THERE’S a rule on Wall Street that brokerage firms need to “know their clients” – so customers can be put into appropriate investments. Well, that turns out to be pretty good advice for banks, as well.
Just ask Citigroup, which last year suddenly found itself with a terrorist organization as one of its prized new customers.
The full story of Citigroup’s awkward banking relationship with Al-Aqsa Bank, a terrorist front organization for Hamas, was outlined last week to the House Committee on Financial Services Subcommittee on Oversight and Investigations.
The longer the name of the congressional group, the less attention it gets. And that was the case with a report given to the committee by Steven Emerson, a terrorism expert and author of “American Jihad: The Terrorists Living Among Us.”
But Emerson’s detailed account of how Middle East terrorists get the money to do the things they do is intriguing, scary and pretty damn disconcerting to those of us who believe banks and others have a fiduciary responsibility to mankind as well as to their shareholders.
In this case, Citigroup was an excellent corporate citizen. Tipped off about the terrorists, the bank asked the U.S. Treasury Department for advice.
It cut off the relationship with Al-Aqsa and others immediately after it was clued in. But it did take a year or so before the Treasury Department – now aggressively in the forefront of the terrorism fight – confirmed the suspicions, Emerson told me in a phone interview yesterday.
Some of this information came out at the time. Emerson filled in some of the blanks last week. “Citigroup’s hands were tied,” Emerson told me. “The Treasury refused to make the designation” of Al-Aqsa as a terrorist group.
Keep in mind that the end of the Citigroup incident occurred nine months before the Sept. 11 attack on the World Trade Center. And had Washington followed the trail of money more closely in a more timely fashion, who knows, perhaps our priorities today would be different.
“The Al-Aqsa Bank and Beit al-Mal are both examples of terrorist organizations using financial institutions to launder money, and of a funding front integrating a legitimate business into its network,” Emerson told the committee.
Israel first got wind of Al-Aqsa and Beit al-Mal’s money laundering operations and banned both from doing business with that country’s banks.
“In order to bypass Israeli restrictions and make its fund accessible to Hamas operatives in Israel and the territories, Al-Aqsa embarked on joint projects with Citigroup, intertwining itself with Citibank’s Israel division,” Emerson said.
Al-Aqsa deposited money in accounts in Europe or in the Middle East and those funds became accessible from Israel through Citibank.
“When Citibank was opening an office in Tel Aviv in January 2001, Israeli authorities formally questioned its ties to Al-Aqsa, prompting Citigroup to request advice from the U.S. Treasury Department,” Emerson says.
That’s when the yearlong delay occurred. Toward the end of that period, some of the suspicions came out through articles in the Jerusalem Post. But it didn’t happen quickly enough – about $1 million had been deposited into al-Aqsa accounts for Hamas.
“At least some of the money reached Hamas through Citibank,” Emerson told Congress.
Citigroup couldn’t be reached yesterday for comment because it was closed for the Presidents Day holiday.
But Emerson’s testimony makes it clear that cutting all funds to terrorists – which is what President Bush intends to do – isn’t going to be easy.
The U.S. has now frozen the assets of Al-Aqsa and Beit al-Mal. But Congress was told that something innocuously called the International Islamic Relief Organization is the chief bankroller of Osama bin Laden and the al-Qaeda terrorism network.
And people may be contributing to this organization without knowing where the money ends up. Emerson tells me that the radicals are “still getting money. They got a cash reserve. They’ve got gold. They’ve got gems. And they are low maintenance.”
But they don’t have an account at Citicorp anymore, thanks to some unusual corporate/government cooperation.
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