s banks but, before such laws could be considered or enacted, the Herriot government was brought down.171 The Swiss, of course, took notice. A debate commenced on the security of their bank records, and was spurred by the dark and foreboding events unfolding on their northern border. The German Weimar Republic, suffering from the same economic crisis that had damaged the economy of France and most of the rest of the world, imposed strict controls on foreign exchange of finance in 1931. Later, in 1933 after Hitler came to power, laws were enacted requiring German residents to declare all foreign holdings and made explicit the punishment for failure to comply “Any German national who, intentionally or

169 “The King’s Swiss Bankers,” Switzerland.isyours, accessed on May 8, 2010, http://switzerland.isyours.com/e/banking/secrecy/origins.html. 170 R. P. Lobos Fuentes, “Consideraciones Sobre el Secreto Bancario en Chile y Suiza,” (PhD thesis, Pontificia Universidad Católica de Chile, Santiago, 2003). 171 Ibid.

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unintentionally, led by lowly selfishness or some other type of vile sentiment, has accumulated wealth or kept funds abroad will be punished by death.”172 And they meant it: Three Germans were executed in 1934 after being discovered to hold accounts in Swiss banks. The Germans utilized various tactics to uncover such accounts, including one in which a plain-clothed German agent would enter a Swiss bank and declare that he had funds to deposit in the account of a German citizen who was suspected of having such an account. If the bank accepted the deposit, that was clear enough evidence for the Third Reich.173 Tremendous pressure was brought to bear against the bankers, demanding that they release the names of account holders, as well as details about funds held. Even so, the Swiss banking industry had long resisted efforts to regulate their operation. The near collapse of Volksbank in 1933, however, served to seal the deal. The Volksbank had seen serious declines in customer confidence between 1931 and 1933, resulting in a run on its assets by depositors. At great risk of going under, Volksbank sought governmental assistance and, in December 1933, the Swiss government bailed out the failing bank with CHF 100 million francs and took seats on the bank’s board of directors.174 According to historian Robert Vogler, “The Volksbank debacle was the catalyst that accelerated the political progress of the Banking Law”175 (Emphasis in the original). Vogler argues—in language that reverberates with contemporary relevance—that the public bailout of the bank could only be justified if the banking industry as a whole were subject to greater financial oversight and regulation.176 In response, the Swiss passed the Federal Banking Act of 1934, the foundation of Swiss Banking secrecy that continues to guide policies to the current day. This act established broad regulation authority over the banking industry and, almost as an afterthought, established criminal penalties for bankers who divulge information about depositors, with only limited exceptions. Vogler rejects the notion that the act was created

172 Ibid. 173 Ibid. 174 R. Vogler, Swiss Banking Secrecy: Origins, Significance, Myth, Vol. 7 of Contributions to Financial History (Switzerland and Liechtenstein: Association for Financial History, 2006), 27. 175 Ibid. 176 Ibid.

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for any reason other than to protect governmental and citizens’ exposure to risks associated with banks’ failures: The political argument about banking secrecy, which had already started before the Nazis came to power in Germany, was on a small scale and could not have been the trigger for the introduction of banking secrecy. The idea…that banking secrecy was created for humanitarian reasons, is not backed up by any evidence and clearly belongs in the realm of myth177 (Emphasis in Original).

SWISS SECRECY UNDER ATTACK As noted elsewhere in this thesis, the wall of Swiss banking secrecy has come under attack in recent years. In the aftermath of World War II, allied powers noted with contempt that they had paid for their victory in millions of lives and untold treasure, while the Swiss had profited due to their purported “neutrality.” That claim of neutrality was itself questioned, with critics leveling accusations that the Swiss had knowingly accepted treasure stolen by the Nazis—perhaps even including gold from the teeth of Holocaust victims—and then worked both to conceal these holdings and to retain them in the post-war period. Others claimed that the Swiss knowingly were sitting on accounts of the Holocaust’s victims themselves, exhausting them through the monthly application of fees and charges, and refusing to release them to heirs on shaky grounds that might have included, for example, the failure of the heirs to produce a “death certificate” from the concentration camps. The Swiss were criticized in the aftermath of the attacks of 9/11 for delays in the investigation of Al Taqwa Bank, its associated banks and principles, and for offering their same defense of “neutrality” and client confidentiality in the context of the so-called “global war on terrorism.” Swiss banks risked becoming known as the last financial refuge of organized crime and dictators. In the 1980s, the Swiss were criticized for refusing to cooperate in the prosecution of three criminal cases: In the “Pizza Connection,“ $1.6B in funds from a U.S. drug dealing operation were laundered through a Manhattan pizza bakery and were moved to Swiss accounts; no law against money laundering existed in Switzerland, however, and no such charges were pursued.178 In the “Peseta Connection,” funds from cigarette smuggling

177 Ibid., 30. 178 Ibid., 88.

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moved through Swiss banks to Liechtenstein; cigarette smuggling, however, was not against the law in Switzerland.179 In the “Lebanon Connection,” two Lebanese men were alleged to have laundered Mafia-related drug dealing funds through a Zurich currency-trading firm; again, no law against money laundering existed in Switzerland.180 The “double criminality” test could not be met. It was discovered in 1989 that $10.3M in funds were being held in Swiss banks by Colombian Medellin drug warlord Jose Gonzalo Rodriguez-Gacha.181 Other revelations emerged that deposed and fleeing dictators were attempting to steal from their nations’ treasuries and hide the loot in Swiss banks. Panama’s Manuel Noriega succeeded in moving over $11M to Swiss banks.182 The Philippines’ Ferdinand Marcos moved $683M, but the funds ultimately were blocked and returned to the nation to which they belonged.183 Indonesia’s Sukarto was alleged to have concealed $25B in Swiss banks, though this was not confirmed.184 Following the controversies of the late 1980s—the Peseta, Pizza, and Lebanese Connection issues described above—pressure was brought upon the Swiss government to criminalize money laundering. They did so in 1990: New provisions required banks to report to federal authorities any suspicion of money laundering. Later, in 1998, new Swiss statutes obligated the entire financial sector to exercise due diligence in combating money laundering.185

MONEY LAUNDERING AND THE FATF The G7 created the Financial Action Task Force in 1989, dedicated to combat money laundering. As of this writing, 35 countries--including the United States and Switzerland— are members of the FATF.186 The FATF instituted protocols in 1990 that countries were

179 Ibid., 91. 180 Ibid. 181 Ibid., 92. 182 Ibid., 90. 183 Ibid. 184 Ibid. 185 Ibid., 91. 186 Financial Action Task Force [FAT F], “FATF Members and Observers,” accessed on May 8, 2010,

