Social Science Research Council

By
Douglas Farah Washington Post Investigative Reporter

The views expressed in this memo do not represent the views of the Washington Post, only those of the author.


In 1998, following the al Qaeda attacks on the U.S. Embassies in Nairobi and Dar-es-Salaam, the Clinton administration froze some $240 million in assets belonging to Afghanistan's Taliban government and Osama bin Laden, the regime's guest. That move was largely unforeseen by either al Qaeda or the Taliban. Because it was so costly and because al Qaeda constantly reviews both successful and failed operations to find and correct their own vulnerabilities, a far-reaching review of the terrorist financial structure was undertaken.

Adapting to the U.S. response and determined not to be caught in the same position again, al Qaeda began a systematic withdrawal of its funds from the formal banking sector, where it was viewed as most vulnerable and traceable. Instead, the decision was made to begin shifting money into commodities that would hold their value over time. Chief among these were diamonds and tanzanite.

Al Qaeda already had long-standing ties to the gemstone trade. Documents and testimony presented during 2000 the trials of Wadih el Hage and Mohammed Sadeek Odeh show that al Qaeda, even before the U.S. embassy bombings, was dealing extensively in diamonds, tanzanite, amethyst, rubies and sapphires, mostly as money making ventures. According the trial transcripts, senior al Qaeda leaders were deeply concerned about the possibility that an al Qaeda operative was carrying a large quantity of stones when he drowned while crossing a lake.

After the bombings, the use of gemstones accelerated rapidly, but with an added purpose. Rather than being viewed solely as a business venture, gemstones, and diamonds in particular, were used as a way to store the value of al Qaeda's financial resources outside the formal financial sector. A premium was no longer placed on turning a profit, but rather acquiring as many stones a possible with money that was being siphoned out of banks and businesses.

The al Qaeda leadership, through one of its senior financial operators named Mohammed Ahmed Mohammed, contacted an old al Qaeda friend who had fought with the mujahaddeen and now ran most of the illicit or "blood diamond" trade for West Africa, Ibrahim Balde. Balde, also known as Bah, is a Senegalese who trained in Libya under Moamar Gaddafi, then went to fight in Afghanistan in early 1980s. After about two years there, he briefly returned to Libya before joining Hezbollah fighters combating Israeli forces. Finally, he returned to Libya in the late 1980s, just in time to train and become friends with the long list of Libyan-backed rulers that would wreak havoc on West Africa: Charles Taylor, now president of Liberia; Foday Sankoh, founder of the Revolutionary United Front (RUF) in neighboring Sierra Leone; Blaise Campaore, now president of Burkina Faso, who assassinated his best friend, Thomas Sankara, in order to assume the presidency.

In late 1998 Mohammed paid Balde a visit in Monrovia, Liberia. Balde escorted him in a presidential helicopter to visit the senior leadership of the RUF across the border in Sierra Leone. The RUF was a rag-tag band of largely-illiterate rebels who gained international notoriety by using machetes to chop the hands and legs off civilians, and for using mass rape of women as a tool of terror. There, the first bargain was struck, although it remains unclear how much business was carried out in the months immediately following Mohammed's visit.

But what is important and instructive are the conditions, ideal for terrorists, that allowed the relationship to begin, then prosper. Balde had access to diamonds mined by the RUF, among the most prized in the world. He was also a key player in Liberia, a corrupt state that, while retaining the valuable trappings of nationhood--the right to issue internationally-recognized diplomatic passports, the ability to register aircraft, control of the formal entry points into the country--is in fact a functioning criminal enterprise. Balde's close relationship with President Taylor and the Liberia security apparatus guaranteed that his guests, while wanted elsewhere in the world, could come and go unmolested to Monrovia. Armed thugs from the presidential guard escorted Mohammed and later terrorist visitors to and from the airport, allowing them to circumvent immigration formalities and lessening the paper trail. As long as Taylor was apprised of the situation and was able to take his percentage of each deal, neither Balde nor his guests had anything to fear.

Balde also had access to the official state apparatus of neighboring Burkina Faso, due to his long-standing personal and business relationships with president Blaise Campaore, and the ties between Campaore and Taylor. Burkina Faso offered another valuable asset that Liberia, under an U.N.-mandated arms embargo, could not: the ability to produce internationally-recognized end-user certificates for the purchase of large quantities of weapons from around the world. For many years Balde, with Campaore's knowledge and blessing, coordinated arms shipments for Taylor and the RUF through Burkina Faso's capital, Ouagadougou.

The commodity was also well-chosen. Diamonds, like tanzanite and other gemstones, carry a high value in small bulk, yet are easily convertible to cash in an industry that is largely willing to ignore the origin of the stone. The stones cannot be detected by dogs and set off no metal detectors at airports, making it easy to transport. Sales of small amounts are impossible to detect on the world market. They cause no undue fluctuations. For years, Balde and others had made extensive use of grey market networks in Antwerp and elsewhere to sell millions of dollars worth of diamonds, with part of the proceeds going to personal enrichment and part going to keep the RUF and Taylor armed and at war.

By late 2000, al Qaeda was moving more aggressively into the diamond trade with the clear intent of putting their assets beyond reach. Two top al Qaeda operatives who were believed to have been heavily involved in the U.S. embassy bombings--Ahmed Khalfan Ghailani and Fazul Abdullah Mohammed--were dispatched to Monrovia to set up greatly expedited mining operations, offering to buy all the diamonds the RUF could produce. They lived in a safe house tucked between buildings housing Libyan diplomats and security forces in downtown Monrovia, although they continued to do some business from the Boulevard Hotel. The house was rented for three years by the one of the Lebanese middlemen brought in by Balde. The two spent several weeks in the bush in Sierra Leone with the RUF. In early 2001, because the RUF distrusted them and they didn't speak the native krio language, the men were apparently left. A Lebanese diamond merchant named Aziz Nassour, already working with Balde, sent in a team of people that had worked for him in the Democratic Republic of Congo to take over.

