So, what’s the story here?

Many, including some members of Congress, are convinced that Saudi Arabia is directly funding terrorism.

But the facts don’t quite support that. During my time at the US Embassy in Riyadh, I made a point of frequent consultations with the various investigative staff assigned to the embassy, as well as visitors from other agencies like Treasury, various offices in the Dept. of Justice, the Financial Action Task Force, and other intelligence agencies. Uniformly, they could not substantiate any specific claim of a Saudi directly financing any terrorist actions.

Is it likely that some Saudis directly funded terrorism? On the balance, I’d have to say yes: there are Saudis who support the ideas of Usama bin Laden and they could very well have provided financial support. But this assertion is not yet proved.

It has been proved, though, that the branch offices of some Saudi charities have had direct involvement in the financing of terrorist groups. Most of the global offices of “Al Haramain Islamic foundation,” a Saudi charitable group, were being shut down jointly by the US and Saudi Arabia, beginning in 2002 and continuing today. The most recent action against that group took place earlier this year. In late September, 2004, the Treasury Department lauded Saudi financial control efforts, as shown in this Congressional testimony. Senate hearings in early November, 2005, note continuing improvement in the Saudi efforts to contain terrorist funding, but also lingering problems.

Two factors complicate any attempts to investigate the issue:

  • The Islamic requirement for charitable giving and
  • The fact that most Saudi money does not reside in Saudi banks.

Among the many misunderstandings about Saudi Arabia is a perception that Saudis are venal. That is not the case. Most Saudis, whether from the ruling family or from a family of farmers or shepherds, take their religion—and their religious obligations—very seriously. As Muslims, they are required to pay a religious “tax”, zakat, of 2.5% annually, based on the value of their entire income and assets (with a few items being exempted from the calculations). They are also encouraged to support charitable works.

There is also a very strong cultural tradition that says, in effect, “to brag about your charity makes it worthless”. Saudis do not seek to be seen doing good.

When asked to support a good cause—particularly if that cause is wrapped in Islamic terms—Saudis tend to do so. They don’t ask for receipts; they don’t ask for progress reports. And that can lead to gross misuse of their donations.

There are several reported instances of money that was solicited for ostensibly good purposes—hospitals, orphanages, schools—being diverted to terrorist groups. The solicitor asked for money to support 1,000 orphans, for instance, but only 50 orphans were actually being supported. The rest was diverted.

Until 2003, there was little or no control over charities operating in the kingdom. Anyone could raise money for any purpose and the money was easily transfered out of the country. In 2003, the Saudi government started taking actions to control the raising of funds by charities within the country and the Saudi Arabian Monetary Authority (SAMA) instituted new regulations on the transfer of funds outside the country.

The chart below lists some of the changes that have taken place in attempts to regulate activity that is intended for charities.


Pre 9/11


 Post
9/11


Ubiquitous Cash donation boxes for Zakat in
mosques and malls


Total prohibition of cash boxes and
anonymous cash charitable transactions


Informal person-to-person financial
networks called hawalas


Licensing and regulation of hawalas.


Unregulated international financial flows
to private relief and charity groups


Total ban on overseas transactions until
regulations and monitoring are in place for oversight


No specific coordination or task force with
the US on terrorism


Joint US-Saudi working group on terrorism
established in 2002


Relaxed financial transaction oversight


Formalized “suspicious activity” reports
and reporting processes

 

This change has not come without a cost. Saudi charities that previously gave money to widows, orphans, and handicapped children have been devastated: some have seen donations drop by 50% whereas others have simply shut down. Donors have been stripped of a means for fulfilling their religious obligations. But the measures have received US accolades. In September 2003, US Treasurer John Snow went to the Middle East for the International Monetary Fund meeting. After his visit with the Crown Prince he said, “I’ve got an absolute sense that there are no holds barred in going after the money and the terrorists.” David Aufhauser, general counsel of the US Treasury Department and chairman of the National Security Council policy coordinating committee on terrorist financing recently outlined increasing Saudi cooperation. A joint investigative task force was created after the May 2003 bombings and is also focused on investigating the November 2003 bombings. Computer records of al-Qaeda associates arrested in the kingdom have already helped law enforcement officials uncover terrorist financing networks across the Gulf. Saudi domestic police powers of interrogation and compulsory process are being used to validate US intelligence regarding Saudi terror financing suspects. Aufhauser’s stated deadline is precise. The taskforce must achieve tangible enforcement results, beyond the initial deep cooperation, before March of 2004. [Source: Saudi-US Relations Information Service]

An additional factor that complicates efforts to investigate whether or not Saudi Arabia is funding terrorist activities is the fact that large amounts of money controlled by Saudis does not reside within Saudi Arabia. It is thus invisible to Saudi governmental efforts to monitor its flow. With no income tax system, the government has no ability to monitor incomes, per se; it can only notice flows of money through its own banking system.

These monies, though, can be and are being traced by the financial authorities in the different countries in which the money is banked or invested. To date, there have been few, if any, actions taken. Accounts clearly linked to terrorist organizations, of course, have been frozen. But none have been positively associated with Saudi Arabia.

Finally, a note on vocabulary. Much has been made of Saudi government declarations that they financially support “Palestinian martyrs’ families”. A distinction needs to be made in how the Saudis use the term “martyr” and how Palestinians use it. In the Palestinian usage, it generally applies to those who die in the service of Islam, but is specifically used in reference to suicide bombers. That is not the Saudi use. The Saudis use the general definition. The money they give—to the Palestinian Red Crescent Society, by the by—is to be used for families of any Palestinian who dies as the result of Israeli actions. While this can include suicide bombers’ families, it also covers the civilians who are inadvertently killed. The Saudis are not making a distinction. One can argue that they should, but at the present time, any Palestinian family affected by the death of a member in conflict with the Israelis is eligible for assistance.

Copyright 2004-2007 Crossroads Arabia


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