Cash Flow to Hamas Is More Restricted, Deeper Underground

By Peter Slevin
Washington Post Staff Writer
Sunday, February 19, 2006

CHICAGO, Feb. 18 -- Hamas leaders who took charge of the Palestinian parliament Saturday are searching for cash, well aware they can expect no financial support from the U.S. government. They also know that aggressive detective work by federal investigators has clipped the pipeline that once carried millions in private donations collected in the United States.

Before the Bush administration intensified its crackdown on terrorist financing after the Sept. 11, 2001, attacks, mosques and Muslim charities openly raised money for the Islamic Resistance Movement, also known as Hamas, that mixes Palestinian community work with anti-Israeli suicide attacks. After Hamas was outlawed, investigators say, one Texas charity funneled $12.4 million overseas to Hamas.

But the indictment of alleged Hamas money men in Chicago and Dallas, combined with the FBI questioning of private contributors, has chilled donors, slowed collections and forced fundraising underground, according to U.S. authorities, terrorism financing experts and members of Chicago Muslim organizations.

Specialists who track the money say Hamas fundraisers are adapting by using hard-to-trace methods for moving cash overseas, including stored-value cards, Internet bank accounts and old-fashioned couriers. Money is also sometimes wired to European and Middle Eastern countries where U.S. authorities say they often get little help in following the trail.

By all accounts, the volume of money going abroad has been reduced, although government officials acknowledge that Hamas agents remain active. As one federal source put it, "We're aware of the Hamas presence here, and it has an organizational structure."

Bruce Hoffman, a Rand Corp. counterterrorism expert, noted: "We have been successful in limiting their activities in the past, but nobody should be under any illusion. Not least because what we've done has been so effective, they're adjusting and adapting in response."

U.S. authorities are preparing for a new Hamas marketing pitch after the Jan. 25 election. The victory gave Hamas a fresh element of democratic legitimacy to accompany a newfound need to help the cash-strapped Palestinian Authority pay for salaries, public works and social services.

Hamas draws money from dozens of countries, most notably Saudi Arabia. Israeli Brig. Gen. Michael Herzog said Hamas will have access to more money than ever as the Palestinian government, but will also face greater needs.

"I'm sure they will maintain an independent military just in case, and they will have to fund it," said Herzog, a visiting military fellow at the Washington Institute for Near East Policy. "They will still need their own independent sources of funding."

The Bush administration's approach to Hamas in this country has not changed. The group remains a designated terrorist organization, and U.S. law prohibits contributions of money or material support. One senior official summed up the long-standing approach: "You stop the money, you stop the bad guys."

The FBI investigation of Muslim charities and other fundraising activities linked to Hamas began in the early 1990s but gained momentum after Sept. 11. The most prominent early target was the Holy Land Foundation for Relief and Development, based in Richardson, Tex.

Created in 1988, the year after Hamas was founded, Holy Land became the nation's largest Muslim charity, collecting $57 million between 1992 and 2001, according to a federal indictment unsealed in 2004. It was a time when advocates openly appealed for support for Hamas, often doing little to disguise the dual tracks of militance and community work.

"Early on, they felt immune," said Dennis M. Lormel, former chief of the Terrorist Financing Operations Section of the FBI, which established a separate team to investigate Hamas financing in early 2002.

The equation changed after President Bush froze millions of dollars in Holy Land assets in December 2001. The foundation and senior officers, including Chief Executive Shukri Abu Baker, were later charged in a 42-count indictment that essentially accused Holy Land of being a Hamas front.

Defense attorneys denied any link, although several of the charity's officers are relatives of Hamas leaders. More broadly, while some defenders say the money raised in the United States goes to Palestinian widows, children, hospitals and development projects, U.S. and Israeli authorities say some of the money underwrites anti-Israeli violence.

"Hamas has gotten most of its funding from the exploitation of charity," said Stuart Levey, Treasury undersecretary for terrorism and financial crimes. "They've structured themselves to provide plausible deniability, to have the public face of a political, social, humanitarian side, and then the military side."

He continued: "They've tried to market it as if it has two separate entities. That's not the case."

A second major indictment, unsealed in Chicago in 2004, charges three men with promoting terrorism through an alleged money-laundering conspiracy that stretched from Mississippi to the West Bank.

The defendants, who deny wrongdoing, include former Howard University professor Abelhaleem Hasan Abdelraziq Ashqar and Mousa Abu Marzook, Hamas's deputy political bureau chief, deported in 1997. The third is Muhammad Hamid Khalil Salah, who spent years in an Israeli prison and now lives near Chicago.

Michael Deutsch, who represents Salah, is among several knowledgeable Chicago figures who said the criminal case and a series of asset freezes after Sept. 11 have "created a very serious chilling effect" on all types of Muslim fundraising.

"There was a drop of money received by many Islamic organizations following the initial wave of freezing the funds," said Mohammed Zaher Sahloul, president of the Mosque Foundation in the Chicago suburb of Bridgeview. "When you have a law-abiding citizen feeling they're doing a good thing and are interviewed by the FBI, that will make them nervous."

Some contributors who continued to donate, he said, switched from checks to cash.

The primary U.S. goal is less money for Hamas. Levey, the only U.S. official who would speak on the record, acknowledged, "I have no illusions we've made this flow zero."

Current and former U.S. officials assert that money continues to move to Hamas from the United States, although it is impossible to know how much. Instead of large wire transfers directly to entities in the Palestinian territories, investigators believe fundraisers are using a variety of less formal approaches, trafficking in smaller sums.

Money can be hand-carried abroad in small bundles. Cash deposited in a U.S. bank can be withdrawn from ATMs in Israel, Egypt or Jordan. Stored-value cards are portable, while Internet banking allows fast and complex transfers. Fundraisers also use hawala , the ancient system of informal money transfers in which money moves among friends and relations.

Money also can be wired to a third party in Europe and on to the Middle East, where a courier could walk it across the border. Whatever the route, it can be hard to track.

"We could follow the money to a certain bank account or a certain location," Lormel said, "but then it would go out and we couldn't trace it."

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