Terror Watch: 'Nobody's Nagging'

An Egyptian-born businessman--accused more than two years ago by U.S. authorities of financing international terrorism from the heart of Europe--has evaded efforts to shut down his operations and is continuing to conduct business under new corporate identities, according to European and United Nations officials.

The faltering investigation of Youssef M. Nada, the notorious former head of a Swiss- and Bahamas-based Islamic financial network called Al-Taqwa, is the latest example of how the Bush administration's much-publicized campaign to dismantle the financiers of international terrorism appears to be losing steam amid waning support from some foreign governments, the officials say.

Nada and several other directors of Al-Taqwa and related companies, including a mysterious Eritrean-born associate named Ahmed Idris Nasreddin, were formally designated terrorist financiers and, in November 2001, were placed on sanctions lists started by the U.S. Treasury Department after the September 11 terror attacks. Although they have never publicly disclosed much of their evidence against Nada, U.S. officials have said they acted on the basis of intelligence reports indicating that he served as the central banker for the Muslim Brotherhood, a secretive network of Islamic radicals that helped spawn Osama bin Laden's Al Qaeda movement and other violent Islamic jihadi networks. Nada and his associates were also placed on similar lists maintained by the United Nations, signaling what was supposed to be a coordinated international effort to freeze his assets and close down his businesses.

But today, officials tell NEWSWEEK, some of Nada's various business operations appear to be very much alive. Swiss authorities, who had raided Nada's offices and opened up a major criminal investigation, are on the verge of closing down the case--apparently unable to develop enough evidence to bring Nada to court, European law-enforcement officials say.

In the meantime, Nada has maintained business interests in Italy, Switzerland and Lichtenstein. Nasreddin, his business partner, is believed to maintain his interests in luxury hotels in Milan, Italy. One way the two men have been able to continue operating is by exploiting loopholes in the international sanctions regime. Nada, for example, was supposed to have been barred from traveling outside his city of residence, a tiny enclave of Italian territory called Campione d'Italia that is surrounded on three sides by Switzerland and by a lake on the fourth. But the U.N. reported last year that Nada had traveled to Liechtenstein--a journey that he could only have made by transiting through Swiss territory, from which he had been banned. Nada's trip was focused on starting proceedings to change the names of two of the companies designated by the U.N. and the United States as terrorist-financing entities.

U.N. and European law-enforcement sources said they could see no reason for Nada to seek to change the names of his companies unless they were still actively engaged in business or controlled some valuable assets and property. To try to find out what Nada was up to, authorities in Liechtenstein attempted to wrest control of one of the companies from Nada by forcibly appointing a former Liechtenstein government official as liquidator of the corporation. But law-enforcement sources tell NEWSWEEK that Liechtenstein's plan to take over the company failed, and Nada remains in charge of the operation.

The Liechtenstein effort against Nada isn't the only one that fizzled. Swiss authorities last year served Nada with a formal notice that he can no longer enter Swiss territory, NEWSWEEK has learned. Theoretically, because the Italian enclave where Nada lives is virtually surrounded by Switzerland, the only way he can leave is either by boat or air. But authorities acknowledge that Switzerland's borders with Campione d'Italia are rarely if ever patrolled and that Nada has virtually carte blanche to leave when he pleases.

In a telephone interview from Campione d'Italia this week, Nada insisted that he had no financial ties to terrorists and defiantly seemed to mock the efforts to keep him bottled up in his hometown. "I never financed Osama bin Laden's terrorist group," Nada said. "There is no way anyone ever had any evidence of that. I never broke any law in my life."

As for the Swiss attempts to ban him from traveling through the country's territory, Nada stated: "If any decision [like that] is made, there must be a way to enforce it." He then pointedly noted there was "no border control" between Campione d'Italia and Switzerland. Nasreddin could not be located for comment, though in the past his lawyers have emphatically denied that he had any involvement in the financing of terrorism.

Victor Comras, a former U.S. government sanctions expert and a member of a recently expired United Nations task force on international terrorism, said the Nada case is symptomatic of the loopholes and weaknesses in international efforts to shut down terrorist financiers. He said foreign interest in the issue appears to be fading--as does United States leadership in pushing for more vigorous action. "This is an issue which requires constant nagging," said Comras, and "nobody's nagging."

But there may be other issues at play, some international experts say. Much of the evidence against Nada and other accused terrorist financiers is still based on secret intelligence that U.S. authorities have been extremely reluctant to share with foreign governments. U.S. Treasury officials have pushed those governments, in Europe and the Middle East, to act on looser standards, saying it is simply unreasonable to expect judicial standards of proof when dealing with the shadowy world of terrorist financing, said one former U.S. official who was involved in the antiterror campaign. But governments in Europe and elsewhere have been reluctant to adopt the lower U.S. standards, leading to a dialogue in which the communications are "lost in translation," the former official said.

Terror Watch, written by Michael Isikoff and Mark Hosenball appears online weekly