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expected to observe in order to identify and prevent money laundering. Known as the “Forty Recommendations,” these protocols direct countries to criminalize money laundering, establish procedures for reporting on suspicious activities, establish penalties for recalcitrant countries and provide for mutual legal assistance and extradition.187 The recommendations were updated in 1996 and again in 2003. In 2001, even before the events of 9/11, the FATF considered the similarities and parallels between money laundering and terrorist financing. According to Ridley, “the various experts and member states were unable to reach total unanimity, but did conclude that, for the most part, the modus operandi involved in money laundering and terrorist financing were similar, if not one and the same.”188 The FATF convened an Extraordinary Plenary Session in Washington D.C. within a month of the attacks on 9/11, however, and promulgated eight (later, nine) new recommendations aimed at preventing terrorist financing. These Special Recommendations, as they were called, increase the responsibility of nations and their banking systems to monitor suspicious financial transactions, to report them and to cooperate with international investigations.189 Protocols are included in the Nine Special Recommendations that directly impact the traditional banking secrecy regulations in Switzerland: • Recommendation II directs countries to “criminalise the financing of terrorism, terrorist acts and terrorist organisations.190 • Recommendation IV directs countries to establish rules requiring financial institutions to report suspicious transactions to “competent authorities.”191 • Recommendation V demands international cooperation, on the basis of a treaty, requiring “the greatest possible measure of assistance in connection with criminal,

http://www.fatf-gafi.org/document/52/0,3343,en_32250379_32236869_34027188_1_1_1_1,00.html. 187 Ibid. 188 N. Ridley, “Combating Terrorist Financing: The Dichotomy between Formulating the Legal Bases and Effective Operational Intelligence,” in Legal Aspects of Combating Terrorism, edited by Centre of Excellence - Defence Against Terrorism, Ankara, Turkey (Fairfax, VA: IOS Press, 2008), 60. 189 FATF, “FATF Members and Observers.” 190 Ibid. 191 Ibid.

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civil enforcement, and administrative investigations, inquiries and proceedings relating to the financing of terrorism, terrorist acts and terrorist organisations.”192 Another Special Recommendation specifically addressed the Alternative Remittance systems—including, for example, the hawala systems—and required that they be licensed, registered and subject to the same requirements as traditional banking systems.193 Brick by brick, the wall of banking secrecy was being taken down. The Swiss Federal Banking Act of 1937, with its ironclad bar to disclosure of details of financial transactions except under the most specific instances of criminal conduct, was coming into conflict with international expectations associated with the “global war on terrorism.” These issues may have softened Swiss resistance to what has been the most recent assault on bank secrecy laws: International efforts have been underway—with significant preliminary success—to force Swiss banks to release information on individuals who are attempting to circumvent their home nations’ taxation laws.

THE NEW FRONT: TAX EVASION AND “DOUBLE CRIMINALITY” International law recognizes the concept of “double criminality,” defined by Ridley as the “principle which stipulates that the alleged crime for which extradition is being sought must be criminal in both the demanding and requested countries.“194 In other words, the same act must be considered a crime in both countries; if not, the extradition agreement does not apply. The Swiss have long drawn a legal distinction between “tax fraud” and “tax evasion.” Under Swiss law, tax fraud is a criminal act, but tax evasion is not. Tax fraud, under Swiss law, involves a deliberate misrepresentation, whereas tax evasion may be characterized as an omission of facts. The Swiss website “Switzerland is Yours!“ notes, Swiss bank secrecy is not lifted for tax evasion, even upon the request of a foreign government….The Swiss are unique in that they attach greater importance to the respect of private life than they do to taxation. Banks do not have the right to

192 Ibid. 193 Ibid. 194 Ridley, “Combating Terrorist Financing,” 57.

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inform the Swiss tax authorities. They have even less right to inform foreign tax authorities195 (Emphasis in the original). As a consequence, international agreements that require partner countries to cooperate in the investigation of crimes are considered inapplicable to charges that an individual is attempting merely to evade taxes. Moreover, based on provisions of the Federal Banking Act of 1934, the very divulgence of such information by a bank official would subject that official to criminal charges, penalties for which could include 6 months imprisonment or a fine of up to CHF 50,000 francs. Even a negligent disclosure without intent may result in a fine of CHF 30,000 francs.196 New international treaty protocols further served to compromise Switzerland’s stance. The Organization for Economic Co-Operation and Development (OECD)—to which both the United States and Switzerland belong--developed the model Tax Information Exchange Agreements (TIEAs) in 2002, bilateral agreements in which countries agree to share financial information specifically related to taxation.197 A key provision in these agreements alters the “dual criminality” provision that previously impeded cooperation between countries with differing criminal codes, to wit: Information shall be obtained and exchanged under this Agreement without regard to whether the requested party needs such information for its own tax purposes or whether the conduct being investigated would constitute a crime under the laws of the requested party if it had occurred in the territory of the requested party.198 Not everyone is thrilled, however. The Swiss Confederation’s Federal Department of Finance issued a document in June, 2009 entitled “Banking Secrecy and International Tax Issues: Switzerland’s Viewpoint.”199 In this document, the Swiss blame international

195 “Swiss Bank Secrecy and Tax Evasion,” Switzerland.isyours, accessed on May 8, 2010, http://switzerland.isyours.com/e/banking/secrecy/tax.html. 196 K. Frawley, G. Gonzalea, and C. Gollayan, “Swiss Banking Secrecy,” accessed on May 8, 2010, http://www.docstoc.com/docs/25403766/Swiss-Banking-Secrecy/. 197 “Tax Information Exchange Agreements (TIEAs),” Centre for Tax Policy and Administration, accessed on May 9, 2010, http://www.oecd.org/document/7/0,3343,en_2649_33767_38312839_1_1_1_1,00.html. 198 Tax Information Exchange Agreement, U.S.-Liechtenstein, Dec. 8, 2008, 3. 199 “Banking Secrecy and International Tax Issues,” Swiss Federal Department of Finance, accessed May 10, 2010, http://www.efd.admin.ch/themen/00796/01377/index.html?lang=en.

