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Al Qaeda's Gold: Following Trail to Dubai

By Douglas Farah

Washington Post
February 18, 2002
Just as the United States and its allies swept toward Afghanistan's main cities last autumn, the ruling Taliban and Osama bin Laden's Qaeda network sent waves of couriers with bars of gold and bundles of dollars across the porous border into Pakistan.

In small shops and businesses along the border, the money and gold, taken from Afghanistan's banks and national coffers, were collected and moved by trusted Taliban and Qaeda operatives to the port city of Karachi, according to sources familiar with the events. Then, using couriers and the virtually untraceable hawala money transfer system, they transferred millions of dollars to this desert sheikhdom, where the assets were converted to gold bullion.

The riches of the Taliban and Al Qaeda were subsequently scattered around the world through a financial structure that has been little affected by the international efforts to seize suspected terrorist assets. This account of the flight of the Taliban and Qaeda treasure from Afghanistan is based on dozens of interviews in Pakistan, the United Arab Emirates, Europe and the United States.

The gold trail was described by intelligence officers, law enforcement officials, gold brokers, and sources that have direct knowledge of some of Al Qaeda's financial movements, but not by Taliban or Al Qaeda operatives.

v The interviews offered a tantalizing glimpse into the critical yet mysterious role played by gold in the finances of Al Qaeda, both before and after the Sept. 11 attacks. Gold has allowed the Taliban and bin Laden largely to preserve their financial resources, despite the military attack that battered their forces in Afghanistan, investigators and intelligence sources said.

Al Qaeda also used diamonds purchased in Sierra Leone and the Democratic Republic of Congo, tanzanite from Tanzania and other commodities to make money and hide assets. But gold played a uniquely important role in the group's financial structure, investigators and intelligence sources said, because it is a global currency.

"Gold is a huge factor in the moving of terrorist money because you can melt it, smelt it or deposit it on account with no questions asked," said a senior U.S. law enforcement official investigating gold transactions. "Why move it through Dubai? Because there is a willful blindness there."

Since it is exempt from international reporting requirements for financial transactions, gold is a favored commodity in laundering money from drug trafficking, organized crime and terrorist activities, U.S. officials said. In addition, Dubai, one of seven sheikhdoms that make up the United Arab Emirates, has one of the world's largest and least regulated gold markets, making it an ideal place to hide.

Dubai is also one of the region's most open banking centers and is the commercial capital of the United Arab Emirates, one of three countries that maintained diplomatic relations with the Taliban until shortly after Sept. 11. Sitting at a strategic crossroad of the Gulf, South Asia and Africa, Dubai has long been a financial hub for Islamic militant groups. Much of the $500,000 used to fund the Sept. 11 attacks came through Dubai, investigators believe.

"All roads lead to Dubai when it comes to money," said Patrick Jost, who until last year was a senior financial enforcement officer in the Treasury Department's Financial Crimes Enforcement Network. "Everyone did business there." When the U.S. bombs began pounding Taliban and Al Qaeda targets last autumn, the rush of gold and money out of Afghanistan intensified.

The Pakistani financial authorities said that $2 million to $3 million a day is usually hand-carried by couriers from Karachi to Dubai, mostly to buy gold. Late last year that amount increased significantly as money was moved out of Afghanistan, they said.

Pakistani and U.S. officials estimate that $10 million from Afghanistan was taken out by courier over three weeks in late November and early December. The Taliban's fighters fled Kabul on Nov. 12 and abandoned Kandahar on Dec. 7.

One of the couriers of cash and gold to Dubai was the Taliban consul-general in Karachi, Kaka Zada, who took at least one shipment of $600,000 to Dubai in the last week of November, according to two Pakistani sources who witnessed him carrying the money.

In addition, U.S. and other officials said, millions more were sent through hawalas, the informal money transfer system widely used across the Middle East, North Africa and Asia that, outside of major cities, often serves as the only money transfer system.

Rather than moving money through traceable mechanisms such as wire transfers, hawala brokers take a client's money, then call or e-mail a counterpart in the area where the client wants the money delivered. The counterpart pays out the sum. When the transaction is complete, the records are destroyed.

