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War on terror advances on financial front

The world's leading industrial powers agreed on Tuesday to co-operate in starving militants of funding they need to plan and execute attacks like those that killed nearly 7,000 people in New York and Washington on September 11.

Finance ministers of the Group of Seven rich industrial nations issued a statement after a conference call, saying they pledged to pursue "a comprehensive strategy to disrupt terrorist funding around the world".

The G7, which links the United States, Britain, Canada, France, Germany, Italy and Japan, will meet in Washington on October 6 to map out strategy for the financial battle.

The G7 acted one day after US President George W Bush froze US assets linked to Osama bin Laden, the wealthy, Saudi-born militant he holds responsible for the attacks on New York and Washington.

He also clamped down on the assets of 27 individuals or organisations accused of supporting bin Laden and threatened that foreign banks that did not follow suit and shun militant money would themselves have their assets frozen in the United States.

"If you do business with terrorists, if you support or sponsor them, you will not do business with the United States of America," Bush said at the White House.

Aside from the G7, the 15-member European Union moved towards a clampdown on cash flows which might favour extremists and there were moves by other countries and financial centres around the world.

EU HAS ALREADY ACTED

EU documents made public on Tuesday showed the bloc had blacklisted assets of bin Laden and his key aides as far back as early July, and that the executive European Commission had instructed European banks to freeze the accounts of hundreds of named individuals and organisations associated with them, acting on a UN Security Council resolution last December.

But formal EU legislation has been held up for months by a dispute between the European Parliament and member states over whether to compel lawyers to report suspected money laundering by their clients.

Klaus-Heiner Lehne, the leading EU legislator on the issue, said on Tuesday a compromise was now in sight.

"We are very close to an agreement," Lehne told Reuters.

Among EU states Germany, France and Britain say they have already frozen suspect assets of individuals and entities on the UN list, and British Finance Minister Gordon Brown said on Tuesday his government would introduce new laws to make it easier to clamp down on the assets of suspect groups.

Outside the EU, Switzerland, home to a third of the world's offshore wealth, pledged its full backing. It insisted its bank secrecy laws, a foundation of its multi-trillion dollar private banking industry, would be no barrier in the quest.

Its tiny neighbour Liechtenstein, an important financial centre with strict banking secrecy, promised to help track transactions linked to the suicide hijack attacks. But it rejected suggestions that offshore havens were largely to blame.

"According to US security officials, the organisation that is responsible for the tragedies in New York and Washington is established in one form or another in 63 countries," the Alpine state's Prime Minister Otmar Hasler said in a statement.

"There is a global financial network with thousands of accounts. There is hardly a country in the world where some part of this network would not be established."

Luxembourg, another financial centre that handles tens of billions of dollars in worldwide funds, promised to co-operate in freezing the assets of possible terrorist networks but said it had yet to find enough information to warrant a formal investigation.

Japan's Financial Services Agency threw its weight behind steps announced last week by the finance, foreign and trade ministries to clamp down on transactions linked to 'terrorists'.

Banks are already required to report to authorities any activities thought to be linked to money laundering.

The FSA said it was strengthening surveillance and seeking to forge more bilateral agreements with foreign governments to enable the swift exchange of information on illegal profits.

The Tokyo Stock Exchange, along with trading centres elsewhere, said last week it was investigating whether any transactions before the September 11 attacks were linked to bin Laden's organisation. Some officials have voiced suspicions that militant insiders may have profited from resulting market chaos.

OUTRAGE AMONG ISLAMISTS

Islamist sympathisers expressed outrage over Bush's order.

But out of the 27 groups, charities and individuals actually to be placed on Washington's blacklist, only one small group came out and commented on the move -- denying it had funds in the United States or organisational links to bin Laden.

"The United States is practising hegemony over the whole world," one Egyptian Islamist said. "Does international law allow it to freeze funds of groups or individuals without evidence?"

Outside of the G7 and Europe, governments from the Gulf to the Philippines appeared willing to co-operate. The Philippines pledged to freeze the assets of local Muslim rebels of the Abu Sayyaf group, believed to have been supported by bin Laden. It said, however, it had not been able to locate any assets.

The OECD offered to help, noting its long experience in targeting tax havens, money-laundering and corruption.

Donald Johnston, the head of the Paris-based grouping of 30 mainly rich industrial countries, told Reuters: "Hopefully we will one day get to the stage of the old adage which says 'you can run but you cannot hide'.

Some experts were pessimistic, though, that this was a war that could be won in today's open, global financial system.

"Publishing lists of names makes us feel good, as if we are doing something," said Raman Uppal, Associate Professor of Finance at the London Business School. "But there is no way of controlling money -- there are no names on cash transactions."

"Money is like water, it just flows to countries or areas where the regulation is lax," Uppal said. "It's very difficult to put a finger on it."

And a report from Pakistan said the ancient Middle Eastern cash transfer system called 'hawala', which operates on a system of trust with dire penalties for defaulters and is widely used in Afghanistan, might have been used by the suicide hijackers.

If so, there would be no paper trail to follow, and it could be all but impossible to stem the flow of cash to the militants.

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