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financial crises for other countries’ push for new revenues, describing the need to “satisfy the fiscal hunger of the large countries.200 They point to their own economic stability. They protest the OECD’s description of Switzerland as a country that has not substantially implemented the OECD standards, and defend the Swiss distinction between tax fraud and tax evasion. They note Switzerland’s low public debt in relation to GDP, and boast of its enlightened approach to government: “According to Swiss understanding, citizens do not live for the State. They are not primarily taxpayers, but rather free people. As free people, they have a right to life, property, and privacy. This is the context in which banking secrecy exists.”201 They also note that the Swiss manage far more of the world’s private financial assets than any other country: Referring to themselves as “The Largest Asset Managers in the World,” they note that they manage fully 27% of the world’s privately held assets; by contrast, the United States holds merely 7%—half the amount held in Luxembourg.202 “Given the significant international position of the Swiss financial centre in cross-border asset management,” the report concludes, “it is not surprising that it also is being targeted.”203 Clearly, the Swiss are feeling besieged. Nevertheless, they announce their intent to cooperate with international protocols established by the OECD: The Federal Council is not blind to the fact that, against the backdrop of the financial and economic crisis, the importance of cross-border cooperation in tax matters has increased. The Swiss government is willing to change the rules for foreigners residing outside Switzerland and also provide administrative assistance henceforth in cases of tax evasion in specific, individual cases. Switzerland has therefore withdrawn its reservations to Article 26 of the OECD Model Convention with respect to administrative assistance in cases of tax evasion.204 With this agreement, another brick fell from the wall of secrecy.

200 Ibid., 9. 201 Ibid., 5. 202 Ibid., 10. 203 Ibid., 9. 204 Ibid., 17.

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CHAPTER 6

PREVENTION

The goal of countering the financing of terrorism is to limit the resources available to groups engaged in terrorism, and to be able to interdict them before they can be used. This strategy is employed in hopes of preventing an attack or mitigating the physical effect that the attack will have on its target. Former FBI director Louis J. Freeh noted that the 1993 attack on the World Trade Center took place earlier than planned and was less devastating than intended by Ramzi Yousef, the convicted mastermind of the attack, because of the group’s limited financial resources.205 Financial control is also useful in reconstructing events after a terrorist attack takes place. For instance, it was financial information that helped law enforcement establish the first links between the hijackers and other conspirators during the September 11th attacks. Financial intelligence can be used for many different reasons: to prevent terrorism by freezing assets and limiting resources; to investigate terrorist attacks by linking different associations with each other to identify a network by tracing the money flow (much in the same way Al Taqwa was shut down after 9-11); to deter terrorist financing by criminalizing contributors, and to analyze contributions to help the intelligence community—including the Department of Treasury—to help piece together the puzzles of these different terrorist networks. There are six different assumptions that may limit the effectiveness of the regulatory approach set in place of financial counter-terrorism. First, it is often assumed that all groups or organizations engaged in terrorism are the same. Regulatory measures designed to disrupt the financing of organized terrorist groups may be applied similarly and assumed to be equally effective against all groups without regard to the organizational structure. For instance, using the same counter-terrorism mechanisms for Hamas, with its limited self-

205 “The Ramzi Yousef Standard,” Wall Street Journal, January 6, 2010, http://online.wsj.com/ article/SB10001424052748703436504574640560502410466.html.

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determination goals, may not be effective in dealing with Al Qaeda, a group with regional self-determination goals that include installing an Arab caliphate rather than just the ousting of Israel. These groups not only differ in the amount of geographical area they affect, or want to affect, but also differ on a fundamental level of organization. The second assumption is that the formal sector of financial institutions is or may be the primary source of terrorist funds. Though there is evidence that prior to 9/11 the U.S. banking system was used for the transfer of up to $300,000, there is little evidence of this happening after 9/11. What is unique about the institution of Al Taqwa is that their presence as a bank, in name only, was only a façade that helped them to skim off the top in order to fund terrorist groups via unconventional terms. Also, there is growing evidence that it isn’t only unconventional transfers by which these terrorist groups are obtaining funding; these groups are becoming more reliant on smuggling and crime to fund their activities. 206 The third assumption is that the regulation of formal financial institutions can be used with equal efficiency on informal financial networks, such as charities. There are initiatives in the U.S. and U.K. for the registration of informal value transfer systems, including those protocols listed in the Financial Action Task Force‘s Nine Special Recommendations. This also suffers from application of the first assumption, as there are fundamental differences between the images that terrorist groups may want to cultivate: Hamas is less likely to embezzle charity funds than Al-Qaeda, for example, as they try to demonstrate a certain un- corruptibility to the people as part of its self-image to preserve popular support. Additionally, it appears that only a small number of western charities have supported terrorist groups financially. 207 Fourth, it is also assumed that the hawala system and other similar informal systems operating in other parts of the world play an important role. As one can see throughout this study, the record keeping in these systems is extremely difficult to decipher and track. It is

206 T. Makarenko, “A Model of Terrorist-Criminal Relationships,” Jane’s Intelligence Review, August 1, 2003. 207 J. Gunning, “Terrorism, Charities, and Diasporas: Contrasting the Fundraising Practices of Hamas and al Qaeda among Muslims in Europe,” in Countering the Financing of Terrorism, edited by T. J. Biersteker and S. E. Eckert, 93-125 (New York: Routledge, 2008).

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hard to find the concrete evidence of the use of hawalas in recent cases of terrorism.208 This means that it could be a practice in futility to attempt control of these informal value transfer systems and, consequently, it could lead to a misuse of resources. It may also suggest that, due to the crackdown on entities like Al Taqwa, terrorist groups are evolving to find other ways in which to finance themselves. Fifth, it is assumed within the regulatory approach of counter-terrorism financing that there is a sort of emerging “nexus” between international organized crime and international terrorism. Though there are instances of such links, there is relatively little evidence of huge international crime syndicates partnering with terrorist organizations. The last assumption is that there is a high cost associated with the conduct of “successful” terrorist activities, an assumption rebutted in Figure 1.209 This may seem contradictory, as it appears as though any attempt to undermine and restrict the financial resources available to terrorist organizations in hopes of avoiding terrorist acts could easily be circumvented by getting a relatively meager amount of money. On the other hand, it shows how important blocking, freezing, and seizing assets are, because “every dollar matters” even more so than if they all were as expensive as the 9/11 attack. One could potentially botch an entire plan by seizing $10,000 from a $30,000 operation. The point of listing these assumptions is to note that a simple focus on the fiscal aspects of terrorism is not enough and cannot be counted upon to stop the motivation or the capability of these terrorist groups, though it is important in hindering and adding a sense of attrition to these groups. The financial sector, both in the private and government sectors, is only one instrument that must work in concert with the intelligence community, with international diplomacy, the physical presence of the military, the legal community in the application of counter-terrorism law as well as prosecution of terrorists, and the cultural aspects such as medical aid and refugee support of innocent civilians who may become disenfranchised due to military interventions.

208 N. Passas and S. M. Maimbo, “The Design, Development, and Implementation of Regulatory and Supervisory Frameworks for Informal Funds Transfer Systems,” in Countering the Financing of Terrorism, edited by T. J. Biersteker and S. E. Eckert, 174-192 (New York: Routledge, 2008). 209 Biersteker and Eckert, “Countering the Finance of Terrorism,” 7.

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Figure 1. Cost of terrorist attacks.