Gold is often used by hawala brokers to balance their books. Hawala dealers also routinely have gold, rather than currency, placed around the globe.

"There are no traditional banking systems in Afghanistan or Somalia," Jost said. "Everything is done through hawala, and gold is the fuel hawala runs on."

U.S. investigators, led by the Customs Service, have begun poring over transactions of some of Dubai's largest and most prestigious gold brokerages for possible links to the movement of Al Qaeda or Taliban money and have found unusual gold shipments into the United States after Sept. 11.

A customs official said that as part of efforts to "investigate terrorist financing," the agency was "scrutinizing movements of gold by several companies, including ARY Gold," one of Dubai's largest and most prestigious gold bullion and jewelry dealers.

ARY's cramped headquarters are situated in the heart of Dubai's gold market - an area several blocks square, filled with stores that sell little else. Abdul Razzak, the Pakistani owner of ARY Gold, strongly denied knowingly doing business with the Taliban or Al Qaeda.

"I am a God-fearing person, but all my life I have been afraid of religious people like the Taliban," Razzak said. "I wouldn't like to deal with Taliban people, and we don't like Taliban people.

"If you say you want 100 kilos of gold, I can give you that wherever you want in 12 hours. What you do with it is your business."

Razzak, who owns three of Dubai's largest gold jewelry stores, said he imports and exports gold legally. Dubai has no restrictions on either activity, and Razzak said competitors were spreading lies about his company out of jealousy.

During two interviews, Razzak displayed few hints that he was a powerful political and financial broker. Wearing a simple white robe, he spoke in a small office separated by a glass partition from brokers monitoring a bank of computers. On the wall were plaques commemorating his gifts to charitable causes.

In 1998, Pakistani investigators looking into government corruption found two checks, each for $5 million, allegedly paid by ARY Gold in 1994 to Asif Ali Zardari, the husband of Benazir Bhutto, the Pakistani prime minister at the time, to secure a two-year monopoly on gold imports to Pakistan.

While acknowledging that he held the monopoly and shipped $500 million in gold to Pakistan from 1994 to 1996, Razzak said that he had paid no bribes and that "enemies" had falsified the bank documents.

He was cleared of criminal charges in Dubai but still faces charges in Pakistan from that case, the Pakistani authorities said.

In addition to using gold to hide assets, there is evidence that Al Qaeda smuggled gold into Pakistan and India for profit. Smuggling gold is lucrative because the two countries have a high demand for gold and legal gold imports are taxed.

A Qaeda manual found by British forces in Afghanistan late last year included not only chapters on how to build explosives and clean weapons, but also on how to smuggle gold on small boats or conceal it on the body, British and U.S. officials said.

The officials said that the Taliban and Al Qaeda moved large quantities of gold into Afghanistan after the Taliban rose to power in the mid-1990s, in part because most people in the region are more familiar with gold than foreign currencies. The officials said the Taliban collected taxes in gold from the heads of Pakistani and Indian trucking networks that hauled cargo through Afghanistan.

Donations to Al Qaeda and the Taliban from wealthy supporters were often made in gold, the officials said, and taxes on opium production, a source of revenue for both groups, were also paid in gold, according to U.S. and British officials. Gold bullion was flown directly from Dubai to the Taliban stronghold of Kandahar on Ariana Afghan Airlines, the officials said. "The Taliban took gold into Afghanistan because there was nothing else they could take there," said Jost, who has studied the use of gold by terrorist groups. "The local money was worthless, and foreign currency brings suspicion, but if you show up with gold, people know exactly what that is worth." For Al Qaeda to operate, the gold needed to be easily convertible to cash, and to be available around the world. For that, the organization is believed to rely on a hidden financial network across the Middle East, Pakistan and Europe, U.S. and European investigators said.

Dubai's links to suspected terrorist financing and money laundering have long been a point of contention between the United States and the United Arab Emirates. "There is no question the UAE was used by terrorists, the question is why," a U.S. official said. "It is no more lax and unregulated than many places. The answer is, Dubai is so damn convenient."