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Money laundering laws won't stop international terrorism

By Bert Ely
web posted June 3, 2002

The anti-money laundering provisions in the USA PATRIOT Act of 2001 will not stop international terrorists from carrying out evil deeds in the United States. The underlying premise of the new law is both false and extremely dangerous: grant federal authorities more intrusive access to customer records at banks, securities firms, and other financial services providers to enable the authorities to identify future terrorists and to cut off their funds before they strike.

The legislation's premise is false, on two grounds. First, the authorities have consistently failed to use existing laws effectively to detect criminal behavior before-the-fact. Second, even with this additional police power, the authorities will still not be able to identify terrorists before they strike nor shut off their funding. In fact, the new law and its accompanying regulations will provide future terrorists with a highly detailed road map of how to avoid detection.

The legislation's premise also is extremely dangerous, for it could give Americans a false sense of security, that evildoers will be identified and caught before they strike. Worse, the premise detracts attention from the extremely serious intelligence failures that occurred before September 11.

FBI boss Robert Mueller admits his agency could have done more in a May 29 press conference
FBI boss Robert Mueller admits his agency could have done more in a May 29 press conference

As has become increasingly clear, the Federal Bureau of Investigation (FBI) is most to blame for this devastating intelligence failure. Other federal agencies, notably the Immigration and Naturalization Service and the Central Intelligence Agency, failed both to perform their assigned tasks as well as to coordinate their activities with their fellow intelligence agencies.

In enacting the USA PATRIOT Act, Congress mistakenly bought the assumption that technology, in the form of running an electronic dragnet across all financial records, is a sufficient substitute for the hard, dangerous work of gathering intelligence by using human agents to penetrate terrorist cells. Many Americans believe that in times of war, it is necessary to sacrifice personal liberties to gain physical security. That is a false trade-off, for individual liberty need not be sacrificed if the government agencies charged with protecting America from foreign attacks do a more effective job than they did prior to September 11.

The latest chapter in the war on international terrorism must be fought on two fronts -- outside the United States, where the terrorists are headquartered, and inside the country, where terrorists could strike again. Domestically, though, the war must be fought in a manner which respects the constitutional protections Americans have long enjoyed and prospered from.

One unchallengeable fact of the war on terrorism is that the enemy consists overwhelmingly of radical Muslims. To defeat al-Qaida inside the United States, domestic terrorist fighters must find the Muslim terrorist cells, penetrate them, and then destroy them. Fishing through financial records will not flag those cells, particularly as future terrorists become more effective in covering their financial tracks. Instead, the search for the terrorists' cells must start where they incubate -- in the minority of Muslim mosques, cultural centers, and similar gathering spots where hatred of America is fomented.

Loyal Arab-Americans and non-Arab American Muslims must be recruited for this task, just as Japanese-Americans helped to win World War II. These new gatherers of intelligence must speak the appropriate languages and the culture of the mosque or the cultural center must be their culture.

Penetrating terrorist cells has the added benefit of sowing mistrust among cell members, greatly impairing their effectiveness. There has been no indication that the FBI attempted, much less succeeded, in penetrating the hijackers' cells.

The failure of the domestic intelligence agencies to prevent the September 11th terrorist attacks may partially reflect this shortcoming -- the crime-fighting orientation of these agencies, notably at the FBI. Intelligence gathering has been of secondary importance, and often has been ineffective, as in the case of the drug wars.

Hence, winning the international war on terrorism within the United States will require a fundamental restructuring of the federal police agencies into just two organizations -- a terrorist-fighting agency that focuses on gathering intelligence on domestic terrorists and acting to prevent terrorist attacks and a second agency devoted to traditional crime detection and after-the-fact apprehension. In particular, the FBI's intelligence activities must be shifted to the new terrorist-fighting agency while the rest of the FBI is combined with other domestic police agencies.

The war on international terrorism will not be won by a bunch of mid-level bureaucrats sitting in front of computer terminals scanning financial records and otherwise probing the financial affairs of almost 300 million Americans who clearly have no terrorist involvement. Instead, it will be won to a great extent by American Muslims ferreting out and penetrating radical Muslim terrorist cells operating within the United States.

Achieving victory does not mandate an assault on the U. S. Constitution, as the new legislation does. Instead, it requires an intelligent, constitutional attack on the sources of international terrorism within the United States.

Bert Ely, the principal in Ely & Company, Inc., is a financial institutions and monetary policy consultant in Alexandria, Virginia. This commentary is drawn from an essay by Mr. Ely that was published in The Privacy Papers. The longer essay is available at a cost of $8.00 from the Free Congress Foundation by calling 202-546-3000 or by sending a check or money order to Publications, Free Congress Foundation, 717 Second St., NE, Washington, D.C. 20002.

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