As of now, many consider the U.S. to be focusing solely on the military aspect of this counter-terrorism effort. However, the often faulty assumptions that limit effectiveness of the fiscal aspects of counter-terrorism would also hold true if applied to any of these other aspects. It is fundamentally an effort in futility to focus on only one strategy; in fact, it is of utmost importance to apply a broad-based approach to countering terrorism, or efforts will suffer from ineffective policy.

NEW LAWS LIMITING BANK SECRECY AND FINANCING OF TERRORISM In the Swiss banking section, this thesis discussed the bank secrecy laws that different “tax haven” countries employ. This section enumerates and discusses laws that have been aimed at combating bank secrecy, both for international terrorism and international crime, as well as tax fraud. Many policies actually existed prior to the attacks of 9/11. For instance, the Treasury Department had the Office of Foreign Assets Control (OFAC) and the Financial Crimes Enforcement Network (FinCEN). OFAC, in particular, had an extensive list of “Specially Designated Terrorists” (SDTs) and was already sending out notices to banks to block their actions. FinCEN was the intelligence arm of the Treasury Department and

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assisted with the blocking of money laundering activities, with the hopes of disrupting the activities of drug traffickers. The National Security Council devoted its time to the analysis of transnational terrorist threats. The Federal Bureau of Investigation (FBI) and Central Intelligence Agency (CIA) also had financial intelligence activities but, as the 9/11 Commission Report indicated, these intelligence agencies did not work together or coordinate their different activities; this represented a grossly inadequate counter-terrorist inaction, leaving the U.S. open to terrorist attack. On the international level of combating the fiscal aspect of terrorism, and the use of international banks to do so, the United Nations Convention for the Suppression of the Financing of Terrorism had been adopted in December 1999.210 By the time the attacks of 9/11 had occurred, however only four countries had ratified the convention; of the required twenty-six ratifications, the remaining twenty-two came after the attack. It is intended that, by impeding the flow of cash to terrorists and by prosecuting and punishing the perpetrators, the Convention will help to suppress future acts of terrorism.211 It does so by criminalizing the element of funding, while having full knowledge of what those funds will do for terrorist groups. The G7 created the Financial Action Task Force in 1989, which encouraged states to establish due diligence and “know your customer” provisions in international banking regulations in an attempt to curb the money laundering aspects of the illegal drug trade, which many viewed as a necessity to countering terrorist financing. Resolution 1267 was promulgated by the U.N. in 1999, which imposed economic sanctions and established a Sanctions Committee to monitor and enforce targeted financial sanctions against the Taliban. It also directed that Osama Bin Laden be turned over by the Taliban because of his indictment in the United States due to his involvement with the bombing of the U.S. embassies in and Tanzania in 1998.212 Resolution 1267 ordered three things: Freeze

210 U.N. General Assembly, International Convention for the Suppression of the Financing of Terrorism, December 9, 1999, http://www.un.org/law/cod/finterr.htm. 211 “Treaty on Suppression of Financing of Terrorism Comes into Force,” United Nations Information Service, April 9, 2002, http://www.unis.unvienna.org/unis/pressrels/2002/lt4366.html. 212 U.N. Security Council, “Security Council Committee Established Pursuant to Resolution 1267” December 2005, accessed on May 10, 2010, http://www.un.org/sc/committees/1267/.

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without delay the funds and other financial assets or economic resources of designated individuals and entities; prevent the entry into or transit through their territories by designated individuals; and prevent the direct or indirect supply, sale and transfer from their territories or by their nationals outside their territories, or using their flag vessels or aircraft, of arms and related materiel of all types, spare parts, and technical advice, assistance, or training related to military activities, to designated individuals and entities.213 After the leadership of the Taliban and Al Qaeda was dispersed, this U.N. letter to the President was written concerning the future of these entities: Summarizing the terrorist threat, the United Nations team writes: "Five years after the Security Council adopted resolution 1267 (1999)...the threat from Al-Qaida- related terrorism remains as great as ever. But the nature of the threat has changed. The Taliban have been removed from power and the Al-Qaida leadership is dispersed. But if the leadership is less able to direct, plan and execute attacks, they have many supporters who are eager to do so. These terrorists form groups that do not wait for orders from above but launch attacks when they are ready, against targets of their own choosing. Using minimal resources and exploiting worldwide publicity, they have managed to create an international sense of crisis."214 With that being stated, and leavened by the knowledge that the organization of Al Qaeda is evolutionary and resilient, this can be seen as a success, albeit a precautionary one. One could see it as a beginning step to deterring the Al Qaeda threat in its operational arm, but the motivation to conduct such attacks still exists due to the flexible nature of its network in not needing a supreme commander. After the attacks of 9/11, three new laws from the United States and the U.N. became policy, with the most infamous being the USA PATRIOT Act. What the Patriot Act claims to do is four-fold: To strengthen U.S. measures to prevent, detect and prosecute international money laundering and financing of terrorism; to subject to special scrutiny foreign jurisdictions, foreign financial institutions, and classes of international transactions or types of accounts that are susceptible to criminal abuse; to require all appropriate elements of the financial services industry to report potential money laundering; and to strengthen measures

213 Ibid. 214 H. Muñoz, “Letter dated 23 August 2004…to the President of the Security Council,” accessed May 10, 2010, http://nefafoundation.org/file/FeaturedDocs/UN1267_Aug2004.pdf.

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to prevent use of the U.S. financial system for personal gain by corrupt foreign officials and facilitate repatriation of stolen assets to the citizens of countries to whom such assets belong. 215 In terms of concentrating on the fiscal attributes of these laws, the Patriot Act strengthened anti-money laundering statutes and provided law enforcement agencies with powerful new tools and authority geared toward the prevention, as well as the investigation of terrorist activities.216 There was also the unanimous adoption of the U.N. Security Council Resolution 1373. This marked a fundamental shift within international relations because all previous statutes had been implemented by a member-state of the U.N. if that state had agreed to it, while this resolution was binding upon all member states regardless of whether they ratified it. The resolution supplemented the previous Resolution 1267 in placing more barriers on fund-raising activities of terrorist organization. More importantly, it encouraged that all member-states of the U.N. share their intelligence on terrorist groups in order to assist each other in combating international terrorism. It also established the Security Council’s Counter Terrorism Committee (CTC) to monitor the compliance of its provisions. Another aspect is that it restricted immigration laws of its member-states to ensure that terrorists cannot seek “refugee status” or that this status is [not?] abused by terrorist groups. Controversy arose when authoritarian leaders used this provision to label anyone they considered a threat as a terrorist engaged in the conducting of terrorist activities, and thus infringed on their basic human rights. This was later remedied by Resolution 1456 that stated, “"States must ensure that any measure taken to combat terrorism comply with all their obligations under international law, and should adopt such measures in accordance with international law, in particular, international human rights, refugee, and humanitarian law."217 The third major new law passed after 9/11 was Executive Order 13224. The order adds another means by which to attempt disruption of the financial support network that aids

215 United States Department of the Treasury, Financial Crimes Enforcement Network, “USA Patriot Act,” accessed on May 10, 2010, http://www.fincen.gov/statutes_regs/patriot/. 216 Ibid. 217 U.N. Security Council, 4688th Meeting, “Resolution 1456 (2003)” (S/RES/1456), January 20, 2003, http://www.un.org/Docs/sc/unsc_resolutions03.html.

