Holes in the Terror Financing Net

What does it take to shut down a major terrorist finance network ? U.S., European and United Nations investigators acknowledge that despite decisions by the Bush administration and the United Nations to put out of business a Swiss-and-Bahamas-based Islamic financial network called Al-Taqwa ("Fear of God" in Arabic), the network's long-time chief, who is also the subject of U.S. and United Nations sanctions, still is fighting to keep some of his businesses open.

Youssef Nada, an elderly Egyptian financier who founded and ran the Al-Taqwa network from bases in southern Switzerland and northern Italy, was designated a terrorist financier by the Bush administration in November 2001. A U.S. Treasury official testified to Congress that Nada had provided financial assistance to Al Qaeda both before and after the 9/11 attacks. In 2002, the Treasury placed more than a dozen companies established by Nada and an Eritrean-born business associate named Ahmed Idris Nasreddin on the U.S. terrorist finance sanctions list.

But U.N. officials and some news organizations recently have reported that despite international and U.S. sanctions, Nada and Nasreddin have continued to operate companies and own businesses--including luxury hotels in Italy owned by Nasreddin. And NEWSWEEK has learned that authorities in the tiny alpine money haven of Liechtenstein have recently failed in efforts to seize control over the remnants of one of Nada's corporate vehicles.

In an apparent effort to keep part of his financial network alive, law-enforcement sources say, Nada successfully applied to Liechtenstein officials for permission to rename two of his companies based in the pocket principality, both of which were in the process of liquidation. Liechtenstein authorities subsequently launched an effort to oust Nada as liquidator of one of the companies, now called Waldenberg, and install a former senior Liechtenstein government official as the new liquidator. This would have given investigators control over what remains of the records of the company, which might have yielded valuable clues as to Nada's financial activities.

But European law-enforcement sources say that a judge in Liechtenstein recently rejected the government's proposals to install a new liquidator, leaving Nada in charge of the failed company--and its critical records. A recent U.N. report noted that even though U.N. sanctions say that officially designated terrorist financiers like Nada must not be allowed to travel internationally, Nada has traveled from his residence in a tiny enclave of Italian territory surrounded by the Swiss canton of Ticino to Liechtenstein on business. A Swiss government official said that due to relaxed travel controls around Europe, it is not practical for the Swiss government to enforce an international travel ban on Nada, who has repeatedly denied any connection to Al Qaeda or terrorism.