How terrorists use cards for everyday needs and to fund operations - By Jeremy Simon
If you've ever used your credit card to buy plane tickets, go grocery shopping or do some online gambling, your monthly statement may not be all that different from that of a terrorist.
Interviews with terrorism experts and readings of case studies from around the world reveal that the credit card has become a favored tool of terrorists. In the hands of a radical, credit cards enable terrorist funding through money laundering operations and identity theft schemes, while allowing the same everyday transactions that law-abiding citizens enjoy.
Plastic pays for terrorismLike any business organization, terrorist groups have both one-time costs and recurring expenses. Staging a terrorist attack can be relatively cheap, but there are also the various day-to-day expenses of maintaining a terrorist cell, including food and travel costs. To cover their needs, terrorists require funding.
That's where plastic comes in. "Credit cards are one avenue available for terrorist financing," says Carol Van Cleef, a partner in the international law firm of Bryan Cave and an expert on anti-money laundering compliance and payments. "Criminals -- and I don't think terrorists are any exception -- will use all types of payment alternatives. Credit cards are just one thing they will look to."
A February 2008 report, "Terrorist Financing," by the Paris-based international anti-money-laundering agency, Groupe d'action financière (Financial Action Task Force) reaches the same conclusion. Recent use of credit cards by terrorists, it concluded, "shows the vulnerability of credit cards to misuse for terrorist financing purposes and other illegal activities."
Experts consulted for this article would not go into detail on specific cases, for fear of providing instructions, but in general, they said the appeal of credit cards is simple. Terrorists and their global support networks choose to finance activities with debit and credit cards for the same reason that the rest of us do: Plastic makes for easy payments. "Any financial vehicles that are convenient for consumers are also convenient for terrorists," says Debra Geister, director of Fraud Prevention & Compliance Solutions with LexisNexis's Risk & Information Analytics Group in New London, Minn.
Where's the python?Plastic helps terrorists by enabling easy movement of funds -- which is ideal for money laundering purposes. While a drug trafficker may seek to hide the source of ill-gotten gains when transferring money into the legitimate financial system, terrorists launder money "not to hide the source of the money, but to hide the ultimate purpose of the money," says Chris Myers, chair of the Compliance Services National Practice Team and partner in the law firm Holland & Knight, based in Tyson's Corner, Va. For example, by funneling funds from a legitimate charity, terrorists may not need to derive their funds illegally.
Ed Wilson, former acting general counsel of the U.S. Department of Treasury, agrees that for law enforcement and others, there is an important distinction between drug and terrorist money laundering. "In one you're trying to find the bulge moving thru the python, in the other you're trying to find why the python isn't there," Wilson says.
Moving the moneyAs an example of how terrorists employ credit cards, Myers gives the hypothetical scenario of a terrorist cell in the European Union that wants to carry out an attack on U.S. soil. A credit card obtained in Europe is simply handed to the cell member who travels to the United States to execute the attack. Bringing a wad of bills into this country would violate cash reporting laws (potentially preventing entry into the country), but there is nothing illegal about carrying credit cards from Europe into the United States. Credit cards can even be mailed internationally, Myers says.
Prepaid cards and gift cards offer a similar benefit: They can be loaded with money and then easily transported to another place for terrorist activity. "Stored value is convenient and it can be anonymous," says Geister. Since wallets are generally not checked when people move across borders (as opposed to scrutiny of passports or other documentation), "You've now brought money across an international border without detection," Myers says.
Geister says another technique used to transmit funds involves cell phones linked to a prepaid card or credit card account -- a common option overseas. A terrorist can link the card to his mobile phone, which can then be used to wire money over the wireless network to a fellow cell member who may be in another country altogether. Geister highlights the speed of this process, saying that it takes just two minutes to register the cell phone and seconds to transfer funds to the person on the other end. The evidence of the transfer would perhaps amount to little more than a transaction detail on the terrorist's credit card statement.
With terrorists, there is some gray area in regards to what constitutes money laundering. Everyday costs, like groceries, can also be charged to the terrorist's credit or debit card. "Is it money laundering?" asks Geister. "By the technical definition, it's not money laundering. Is it facilitating a terrorist cause? Yes it is," she says.
Ever resourceful and creative, terrorists have a variety of techniques for moving funds around. "There are as many different schemes and scenarios out there as there are money launderers," Geister says. Regardless of the scheme, the goal is the easy movement of funds for terrorists: "They can fly under the radar screen," Myers says.
Terrorism and credit card fraudTerrorist cells often seek to blend in, so careful use of credit is important. "The terrorist is looking to be as vanilla as possible," says Wilson. Since they don't want the risk of drawing added attention, "Terrorists by and large will only open up legitimate credit cards," he says.
Not necessarily, argues Geister. "Certainly they want to stay under the radar," she says. "But does that mean they don't use false identities? I don't think that it does." Even when credit card information is stolen or a fraudulent account is set up, terrorists still play it safe, making sure they pass the verification tests and avoiding large account deposits while paying off charges incrementally, Geister explains. "The more anonymous they are, the more problematic they are from a money laundering perspective."
Having numerous fraudulent accounts also gives the terrorist options, she says. "If I have 100 different identities set up in the system, they're not going to focus on one," says Geister. This approach helps with law enforcement crackdowns, too. As a terrorist, "The last thing I want to do is to have someone come straight to me," she says. Linking an account to an actual terrorist's identity could expose plotters whose names appear on watch lists. Referring to the Office of Foreign Assets Control division of the U.S. Treasury, "If I'm on the OFAC list, am I really going to tell you my name is Osama Bin Laden?" Geister asks.
Fraud techniquesAccount information from legitimate credit cards becomes a valuable commodity for terrorists. "Terror groups and criminal organizations use credit card cloning and skimming to fund themselves," says Loretta Napoleoni, author of "Terror Incorporated: Tracing the Money Behind Global Terrorism." "Cloning is done primarily via the Internet. Skimming requires use of the actual card, so it is done in restaurants and stores," she says. "It is a very popular and easy technique." Experts also note that the theft of a laptop or computer database security breaches can produce a treasure trove of credit card information for fraudsters.
"It happens that various terrorist organizations engage in credit card fraud and related crimes (e.g. phishing), as do individuals and groups of so-called 'homegrown' terrorists," says Aaron Weisburd via e-mail. Weisburd is director of the Web forum Internet Haganah, which tracks pro-terrorist online activity. "Regarding the latter, we are in an age of 'do-it-yourself' terrorism and this is a kind of fundraising activity that such people can engage in on their own, freeing them from any need for financial support from a formal organization such as al-Qaida."
"It is worth noting that often the perpetrator is not the terrorist himself, but rather the individuals or small businesses who are providing services such as hosting a Web site for terrorists," he adds.
"What I can say is that in the course of investigating online activity of terrorist groups and their supporters, I uncover signs of credit card fraud frequently, and have done so for at least six years," Weisburd says. Still, "I would not say that it is happening more often now than before," Weisburd says.
How much credit card fraud is tied to terrorism?Yet it is happening. Fraud is an unbelievably profitable business. "We don't have any way to know how much of that credit card fraud is related to terrorism. It may be higher than we even know about," Geister says.
Therefore, consumers can play an active role in preventing terrorist funding by staying alert to credit card fraud. "The more diligent consumers can be to protect their data, the better," she says.
"Consumer attention to credit card fraud is crucial because the more that people are aware of fraud, the less likely it is to work," says U.S. Treasury spokesman John Rankin. "Preventing terrorist financing is an international effort with many components, but consumer awareness is certainly important."
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