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terrorists and terrorist organizations. It does so by blocking the assets of individuals or entities that commit or may commit acts of terrorism; as well as those individuals or entities that provide support, services, assistance to, or otherwise associate with terrorists or terrorist organizations that are designated under this Order.218 In terms of agreements that have limited the bank secrecy acts in countries--in this case, Switzerland--another brick in the wall fell in 2009. Federal prosecutors in the United States alleged that Swiss banking giant UBS aided Americans in committing criminal tax fraud. Under intense pressure by United States prosecutors and with the reluctant acquiescence of the Swiss banking regulator, UBS entered into a deferred prosecution agreement in which it paid a fine of $780 million and agreed to disclose the identities of, and account information for, 250 to 300 United States customers of the UBS’s cross-border business. The next day the United States government made a surprising move by filing a lawsuit against UBS to enforce an IRS summons from July 1, 2008, that would force UBS to reveal the names of 52,000 American customers. Both UBS and the U.S. government came to an agreement announced on July 31, 2009 that UBS would provide information of approximately 9% of the afore-mentioned 52,000 customers. IRS commissioner Douglas Shulman said the agreement “blows a big hole in bank secrecy.” The Swiss newspaper Tages Anzeiger called the UBS affair “the death knell” for Swiss banking secrecy. 219

ANALYSIS OF LAWS Much of the work that was needed has been done. The legal aspects needed to combat terrorism are in place. Many of the laws that came before 9/11, and after, share a common theme of working together--although some, like the UN Resolution 1373, forced this theme-- in order to combat terrorism. With this comes my first criticism: Notions of sovereignty are threatened by what may be seen as the U.S. or U.N. throwing around their power, as they work to impose new international restrictions. This study does not consider the international relations aspect of this problem, but acknowledges a lack of trust among nation-states, even between states

218 Exec. Order No. 13224 (Sept. 23, 2001). 219 B. J. Bondi, “The IRS, UBS and Swiss Bank Secrecy Law,” TaxProf (blog), April 2, 2010, http://taxprof.typepad.com/taxprof_blog/2010/04/bondi-the-irs-.html.

70 historically allied with each other. What some say was an inherent problem of 9/11, i.e. the lack of intelligence agencies working together, now grows to an international level problem, but only if the worldwide intelligence community continues to be unwilling to share information, believing that they will lose even more sovereignty by giving up intelligence assets to a larger power. Just as the U.S. intelligence agencies were competing with each other—perhaps with the goal of being allocated more federal funds if their agency were to make a break on a case-- the international intelligence community is also competing and unwilling simply to give up their intelligence, or what some could equate to their “resources”, to each other. This jealous guarding of information may have compromised the investigation and prosecution of Al Taqwa: The Swiss claimed that the Bahamians, Saudis and Americans were not forthcoming with the information necessary to complete their examination, and were unable to meet the deadlines imposed on prosecutors by unsympathetic Swiss courts. Though this information wall is not so easily breached, we could help curb this trend by having more joint domestic operations for dealing with intelligence and changing the system by which funding is allocated among our security agencies, incentivizing joint operations, and reducing the “stovepipe” competition. Similarly, if the U.S. wishes to obtain information from countries abroad, then it must also be willing to inform other countries about the full scope of the situation, or be doomed to operate with the crumbs and fragments of intelligence that other nations may be willing to share. I believe that balancing security with privacy and upholding the ideals upon which our Western society is built are of utmost importance. This balancing act is epitomized in the age of “war on terrorism” by the idea of not criminalizing thought. We, as members of the Western world and the world at large, must remember that it is not illegal to actually want a better life for one’s countrymen, or to show discontent for the actions of world powers when it comes to policies within one’s country, or to disagree with corrupt government officials disenfranchising their population. Neither is it illegal to be a part of a group that has these ideals. What is illegal, of course, is the employment of violence. Violence against innocent civilians in pursuit of a political agenda—even though the main target is those innocent civilians’ government—is even more heinous. What separates our government from a fascist

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government is that our law enforcement is reactionary, and this reactionary law enforcement is prone to attack by non-government entities. Due to the nature of these attacks, and the sheer destruction that is associated with them, one cannot simply sit back and react to these attacks as they come. It is difficult to balance these different concepts but it is imperative that we keep the discussion current and respectful. The citizens must realize how hard it is to keep a free society safe, and the government must realize how the citizens define a free society and how they wish to keep their privacy. Some even criticize these specific laws that turn the banking industry into a conduit for a banking global espionage apparatus. It is apparent that both the federal government of the U.S. and the international government of the U.N. have been strengthened by these anti-terrorism laws, but as long as there is open and honest conversation to ensure that the encroachment of power is not without due diligence, then it will be possible to navigate this narrow path between safety and security. A global networked threat requires a global networked response. Another flaw is the “War” marketing metaphor of these counter-terrorism policies. Instead, it is important that we turn the focus, as previously stated, to enhanced intelligence sharing and increased police cooperation globally. Though one could argue that this metaphor is helpful in mobilizing a population, it is entirely misleading and may serve to mobilize populations other than one‘s own. As stated before, and will be stated later, the physical presence of military is only one aspect among many interrelated counter-terrorism policies. The very presence of military is extremely helpful in preventing a state from providing shelter and sanctuary for terrorist organizations, or allowing their country to be used as a launch pad for attacks into other countries. Certainly, as was seen in the case of the Taliban’s rule in Afghanistan, the military can be effective in disrupting a state that shields terrorists from international law. Another flaw of the “War” metaphor is that it implies by its very name the suspension of rights. In times of extreme circumstances one could legitimize this suspension, but this “war” is so open-ended that it could render the suspension of human rights for the duration of the “war”. Characterizing these counter-terrorism policies as war, which denotes the battle against terrorist organizations and their acts as a grand movement, legitimizes Al Qaeda and

72 the extremist Salafist movement in general as competent competitors in a “world-wide competition of ideas”. Besides the apparent flaws within these laws dealing with national sovereignty and the extension of power within governments, either of which could be seen as a good or bad thing, another flaw is the lack of partnering with the civilian and private sectors. It is not as though there have been no attempts to remedy this situation, but there is a lack of development of a legal foundation either to protect the private business from over-reaching of power by the government or to punish those companies outside of the banking community for helping to sponsor or conduct illicit activities. It is apparent that the help of these industries will be needed not only to combat the financing of terrorism but also to ensure that foundations of a free enterprise within a capitalist society, which is also considered free, are not hindered by more government intervention. If we are to be successful in developing a more productive anti-terrorist environment in both sectors, government and private, we need to change their client culture from one of mere security awareness or knowledge to that of security ownership and responsibility. We need to lead the way, demonstrating clearly through our actions that the security of everyone is the responsibility of everyone. This not only helps in terms of potential intelligence gains but also with emergency management, in mitigating the consequences of a natural or man- made disaster. Both entities have an equal stake in not only keeping their countries safe but also preventing a terrorist attack, partly due to the economic impact it has on both entities.

