U.S. Finds Success Tracking Terror Money

David Aufhauser, former general Counsel of the U.S. Treasury Department, talks with Steve Inskeep about the Swift Program, a government effort to monitor international financial networks. Aufhauser discusses how terrorists finance their operations, and how the exposure of the Swift program could affect U.S. intelligence.

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STEVE INSKEEP, host:

President Bush's nominee to head the Treasury Department says he will review a program that uses international financial records in the search for terrorists.

Mr. HENRY PAULSON: (Nominee to Head Treasury Department): I am going to, if confirmed be all over it, make sure I learned everything there is to learn. Make sure I understand the law thoroughly.

INSKEEP: That's Henry Paulson speaking at his confirmation hearing yesterday. To learn how the government used the swift database to gather information on suspected terrorists, we called David Aufhauser. He was general counsel of the Treasury Department from 2001 to late 2003.

Mr. DAVID AUFHAUSER (Former General Counsel, Treasury Department): The program had a dual use. One is to track money used to bank terror. But more importantly, the information provided by SWIFT was also used almost like a crystal ball.

You'd get some human intelligence or some intercept intelligence from some other portions of the government about a potential terrorist action, and you'd try to establish whether the banking network and the banking information permitted you to create a picture of the network of contacts that this person had.

So it turned out to be very helpful. Not just in combating terrorist financing, but in trying to prevent calamities.

INSKEEP: Were terrorist groups, as far as you can tell, using these international wire transfers that often anyway?

Mr. AUFHAUSER: It's probably wrong to say terrorist groups. People who might want to bank radical movements were using the wire transfers system. It's the easiest way to move value across borders.

INSKEEP: In the months after September 11, much was made of the fact that a lot of terrorist financing appeared to be going through informal channels. The Hawala system, as it's called, where one person in Afghanistan telephones a person in Pakistan - or in Miami for that matter - and money is transferred without a formal bank being involved. Doesn't that limit both the effectiveness of the SWIFT program and the impact of its disclosure?

Mr. AUFHAUSER: You're right. The Hawala transfer system, which is the largest, really, informal international banking transfer system out of the third world, is the most vexing problem. And you have to use other tools. Basically you have to try to penetrate the sales that are the Hawalas. But that's not to say that alternative means to transfer value across a border should not be pursed. And the SWIFT system is one such means.

INSKEEP: Maybe throw up a roadblock over the international banking system will force people to (unintelligible)...

Mr. AUFHAUSER: You want to make things difficult to kill people. And so if you diminish the opportunity to transfer currency that's intended to cause another calamity, like 9/11, then you've saved lives.

INSKEEP: To the extent that you can, can you give an example of a transaction that would be of interest to the United States government, and what the U.S. government would then do about it?

Mr. AUFHAUSER: Certainly. A transaction where you have a piece of human intelligence that tags somebody as a potential participant in a terrorist cell, if that information were then pinged against the SWIFT database and identified dozens of people that that person had transacted business with. Or, for example, purchases that were made through wire transfers for bomb parts or chemical parts, you begin to build a picture of a real danger and rather than just a suspicion.

INSKEEP: Did you notice al-Qaida adapting as you tried to adapt to what they were doing?

Mr. AUFHAUSER: Yeah, but I don't think it was just to the money. Al-Qaida once had a central nervous system and now it's atomized, which has made it more difficult to police it. A little less important that you know what's going across the borders because a lot of the terror is being financed through pedestrian criminal domestic activity. For example, the Madrid train bombing was financed through narcotics smuggling and through the smuggling of human beings.

That underscores a high priority for sharing national intelligence information with local police in a reciprocal way.

INSKEEP: So is the SWIFT program as important a tool as it once was?

Mr. AUFHAUSER: Yes, it's all the more important, that if we get small (unintelligible) of information from those cells, that suggest that something may be amiss, and somebody is up to the kind of mischief which would bring calamity to a city or a town, that we have some central databank to rationalize that information. The SWIFT program represents the best of government, and I agree with the president's statement that it's a shame that its utility has been diminished by the public disclosure.

INSKEEP: David Aufhauser, formerly of the National Security Council, as well as the U.S. Department of Treasury. He's now with the Center for Strategic and International Studies here in Washington. Thanks very much.

Mr. AUFHAUSER: Sure. Thank you.

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