Date Posted: 16-Jan-2007

Money problems - Tackling terrorist financiers in Sweden

Sweden has investigated several cases suggesting that radical Islamist groups have been using the country to raise funds in support of militant groups abroad. Michael Jonsson and Klas Karrstrand examine the cases and efforts to clamp down on terrorist financing.

Sweden's attitude towards co-operation with other Western countries in the war on terrorism has shifted over the years. Initial whole-hearted support for US counter-terrorism efforts has been steadily eroded by scepticism over its methods, such as renditions, concerns about civil liberties and sensitivities over alienating Muslim communities.

The cooling support has become most obvious in cases involving alleged terrorism financing. It first became evident in a US request for the Swedish authorities to freeze the assets of three Swedish citizens associated with a Somalian hawaladar (an agent in an informal money transfer system), Al-Barakaat, in 2001. Although the Swedish authorities initially complied with the request, domestic criticism over the lack of solid evidence against Al-Barakaat and the legal procedures grew to such an extent that no one involved with Al-Barakaat faced criminal charges.

As the 9/11 Commission's Monograph on Terrorist Financing later pointed out, whereas the case against Al-Barakaat did not lead to a single criminal prosecution for terrorism financing, it is estimated to have cut remittances to Somalia in half. The report also noted that some US field operatives believed early on in the investigation that the allegations against Al-Barakaat could have been fabricated by competing money transmitters.

This illustrates the inherent sensitivities of following suspected terrorist financing allegations into diaspora communities. In the Swedish case, a request to freeze funds created a feeling of injustice and wrongdoing within the targeted community. This issue has become especially sensitive throughout established Muslim communities in Western Europe as it pertains to the funding of radical Islamist organisations through the abuse of the Muslim tradition of zakat (giving alms to the poor) for less than benevolent purposes.

Following the Al-Barakaat case and the controversial rendition by the CIA of two Egyptian citizens from Sweden to Cairo in December 2001, Stockholm has on several occasions denied requests to arrest and extradite citizens to the US on the basis that there was insufficient evidence provided.

Radical Islamism in Sweden

Since September 2001, there have been a handful of cases involving Swedes or foreign citizens based in Sweden being accused of involvement in radical Islamist terrorism.

In October 2005, Swedish citizen Mirsad Bektasevic, 19, was arrested in Bosnia suspected of preparing a suicide bomb. A suicide vest and a filmed testimony were reportedly found with the group arrested. The intended target has not been identified, although newspaper sources, such as The Times, cited the British embassy in Sarajevo as the suspected target. In January 2007, Bektasevic was convicted to 15 years and four months in prison on charges of terrorism.

On 11 December 2005, Swedish citizen Usama Kassir (also Oussama Kassir) was arrested in Prague en route to Beirut. He is charged by US authorities of having attempted to set up a training camp for Al-Qaeda in Oregon with the help of several British-based Islamists. The Swedish prosecutor had earlier argued that the evidence available was insufficient for granting an extradition requested by the US, but when the man left Sweden the Czech security services were notified and arrested him. Following this, the Swedish police have also raided Kassir's home at the request of the US and later denied requests from Kassir for legal assistance. Kassir was previously jailed in November 2003 in Sweden for possessing illegal weapons, although charges of planning a terrorist attack were dropped. Kassir denies charges against him in the Czech Republic and is fighting extradition to the US.

Several cases also involve suspicion of terrorist financing and/or logistical support. On 11 June 2006 the Swedish security service (at the request of the British security services) raided homes, arrested several people and interrogated prisoners, primarily in the southern Swedish city of Malmo. The final outcome of the case, and any eventual connection to other investigations, is currently unknown.

Financing the Iraqi Insurgency

On 19 April 2004, two Iraqi citizens of Kurdish origin were arrested in Sweden for having channelled an estimated USD148,000 to finance Ansar al-Islam/Ansar al-Sunna in the Kurdish part of northern Iraq.