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CHAPTER 7

RECOMMENDATIONS

No single approach to countering terrorist activities can be effective on its own. When only military strategies are employed, underlying causes are left unresolved, and beleaguered civilian populations may come to identify with those who previously had persecuted them. When only social aid is offered in an attempt to curry favor with civilian populations, corrupt leaders may divert aid to their own use or as a means of minimizing the propaganda impact. Instead, a comprehensive approach is required--one that recognizes the need to emphasize one domain over others as conditions demand, but one in which all domains are part of the long-term strategy (see Figure 2).220

Figure 2. Comprehensive counter-terror strategy.

220 R. Smith, “Counter Terrorism Simulation: A New Breed of Federation” (paper presented at the Simulation Interoperability Workshop – Spring 2002, Orland, FL, March 2002).

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This model represents the goal toward which our counter-terrorism policies must work. The financial aspect of this counter-terrorism strategy—the one that is the primary subject of this study—must be considered in conjunction with the other aspects as part of the greater strategic approach. Notwithstanding the need to employ this concerted approach, the topic at hand is Al Taqwa Bank; this recommendation section focuses on the financial aspect within this greater counter-terrorism strategy, one that is itself only a small aspect of the greater financial domain. In the realm of international banking, then, and considering the use of hawalas and charities, what could be recommended in order to curb the threat of terrorism? This section focuses first on summarizing the evolution of these practices of fund raising for these organizations. Second, as both counter-terrorist policies and the terrorist organizations against which they are deployed continue to evolve, it is important to consider whether financial approaches continue to have merit. Third, this section examines possible ways that the financiers of terrorism will continue to fund organizations that act on their behalf. The use of charities must be considered when discussing Al Taqwa, as many who were on the terrorist watch list utilized charities as means of collecting and diverting funds in support of terrorist activities. According to Farah: …how ineffective and toothless the international sanctions regime has become. Those on the UN (terrorist financier) list continue to operate freely, presiding over businesses and charities that give them continued access to millions of dollars. The organizations that hire them are not penalized and, in the end, neither are the individuals.221 This jump from being the banking and financial arm of the Muslim Brotherhood to sponsoring charities—with which the Muslim Brotherhood is also associated—isn’t that great a distance. However, just as with many strategies in counter-terrorism policy, and the thin line that must be navigated between enforcement and freedom, the policy related to charities may be overrated and overstated. Just as this “war on terror” isn’t meant to be directed towards the Muslim people in general, but only against the tiny minority participating in terrorist acts, so are most charities not engaged in funding terrorism. The risk

221 D. Farah, “The Return of IIRO and the Delisting of Yousef Nada,” Douglas Farah (blog), March 18, 2010, http://www.douglasfarah.com/2005/11/islamic-charity-continues-to-function.html.

75 from charities is real, of course, and Al Qaeda and other groups have utilized them through direct solicitations and diversions of donations intended for humanitarian purposes. What is needed is a differentiated approach from financial humanitarian networks affiliated with resistance groups and the actual financing of terrorism. Condemning all groups that provide social welfare alienates Muslims and prevents aid from reaching those who are in need. A key belief in Islam is the payment of zakat222, a tithe that is paid from individuals’ income in contribution to the community good: There must be a charitable organization available to receive and distribute these funds. Charity, at bottom, is part of the religion of Islam, and when one feels alienated from the greater community, one may start to feel disenfranchised. If one starts to feel disenfranchised, then one probably is more likely to join in unconventional warfare, if Schwartz’s theory of political alienation is true.223 Aggressive inhibition of charitable contributions and distribution may also conflict with diplomacy measures, since the U.S. may be viewed as hypocritical in claiming that it wants what is the best for these people even as it removes a staple from a needy society. Western governments must support charitable giving through a transparent process. Hawalas present a more complex challenge, due to the typically informal and unregulated nature of the hawala informal value transfer system. In the case of a nascent or failed economic state, such as Somalia or Afghanistan, there is no infrastructure to compete with this older system. Also, there is a historical lack of appreciation for the social and cultural context in which hawalas operate, as evidenced by the social repercussion and backlash that occurred when the activities of Somalia‘s Al Barakaat hawala were frozen, leaving thousands of Somali families economically stranded from wage earners living abroad.224 But just as charities need to be more transparent while being culturally appreciated, so do hawalas need an added infrastructure and regulatory foundation so that they may function without the paranoia that now is associated with them, given the past use of hawalas by terrorist organizations. The very lack of a sophisticated record-keeping

222 “Zakat,” IslamiCity, accessed on May 11, 2010, http://www.islamicity.com/mosque/Zakat/#Learn. 223 D. C. Schwartz, Political Alienation and Political Behavior (Piscataway, NJ: AldineTransaction, 1973). 224 Passas and Maimbo, “Design, Development, and Implementation.”

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practice that is inherent in a hawala leads to a lack of evidence to support the theory that it is may be used for nefarious purposes. In the face of compelling evidence that Al Taqwa Bank was being operated as a hawala, there is equally convincing evidence that such a hawala can be used in support of terrorism. Given that Al Taqwa was supported and surrounded by robust and sophisticated banking structures, it should be considered of utmost importance that these hawalas have a transparent form of record keeping when they exist within a culture where conventional banks exist. In other words, any society that is economically capable of having a conventional banking sector ought to hold hawalas accountable to the same standard of record keeping. This requirement aligns them more closely with the formal financial sectors and still permits them to retain their specific nature. Implementation of this small step— given that most of the world’s financial resources exist within societies with conventional banks—will help curb the influence that hawalas have on funding terrorism. It is apparent that some flaws and gaps might remain if, for example, someone intent upon funding terrorist activities simply moves to a state such as Somalia to exploit a hawala with no conventional record keeping; nevertheless, this first step is crucial in helping to limit the amount of damage that this form of unconventional financial transferring system may inflict. Even after this form of regulation is applied to hawalas, financial and security experts must conduct further research on informal value transfer systems to determine if and how they may still be used in financing terrorism. This study already has described the problems associated with institutionalized banking secrecy, and how this problem should be handled. Though some may feel that this is a hostile transnational act asserted upon the sovereignty of Switzerland, it is ameliorated by the legal argument that the harboring of tax evaders undermines the fiscal policies and stability of other countries; this becomes a defensive act, then, imposed specifically to protect the interests and sovereignty of other countries. Even so, Swiss resilience may be positive in the long run, as the Swiss will not be easily persuaded to give up the privacy rights of individuals without documented evidence that these individuals are engaged in illicit activities. The problem, as became evident with Al Taqwa, occurs when the owners of these banks have connections with influential politicians. This obviously hinders any type of cooperation between the U.S. and a bank run by those pursuing an agenda that challenges

