Terror Watch: The Money Trail

A U.S.-based Islamic charity received millions of dollars in State Department funds for charitable work in Africa--at the same time that its overseas affiliates were allegedly funneling large sums of money directly to Osama bin Laden, according to newly released government documents. The new information about the Islamic American Relief Agency, and its parent organization in the Sudan, appears to represent the strongest evidence yet that, at least for several years in the late 1990s, U.S. taxpayer money may have been inadvertently used to finance the terrorist operations of Al Qaeda.

A team of FBI agents last week raided a small office building in Columbia, Mo., that serves as the U.S. headquarters of IARA, hauling away boxes of records and computers. At the same time, federal agents also raided the home of the group's former executive director and interviewed as many as 90 others across the United States, people who had either been donors or had other suspected ties to the group, an FBI spokesman said.

The same day, the Treasury Department froze the assets of IARA and its overseas parent, the Islamic Africa Relief Agency, after formally designating the group, its multiple worldwide affiliates and five of its senior officials as financiers of terrorism.

The FBI declined to comment on the basis for its action against IARA, which so far has resulted in no arrests. But a little-noticed Treasury statement accompanying the freezing of IARA's assets provides startling new allegations suggesting that the group and its Khartoum-based parent had far closer ties to Al Qaeda than anybody had previously suspected--even while the group was receiving hefty sums of money from the U.S. government.

"Information available to the U.S. indicates that international offices of [the Islamic Africa Relief Agency] provided direct financial support to UBL [Osama bin Laden]," the Treasury Department asserted in an Oct. 13, 2004, press release.

A phone answering machine at IARA offices in Missouri was not accepting messages today and NEWSWEEK was unable to locate officials associated with the group. A statement posted on IARA's Web site notes that the group's "charitable activities" have been suspended as of Oct. 13 but urges prospective donors to "not let this unfortunate situation keep you from giving generously to the needy" during the current Ramadan holiday.