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Al-Qaeda Masters Terrorism On the Cheap

"The bad guys, after a while, they realize what we're doing, so they're going to alter how they do business," he added. "Obviously, you're not going to stop them from getting money, and they're going to be able to adapt."

Inventive Fundraising

Al-Qaeda's self-financing cells in Europe have become increasingly creative in their fundraising methods, officials said.

After the July 2005 London transit bombings, police knocked on the door of a sheep farmer in Scotland to inquire about a livestock deal gone sour. The farmer, Blair Duffton, confirmed that he had lost more than $200,000 when he sent several truckloads of sheep to a slaughterhouse in Leeds, England, but never received payment.

The slaughterhouse specialized in halal meat, or food prepared according to Islamic law. Detectives informed Duffton that the person who had stiffed him for the sheep was an associate of Shehzad Tanweer, one of three bombers who had lived in Leeds.

"I almost went bankrupt," Duffton recalled in a telephone interview. "I couldn't believe it when they told me that this might have been connected to terrorism."

British authorities have not commented publicly on the sheep scam or said if any of the proceeds were used to finance the attacks. Three men accused of providing support to the suicide bombers are currently on trial in London.

In Germany, three Arab men were convicted in December on charges of attempting to raise $6.3 million for al-Qaeda by faking a death to collect on nine life insurance policies. In Switzerland and Spain in 2006, authorities broke up a cell that had stolen $2 million worth of computers, cars and home furnishings. Police said the group sold the goods on the black market and had couriers carry the cash, in $2,000 increments, to an al-Qaeda-affiliated network in Algeria.

In Britain, an al-Qaeda operative, Omar Khyam, was caught on a surveillance tape urging some of the July 2005 London suicide bombers to defraud banks and hardware stores by defaulting on loans of less than $25,000.

Khyam said the goal was not just to raise money for operations but to "rip the country apart economically, as well," according to court testimony in April at the trial of the three men accused of providing support to the bombers.

Acting on Khyam's advice, one of the bombers obtained and then defaulted on a $20,000 loan from HSBC Bank. Another secured a $14,000 line of credit from a building supply company.

Given the small scale of such transactions, banks or police would have had little reason to suspect the involvement of terrorists, officials said.

"That's the cleverness of these schemes -- to keep it under the radar," said Stephen Swain, former head of Scotland Yard's international counterterrorism unit. "By doing this, they can raise significant amounts of money, fairly quickly, and there's no real way to detect it."

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