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America. Protocols must be established on an international level in order to thwart this type of circumstance. Bank owners and operators should undergo a screening process, conducted by their own countries, to investigate potential organizations that are considered hostile to the international community. Again, there must be a differentiated process here between a known affiliate of a dissident group and a member of a terrorist group; one merely protests the status quo and seeks political solutions, while the other partakes in acts of violence as a means to force one political agenda on another. It is imperative that the formal financial sector be engaged in this process, providing them with access to policy deliberation. In the wake of 9/11, for example, some of the reporting requirements imposed on financial institutions may have been counterproductive, as banks were expected to review, monitor and report upon millions of transactions that ultimately were irrelevant to counter-terrorism efforts.225 If the counter-terrorism community continues to use pejorative comments about any institution’s affiliation—knowingly or not— with a terrorist organization, then the private sector may be more inclined to consider these actions as political intrigue on the part of the intelligence community, and less as a means to engage a valuable partner in combating threats to our society. Perhaps incentives should be implemented to make it more appealing to work with the government sector, rather than with those that engage in illicit activities. In a section earlier in this study, a connection between Al Taqwa Bank and Iraq was discussed, suggesting a connection between Saddam’s regime and other terrorist groups. The connection likely occurred via a mechanism called trade diversion. It is one of the most sophisticated ways to launder large amounts of money, and it is accomplished by “hiding in plain sight.” To do this effectively one must use large transactions disguised as legitimate financial trade, using large and well-respected firms to complete the transfer. This veneer of legitimacy makes it extremely difficult to detect this specific mode of laundering; in the instant case of Al Taqwa, this mostly transnational organized crime financing strategy has been employed for terrorist financing. It is doubly devastating because it not only helps fund different types of terrorist organizations but it also effectively hides such transactions from

225 S. E. Eckert, “The US Regulatory Approach to Terrorist Financing,” in Countering the Financing of Terrorism, edited by T. J. Biersteker and S. E. Eckert, 209-233 (New York: Routledge, 2008).

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the scrutiny of law enforcement. The International Narcotics Control Strategy Report (INCSR) observed this about trade diversions: Terrorist financiers are increasingly likely to use fraudulent trade-based practices in international commerce to launder, earn, and move and integrate funds and assets. US Customs officials define trade-based money laundering as the use of trade to legitimize, conceal, transfer and convert large quantities of illicit cash into less conspicuous assets or commodities. In turn, the tangible assets or value are transferred worldwide without being subject to financial transparency laws and regulations.226 The complexity of this method of financing demands a sophisticated knowledge of economics and pricing mechanisms, such as import overpricing and export underpricing, and rivals the complexity of multinational corporations. This complexity limits the number of people who can master these strategies to a few; these few, however, are capable of moving millions of dollars each day, largely undetected by law enforcement. These trade diversions can be as simple as moving a consumer product from a low-price market to a high-price market, since products vary in price in different places, and these are done by shell companies. The company takes advantage of the higher “mark-up” in the secondary market, and pockets the difference. It could be a more complicated transaction in which perpetrators approach a U.S. manufacturer with a large order, insisting that the destination is an underserved area of that manufacturer, and negotiating a discounted price; they then end up selling the product either to a prohibited market, diverting it and selling it back in the U.S. in direct competition with the manufacturer, or selling the product in competition with the manufacturer in a third-world country. If it is sold back to the country of origin, then these goods are “duty free” since they are “U.S. goods returned.” This is a type of transaction known as a U-Boat transaction, and trading companies in Canada, the UK, Switzerland, Singapore, and Dubai specialize in this type of transaction, which easily can be in the millions of dollars.227 The way in which Al Taqwa used trade diversion was already touched upon in great detail in a previous section. Basically, Al Taqwa was disguised as a legitimate bank, though

226 D. E. deKieffer, “Trade Diversion as a Fund Raising and Money Laundering Technique of Terrorist Organizations,” in Countering the Financing of Terrorism, edited by T. J. Biersteker and S. E. Eckert, 150-173 (New York: Routledge, 2008). 227 Ibid.

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it was set up as a shell company, in which it transferred money like a hawala. Though the bank itself was not used for the trade of commodities besides money, it often did business with those that did. This is what makes Al Taqwa unique: It combined so many elements of illicit funding mechanisms that it embodied the very complex structure of black market terrorist financing that the U.S. is trying to eliminate. The fact is that, although the entity of Al Taqwa is gone—perhaps tempting some to fly a banner of “Mission Accomplished”—the men involved in Al Taqwa remain free; national governments continue to conceal information from each other, though it is not clear who is hiding what; the Swiss proudly brandish their bank secrecy laws to impede investigations by Italian law enforcement, and connections within the international political elite helps mitigate or stop further investigation. This may sound like a great mystery novel, but what is apparent is that the story of Al Taqwa not only represents the embodiment of the illicit trade financiers of the world, it also is a story that embodies the ineptitude and lack of resolve among the international community as a whole. As previously stated, these people are involved with a global networking system using any means necessary to carry out an agenda and are held accountable by no constituents or stockholders. To combat this we must create an international global networking system that is accountable, to be certain, but that also is compassionate: We must lead the effort to encourage a sense of tolerance and individual empowerment around the world if we are to protect, and not destroy, our values, our society, our species and our world.

