Finance crisis seen affecting terrorism crackdown

By Randall Mikkelsen

WASHINGTON (Reuters) - The global financial crisis may make it easier to restrict the money supply for terrorism, but there are also risks banks could skimp on monitoring suspicious cash flows, U.S. experts said on Monday.

The authors of a new report on terrorist financing said an increased attention to financial regulation and more caution over risk in general could help identify and prevent suspect transactions.

However, hard times affecting the financial industry could also reduce budgets at banks and other institutions for monitoring and reporting, they said at a seminar on terrorist financing sponsored by the Washington Institute for Near East Policy.

"What this financial meltdown has created is even more attention and sensitivity to risk," Matt Levitt, a former senior intelligence official at the U.S. Treasury Department, said "I think it's going to end up being a net plus, for trying to make the international financial system more secure."

Levitt and Michael Jacobson, a fellow Treasury veteran and Washington Institute researcher, wrote a report for the institute that sought to counter what they called doubts over the value of cracking down on militant financing and recommended new steps to make the efforts more effective.

Jacobson noted that the September 11 attacks cost a relatively low $500,000 and later strikes even less. "As these figures keep coming out about how cheap terrorist attacks are to carry out, there is a growing skepticism about why are we even doing this," he said.

But the report argues that fighting terrorists through their wallets -- using measures including freezing assets of suspected terrorism financiers, tracking money flows and prosecuting individuals for material support -- remains a vital tool.

"While there is evidence that the al Qaeda core is resurgent, funding difficulties may prevent it from growing even stronger," it said. The report cited widely disseminated contribution pleas from al Qaeda leaders and public complaints of a lack of funds.