The organisation claimed responsibility for the bombing of the Patriotic Union of Kurdistan (PUK) and Kurdistan Democratic Party (KDP) headquarters in Arbil on 1 February 2004, in which more than 100 people were killed and another 250 seriously wounded. Four men were initially arrested by Swedish authorities, but two of them were later released after questioning. Ferman Jabbar Abdulla and Ali Kamal Berzengi were eventually convicted of plotting and financing terrorist crimes and sentenced to seven and six years' imprisonment (later changed to five and four-and-a-half years upon appeal), making this case one of the very few successful prosecutions on charges of terrorist financing. Careful inspection of the court proceedings provide interesting explanations as to why this prosecution was successful where so many others have failed.

The investigation was initiated after a tip-off from a foreign security service, with the majority of the evidence in the case collected through wiretaps. Although the initial assessment of the recorded conversations between the suspects and their contacts in Iraq were confused and steeped in code words, it quickly became apparent that the codes used were crude and clumsy, and it would therefore be unlikely for the conversations to be mistaken for daily casual telephone calls. Nonetheless, by themselves the wiretap evidence would have been insufficient to lead to the conviction of the two men.

During a house search at the residence of Ferman Abdulla, the Swedish police found a manual describing the set of codes used in the conversations. Furthermore, in initial interrogations, Ferman Abdulla, seemingly unaware of the serious offence it constituted, admitted to having transferred funds to Iraq with the intention of funding the armed insurgency. He also provided crucial information on the other convicted man, Ali Kemal Berzengi, and his connection to Ansar al-Islam/Ansar al-Sunna. In later hearings Abdulla claimed to have lied and backtracked on many of his statements, but the court chose to disregard this.

The original source of the money transferred to Iraq is not known. During court proceedings, one witness described how money had been collected in a mosque in the small Swedish town of Gävle, but it has not been proven that this was the money transferred to Iraq by Abdulla and Berzengi.

The transfer of funds from Sweden to Iraq took place alternatively through cash couriers or through a hawaladar that Abdulla ran in Malmö in southern Sweden.

The recipients of the transfers were placed in Iran, Baghdad and northern Iraq. From there the money went by cash couriers to its final destinations. On at least one occasion, the transfer of money seems to have been directly connected to the planning and execution of a specific terrorist attack, namely the attack in Arbil on 1 Februrary 2004.

On 25 November 2006, a report from the US Army on the funding of the insurgency in Iraq was leaked to The New York Times. Against the backdrop of this report, the Swedish case of terrorist financing to Iraq seems to have been part of a larger pattern. The Iraqi insurgency is estimated to have an annual budget of USD70 million to USD200 million, according to the US report. Whereas it is currently believed to be self-sustaining, this was not the case during 2004. The report argues that during this period "foreign fighters were bringing in funds in bulk cash or through hawaladars". The Swedish case therefore appears coherent with a larger pattern of financing, even though the sums in question were fairly negligible.

Abdulla and Berzengi both come from the Kurdish part of Iraq and arrived in Sweden in 2001 and 2002 respectively. According to the court verdict, the two men became acquainted while in Sweden. Berzengi, the leading figure of the two, toured Europe, spending time in Turkey, Austria, Germany, the Netherlands, Denmark and Norway before arriving in Sweden. He lacked paid employment but established himself as the imam of a mosque in the outskirts of Stockholm. According to the court verdict, he and his family of four led a frugal life on Swedish welfare.

Abdulla admitted to having been a member of an Islamist organisation in northern Iraq and participating in Islamist training camps in Iraq in the late 1990s. Upon arrival in Sweden he established a kebab restaurant in Malmo, where he also set up a hawala business. Abdulla stated that some of his relatives were killed by US bombings in Iraq in 2003. court verdict also reported that he initially claimed that he had heard that Berzengi was collecting money openly in mosques with the purpose of sending funds to Chechnya, the Palestinian Territories and Iraq (including Kurdish areas), one of the statements he later rejected. In the verdict there is no evidence that Berzengi was collecting money in the mosque where he was an imam, but neither can this possibility be excluded.