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CHAPTER 8

CONCLUSION

There remain significant challenges both in understanding the complexity of the financing of terrorism and in the context of this being just a very small facet within the greater counter-terrorism strategy. In the epigraph, I cited a quote that is not only insightful for the terrorists to use as legitimacy to combat the west but also portends what lies in store for the western world as we choose to impede their advancement of violent propaganda. This fight that is prescribed for us, however, is not merely a physical endeavor; it is also an exercise in restraint, legality, communication, humanitarianism and diplomacy. It requires more than just a blanket condemnation of those who oppose us, but also an intimate understanding of how other cultures interact, both from a social perspective and an economic view. Some will abhor this counter-terrorism strategy. Reasonable persons who asked why such anger existed against the West, in the wake of the attacks of 9/11, found themselves labeled as appeasers and apologists. Others might consider any attempt to engage other nations as a form of diplomatic hegemony—nothing more than new age imperialism meant to further disenfranchise an already poor people. True learning, however, typically inoculates one against repeating the mistakes of the past. And it is imperative that we continue to learn in order constantly to keep up with an ever-evolving foe. As previously stated, Al Taqwa Bank was merely an entity. What made this entity unacceptable was its agenda to oppose those in power through unacceptable means. From an unbiased perspective, one can easily conclude that the mere act of contesting those in power may not seem like such a bad thing; perhaps this kind of fight is representative of the values that this society treasures, including debate and democracy. What makes it abhorrent is that the funding that flowed through Al Taqwa and its affiliates was intended not for mere discussion or civil disobedience, but to fund violent acts that targeted innocent civilians, undermined the sovereignty of nation-states, incited violence and caused economic downturns that affected everyone. What needs to be considered is exactly why they would want to pursue action through violent activities—especially directed against civilian

81 populations—instead of through activities that would enrich their society, and that answer seems evident: They believe that these activities will have a positive effect on their people in the long run. Just as the leftist movement in Europe is hardly a factor in modern times, and neither do the anti-colonial movements of the post-WWII era barely resonate in this century, it may be that terrorist acts are merely the “soup of the day,” or “flavor of the month.” They may merely represent the current methods by which one partakes in rebellion against societies’ values. After this fundamental surge in terrorism, there likely will be another surge of those who feel disenfranchised. In looking at the leftist movement, and how it eventually became the “green” party in Europe and America, we should ask ourselves why we do not provide a similar voice and platform to those who feel alienated in an international setting. I have noted throughout this study that it is of absolute importance to pursue sincere communication and outreach with other nation-states and with private businesses in order to curb this terrorist threat. It is equally important to employ this approach in communicating with groups such as the Muslim Brotherhood. This paper condemns the actions of the Muslim Brotherhood, but questions whether any nation-state in existence has not been part of an action worth condemning. Though the number of extremists Muslims is a minority of the greater Islamic world, it is still a significant number, and a number that deserves access to a political voice. Most of the world’s population does not agree with some of their initiatives, such as re-creating an Islamic caliphate, but quite a few will agree that it is important to enrich their areas so that their families will not live in abject poverty, or agree that it is important to create new jobs, or agree that it could be useful to build an actual infrastructure that provides education and social programs to their population. There is, of course, the possibility that these groups have no intention to partake in a political process established by the West, the “infidels.” If this is the case, we still should not falter in our efforts to integrate these societies into the greater community of nations, with the utmost diligence in respecting their social, economic and religious culture. Though it is inevitable that battles will continue between the jihadis and the Western society, it is important that this fight does not further escalate into ongoing generational violence, such as what happened with the IRA in their battles with the United Kingdom.

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The theme of this thesis is not only to inform and tell the story of Al Taqwa Bank but also to illustrate the ineffectiveness of our applied mode of communication. This is not just the failures and gaps of communication within our domestic and international intelligence community in their competition for leverage, nor the way that sovereignty is asserted to protect a prideful law such as bank secrecy, nor even societies’ failure to consider those who are less fortunate. Instead, this is the story of a group of men who embraced the message of Nazism in order to spread Arab nationalism, who used the funds of those who died in concentration camps to further their agenda, who made no excuse for their intolerant beliefs even as we tolerated theirs, and who would undermine society at large so that they could create their own. We would do well to remember the story of Al Taqwa.

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CHAPTER 9

METHODOLOGY

This thesis rests upon extensive secondary research. Because of the sensitive nature of its topic, much information that would be most relevant is unavailable to anyone not possessing a security clearance and in a “need to know” position within the intelligence structure. Interviews were an ineffective avenue for the same reason. What was left was an exhaustive review and analysis of what exists in the public domain. No single researcher has gathered the biographical data of the principles involved in Al Taqwa, and that which is available is often suspect. Champions of one ideology or another are quick to portray individuals either as conspiratorial villains or as innocent victims, and one must maintain constant vigilance in the face of advocacy that sometimes is overt, but often is subtle. Much work is derivative of other work, with echoes of “facts” reverberating through the literature. My goal has been to be wary of apocrypha, then, and to seek validation of facts as opposed to corroboration. And, because of the limits on available information described in the first paragraph, above, this has proven to be laborious. Nevertheless, the accumulation of bits and pieces result eventually in some idea of the nature of truth. Just as paleontologists must estimate the appearance of a hitherto unknown dinosaur on the basis of a few bones, so have I had to engage in some estimates of roles and biography on the basis of occasional flashes of light. The reference listing at the end provides the primary sources of illumination. The internet, with its search capabilities, typically does not provide the answers to questions, but can lead one to the answers. Newspaper and magazine articles, blog entries and encyclopedic sites provided clues to sources. Sources mention dates and documents, and a search for those documents with those dates often turns up links to original material. Whenever possible, information contained in original material forms the basis for factual conclusions. Governmental documents have been identified and quoted, and other authors’ conclusions have been carefully referenced.

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There is an abundance of material on Islam, though little of it can be considered objective. One man’s freedom fighter, of course, is another man’s insurgent. Even so, it is possible to winnow the belligerence from the benevolence and determine some basic understanding of the beliefs that drive the Muslim Brotherhood, as distinguished from those that drive Al Qaeda or Hamas, as distinguished from those that guide the hand of the leaders of predominantly Muslim countries. Similarly, there is a wealth of information on Swiss banking and other international banking systems that pledge anonymity and secrecy for their customers, though this information also is subject to the extreme biases of the sources. Hoyt Barber’s “Secrets of Swiss Banking” champions and strives to protect those secrets on behalf of depositors, and the Swiss Confederation’s Federal Department of Finance wraps its secrecy protocols in the language of “freedom” on behalf of its banking industry. , on the other hand, battled to shed light on the darker nature of Swiss banking secrets, and George Carpozi’s “Nazi Gold” described the kind of grisly and macabre secrets that have been kept. In all, I conducted an expansive review of available literature. I tossed aside far more than I kept; every piece added to an emotional understanding of the world-view of the parties involved, even when it did not add to the empirical foundation that was my aim. In the end, I was able to piece together a reasonably complete timeline of Al Taqwa, as well as the key biographical notes of its associated members. I was able to gain and, I hope, present a basic understanding of the protocols of the Swiss banking system and its international cousins, including the role of correspondent banks and alternative remittance systems. I was able to connect the dots between what at first face seemed an unlikely alliance between White Supremacists and jihadis. I was able to conclude that the “war on terror” is not a war at all, although it is a conflict that may be no closer to resolution than it was on September 10th, 2001.

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