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Is al Qaeda Bankrupt?

Jihadists had a name for Abd al Hamid al Mujil--"the million dollar man." Al Mujil had forged a personal relationship with Osama bin Laden and Khalid Sheikh Muhammad, the self-described mastermind of the Sept. 11 attacks, spending parts of the late 1990s in Afghanistan. In those days the Kuwaiti-born al Mujil traveled to various Arab countries to meet with bin Laden's deputies. As recently as 2006 al Mujil conducted fundraising in Saudi Arabia, where he was executive director of the eastern province branch of the International Islamic Relief Organization, a charitable group. He provided donor funds directly to al Qaeda, says the U.S. government, and was particularly focused on helping al Qaeda affiliates in the Philippines by handing out cash to a supporter who pretended to be on an Islamic pilgrimage to Saudi Arabia. These days al Mujil is out of business. That's largely thanks to efforts by the U.S. Treasury Department and the U.N. Security Council. Designating al Mujil as a terrorist financier and singling out the Philippine and Indonesian offices of his charity, they have prohibited U.S. financial firms from conducting any transaction with him or those offices and required U.N. member states to freeze his assets. The Saudi Arabian government has met that requirement, in addition to restricting the transfer of iiro funds outside of the kingdom. The charity's U.S. lawyer says the iiro is not a terrorist organization and has done nothing wrong. Al Mujil, he adds, no longer has a role with the charity.

Such actions, across many fronts, have made a significant dent in al Qaeda's treasury. On the eve of the attacks on America al Qaeda was running a $30 million annual budget, according to the CIA. The terrorists were tapping into deep-pocketed Saudi and other Arab donors. Now they are hard up. Witness the pathetically ill-equipped and mistrained underwear bomber.

As the feds continue to track, cut off and prosecute al Qaeda financiers, European nations, particularly the U.K., have stepped up their work in this area. Saudi Arabia has finally cracked down on contributions from charities and donors that used to flow to terror groups. International bodies, like the U.N. and the Financial Action Task Force, have sustained a coordinated effort with rules that have been adopted by many governments and banks in places where bombers used to get funds. "Al Qaeda is in a weaker financial state than it has been for a number of years," says David Cohen, the Treasury Department's assistant secretary for terrorist financing (See Sidebar: David Cohen's War). As evidence of success he points to the rush of public pleas for financial help coming from al Qaeda leaders, outstretched turban in hand. He hastens to add: "No one is arguing that because al Qaeda core is in a weakened financial state that it is disabled."

Shallower though its pockets may be, the group still poses a threat: A small sum spent cleverly on the right explosive in the right place can do a lot of damage. The Christmas Day bomber, a rich kid from Nigeria, Umar Farouk Abdulmutallab, paid for his own ticket in cash but got training and equipment from a then little known affiliate in Yemen, al Qaeda in the Arabian Peninsula.

Al Qaeda is much less of a top-down organization than it once was, when it called the shots and funded terrorist operations from Afghanistan. Then, it told operatives to focus on assignments and not to worry about how to subsidize them. Today it's a much looser organization of affiliates--more of a McDonald's, if you will, than a General Motors. Its decentralized partners and cells around the world pick their own targets, concoct their own strategies and raise their own funds. They may draw inspiration from al Qaeda headquarters somewhere in the Chitral region of northwest Pakistan, even kick back money to the leadership. But, like franchisees, they are largely on their own.

The change, U.S. officials like Cohen say, is a direct result of the pressures the U.S. government has placed on terrorist money men. That has forced al Qaeda to go underground. While it still relies on individual donations from the Persian Gulf region, these contributions now move outside the formal financial system, through cash couriers and informal money transfer shops known as hawalas. In addition, the network seems to be turning to organized crimes like kidnapping and drug running. The shipment of cocaine from Latin America to Europe is a source of funding.

Fundraising efforts have also embraced new technologies--like the bit of telemarketing by Ayman al Zawahiri, al Qaeda's second-in-command, who solicited donations through cell phone recordings that were distributed in 2008. Last June Abu al Yazid, a former al Qaeda money man who now runs its Afghan operations, made his pitch on a Web site controlled by al Qaeda leaders: "If a holy fighter does not have the money to get weapons, food, drink and the materials for jihad, he cannot fight jihad." The Internet, of course, is a terrorist's best friend when it comes to recruiting. Not that they've given up on old-school methods like extortion. "A broader trend that shows their financial troubles is they are shaking down recruits for money," says Michael Jacobson, a fellow at the Washington Institute for Near East Policy, who specializes in terror financing. A handful of people, arrested in 2008 by French and Belgian authorities, had traveled to Pakistan for al Qaeda training--and were forced to cough up euros for courses, a room and weapons.

Clearly the money hasn't stopped; it is coming in smaller dollops via other channels. That fact has prompted critics to complain that the U.S. government has wasted its efforts trying to cut off the visible end of financing. They point out how little the most destructive attacks cost--an estimated $500,000 for Sept. 11, $70,000 for the 2004 Madrid train bombings, $10,000 for the 2005 London transit attacks. By forcing terrorists to resort to more subterfuge, they claim, the U.S. has lost opportunities to glean vital intelligence. "A lot of what has happened is overreach by the so-called financial warriors," says Ibrahim Warde, a professor of international business at Tufts University. "It is not the most productive way of using the money trail, and you achieve hollow victories."

That's not the view from the highest levels in Washington, where the Pentagon has taken a keen interest in the financial front on terror and is forming a new threat-finance strategy. The repeated pleas for money from al Qaeda leaders over the last year are seen as evidence the group is desperate for funding and that it has gotten more difficult for operatives to grease the right palms along the way. "It is not just about funding the attacks, they must pay the operatives and families of suicide bombers, bribe public officials, travel, purchase travel documents and provide training," says Stuart A. Levey, under secretary for terrorism and financial intelligence at Treasury. "They need money, and they are now under financial stress."