Abdulla and Berzengi were not isolated loners within the radical Islamist movement. They had extensive contacts with leading figures within the Ansar al-Islam/Ansar al-Sunna movement. During the wiretapped telephone conversations, there was also frequent mention of a person believed to have been Abu Musab al-Zarqawi.

The Bergenzi/Abdulla hawaladar case indicates a number of vulnerabilities that radical Islamist organisations expose themselves to when using this avenue of funding. Telephone calls to satellite telephones in Iraq, the running of a hawaladar, possibly collecting money through mosques and telephone conversations with a well-known extremist imam are all obvious points at which the operatives may draw the attention of domestic and international security services. Nonetheless, obtaining convictions on charges of terrorist financing can be tremendously challenging. As this case indicates, even when there is fairly strong evidence, proving when and where the money is collected and how it is ultimately used may not be possible.

According to Swedish legislation, transferring money to a terrorist organisation and knowing that these funds will be used to fund terrorism is enough to be considered guilty of terrorist financing. However, while it may prove too difficult to substantiate charges of terrorist financing, collection and transferral of funds may still be an avenue through which security services may be able to identify sympathisers of extremist organisations.

Other cases

Sweden has been criticised in the past for not being sufficiently proactive in its stance against radical Islamist groups. In 2002, a former CIA chief of operations interviewed by BBC's Newsnight stated that both the CIA and FBI had concerns over the liberal way Sweden was dealing with the perceived threat of terrorism. Four years on, such a description seems increasingly irrelevant. In 2005, after having obtained the conviction in the terrorist financing case, the head of the Swedish National Security Service (Säkerhetspolisen: SÄPO), Klas Bergenstrand, expressed satisfaction with the outcome of the trial. He also admitted that terrorist financing was a problem in Sweden but indicated that further prosecutions were to be expected.

One of the cases implicitly referred to was the Sanabil al-Aqsa Foundation in Sweden (also based in Malmo). The foundation has been under investigation since 2003 on suspicion of having collected and transferred funds to Hamas. That year, US authorities asked Sweden to freeze the foundation's resources, but the Swedish prosecutor denied the request, citing insufficient evidence.

Nonetheless, investigations continued and in November 2006 the organisation's assets were frozen and one of its leading figures, Khalid al-Yousef, was arrested on suspicions of terrorist financing. The court deemed the evidence against him to be insufficient for keeping him in custody but the outcome of the case is still pending.

The Al-Aqsa case is a good illustration of the trade-off faced by security services aiming to suppress suspected terrorist financing while avoiding alienating charitable Muslims who simply wish to contribute humanitarian funds to alleviate suffering overseas. On the one hand, several of Al-Aqsa's alleged sister institutions in the Netherlands, Denmark, Belgium and Germany have been shut down due to allegations of terrorist funding emanating from the US. However, representatives of Al-Aqsa in Sweden deny having any links to these organisations. Furthermore, the foundation admits having collected an estimated USD250,000 annually in Sweden and channelling this money to the Palestinian Territories (Swedish authorities estimates the figure is closer to USD600,000 a year).

Money has been sent to intermediary aid organisations such as Palestine Aid and Human Appeal International, but their final recipients and use is not known. According to the Swedish newspaper Sydsvenskan, funds were collected relatively openly by the Al-Aqsa foundation from "cellar mosques" and Muslim organisations in Sweden.

In order to substantiate charges of terrorist financing, the Swedish security service would arguably have to prove both that the intermediary aid organisations passed on money to proscribed terrorist organisations and that representatives of the Al-Aqsa Foundation in Sweden knew or should have suspected that this would happen, which for obvious reasons would be extremely difficult.

As the hawaladar case showed, wiretap evidence would hardly provide sufficient by itself. Therefore, there is a strong case for arguing that any aid given to conflict zones must be subjected to very stringent accounting procedures and have meticulous bookkeeping or else should not be allowed, at least to free well-intentioned donors from undeserved suspicions.