Nassour, who was a close business associate of Mobuto Sese Seko in the former Zaire and owner of a host of diamond companies in Antwerp with overlapping directorates, met with the RUF high command in Monrovia in July 2001. At the meeting, he again urged the rebels to mine as many diamonds as they could and promised to pay a top dollar for the stones made available for selling. Then he left, briefly returning to Antwerp and then on to Beirut. He left his nephew, Samih Osailly, in charge of operations. A woman traveling from Pakistan also spent time in Monrovia overseeing operations. Her travels back through Karachi, Pakistan in the presence Ghailani and Mohammed indicate an al Qaeda tie. Diamond buyers who normally bought stones from the RUF told me they were unable to buy diamonds during those months in 2001 because some unknown buyer, who I believe to be the al Qaeda operatives, was paying 10 percent to 15 percent more than the market rate. They said that premium, being paid by their competitor, made it virtually impossible for them to buy high quality stones. At the same time, according to Belgian diamond experts, despite the massive diamond mining in Sierra Leone in 2001, the most mining carried out in more than a decade, the stones didn't show up in Antwerp or any of the other world markets. That showed, one investigator said, that "someone bought and is hoarding a large stock of diamonds, worth many millions of dollars."

The paradigm shift in terrorist financing, although similar methods have been used for decades by Hezbollah and other Middle Eastern groups, was missed entirely by Western intelligence agencies. The CIA lost almost all of its operatives in the region after the Cold War, leaving them with virtually no resources on the ground. French and Belgian intelligence, active in their former colonies in West Africa, knew of the Middle Eastern connection to diamond sales_principally to Hezbollah and Amal militia supporters_but viewed them as relatively harmless. Besides, the Israelis also had a large number of diamond buyers in the region.

So, instead of looking for the money where it was hidden, the initial hunt for al Qaeda funds after Sept. 11 focused almost exclusively on trying to freeze the few assets that remained in Western banks and were traceable to terrorist funding. The initial reporting on terrorist ties to gemstones, by me on diamonds and Bobby Block of the Wall Street Journal on tanzanite in particular, were met initially with deep skepticism in the U.S. intelligence community.

This largely continues today. Because it had such a limited understanding of al Qaeda's financial structure before the Sept. 11 attacks, the government was slow to recognize and begin to act on the host of non-traditional financial methods used by terrorists. These include the use of charities, the hawala system of transferring assets and the vital role that gold plays for these groups. It took almost a year for the Treasury Department and others to begin to publicly acknowledge the possible transfer of wealth by al Qaeda to gemstones. Some U.S. intelligence agencies remain reluctant to acknowledge even the possibility that al Qaeda moved significant assets into commodities, especially gem stones, despite the growing evidence, beyond anecdotal evidence and eyewitness testimony to support the veracity of the reporting. Much of the evidence has been uncovered by European law enforcement and intelligence officials who have followed leads the U.S. has chosen not to. The Swiss attorney general, in a recent interview, said it was now accepted, conventional wisdom among European investigators and intelligence agencies that al Qaeda had put most of its wealth, estimated by U.N. experts to be between $30 million and $300 million, into commodities for safekeeping.

The Belgians in particular, following the arrest earlier this year of Samih Osailly for the illegal possession of weapons, have uncovered a wealth of information on the diamond nexus to al Qaeda, flowing through Antwerp. Other eye witnesses, unavailable when I did my initial reporting, have come forward to confirm the presence of the al Qaeda operatives in Liberia and Sierra Leone. For reasons that remain unclear, U.S. officials have given little importance to the findings.

The ties to the diamond and tanzanite trade were uncovered by reporters on the ground in Africa. Given the lack of human resources the CIA and other intelligence-gathering agencies have on the ground in West and Central Africa particularly it is not at all surprising the activities were undetected. Perhaps more than any other region, Africa was abandoned by U.S. intelligence services following the Cold War, often leaving a single station chief to cover two or even three countries with almost no support personnel. Given the dearth of assets on the ground and the fact that so little of the illicit trade is detectable through electronic intercepts or other high-tech tools, it seems to me highly probable that similar transactions, by al Qaeda and other terrorist groups have transpired in other countries. Countries across Africa, from the Central African Republic to the Congo and Chad offer many of the same conditions that Liberia and Sierra Leone have offered: the trappings of a state coupled with lack of strong government presence in much of the national territory; states rife with corruption; an almost complete lack of investigative capabilities; and no tradition of confronting criminal elements.

There is strong anecdotal evidence that al Qaeda bought gems in the Congo-Kinshasa and Angola as well as Sierra Leone and Liberia. The Congo, with its host of different armies dividing up the country for the purpose of looting, coupled with a long history of a rapacious state and corruption, is long known to be a major financial center for Hezbollah and other armed groups. In Angola, Jonas Savimbi maintained strong ties to Campaore in Burkina Faso and the corrupt dictatorship in Togo, often using diamonds as a medium of exchange for weapons. The only serious investigations into the activities and their possible ties to terrorist organizations have been carried out by the United Nations panels of experts and a handful of private, nongovernmental organizations. Neither the host states nor counter-terrorism bodies from other countries have dedicated significant resources to unraveling the diamond trade there. Until resources and attention are brought to bear in this area, al Qaeda and other terrorist organizations will continue to use diamonds and other commodities to finance their actions.