The Swedish response

Terrorist financing of organisations abroad is by no means a new phenomenon in Sweden.

The Kosovo Liberation Army (KLA) gathered substantial amounts of money from its large diaspora in countries such as Germany, Switzerland and Sweden before, and especially during, the war in 1998-99. Similarly, there is plenty of anecdotal evidence that the Kurdish Workers' Party (Partiya Karkaren Kurdistan: PKK) collected money via more or less voluntary contributions from its diaspora in the country, a practise that is believed to have ground to a near-halt following Abdullah Öcalan's capture in 1999. Other terrorist organisations are also believed to have received smaller sums from Sweden. Similar to many other Western democracies, Sweden was perceived by the US as lacking in preventing these practices before the 11 September 2001.

Following the 11 September 2001 attacks on the US, Sweden has increased its efforts to combat money laundering and terrorist financing. However, evaluations have repeatedly identified shortcomings in its financial regulatory system. A joint study commissioned in 2005 by all the agencies working with combating money laundering in Sweden estimated that in 2003 an equivalent of USD140 million or more was transferred out of Sweden via alternative money transmitters, beyond the control of Swedish financial regulatory organs. This was also how Berzengi and Abdulla transferred some of the funds they collected to Iraq. The Financial Supervisory Agency's unit for dealing with anti-money laundering and combating the financing of terrorism (AML/CFT) was badly undermanned at the time and did not have the right to carry out unannounced onsite inspections to such alternative money transmitters, making the risk of legal consequences fairly negligible.

An extensive evaluation of the AML/CFT regulatory framework by the Financial Action Task Force published in February 2006 arrived at similar conclusions. Sweden was only fully compliant with six of the 40 recommendations and was found to be non-compliant with the important recommendation on wire transfers. The number of prosecutions on charges of money laundering is also surprisingly low: three in 2004 and 14 in 2005. These findings were echoed by a recently released report from the Swedish Financial Supervisory Agency (Finansinspektionen), in which the Swedish banking sector is found to be the sector closest to live up to its obligations in terms of combating money laundering and terrorist financing. Other financial sectors were criticised for their failure in that regard.

However, recently Swedish authorities have increased their efforts to combat money laundering and terrorist financing significantly. Anticipating the results from the Financial Action Task Force evaluation, the funding for personnel working with AML/CFT at the Financial Supervisory Agency was expanded. A new AML/CFT law is also currently in the late stages of being drafted. The law will incorporate the regulations of the EU's Third Money Laundering Directive, but will also take into account feedback from the Financial Action Task Force evaluation.

Meanwhile, funding to the Swedish security service has increased from SEK547 million (USD78 million) in 2003 to SEK699 million (USD100 million) in 2006, and the percentage allocated to the counter-terrorist unit increased from less than 20 per cent in 2001 to 27 per cent in 2004.

Notably, the regional office in Malmo has received substantially extended resources. The two prime motivations for this transformation were arguably a growing realisation of the actual extent of the problem in Sweden and the sense of urgency communicated from Washington.

Lastly, there have been some initial indications that the new Swedish government, inaugurated in October 2006, intends to take a somewhat different approach in countering terrorist financing. A case in point is a Swedish citizen of Moroccan origin who was placed on the UN's list of terrorist suspects early in December 2006 on charges of being "the undisputed leader of a terrorist group" based in a suburb of Stockholm, a decision which Sweden has not yet disputed. The former Swedish minister of justice has disagreed sharply with this, but the new foreign minister, Carl Bildt, has so far ignored the critique.

There is an ongoing debate, within the government and in Sweden in general, on how to react when its citizens are placed on the UN list of terrorist suspects, as these charges are not disputable through legal procedures. Therefore, although the Swedish state is expanding its ability to target terrorist financing, the balancing act between protecting civil liberties and aggressively targeting supporters of terrorism continues.