LONDON: For all the headline-grabbing dawn raids and alleged ricin poison plots, Britain’s security services are doing nothing to seize terrorists’ money. This, believe it or not, is deliberate.

Many of the country’s best-known high street banks and building societies (savings and loans companies) currently have the funds of extremists passing through their accounts, detectives believe. Yet for now, the police are happy just to sit back and watch.

Special Branch, regional police forces and the intelligence agencies have learnt over the past 16 months that terrorist money, once identified, is often better put under surveillance than seized.

“Watching those funds come and go has been a revelation and far more useful in developing new leads than just steaming in with confiscations and arrests,” a Home Office source said. ”Better for us to know what terrorists are doing than vice versa.”

In the weeks that followed the Sept 11 attacks on the United States, the news was full of stories of Barclays bank accounts being frozen, Afghan banks shut down, and Islamic charities investigated. Not any more.

“I think everyone now concedes that was a bit of a kneejerk reaction,” says the source. “We were all flailing about to reassure the public that we were on top of things, but freezing money didn’t always get us very far.”

Recent raids on suspected terrorist activity in Manchester and London’s Finsbury Park, as well as in Italy and Spain, are likely to have been preceded by monitoring of the suspects’ financial transactions.

Detective Inspector Cliff Knuckey, head of Scotland Yard’s money laundering unit, did not work on those operations, but he says: “Terrorist cells try to blend in with their surroundings. And they have to survive financially, so they are likely to have some sort of interaction with the financial services industry.

“You treat their bank accounts like a river. It leads you upstream to the source of their money, and downstream to where the money is going.”

Knuckey adds: “From an intelligence point of view, there are perfectly valid operational reasons for allowing transactions like these to continue. But obviously you’ve got to be ready to act quickly to shut them down if the need arises.”

The United States and other countries chasing terrorist funds are likely to have employed the same sort of discretion. After all, only US dollars 113 million in 160 countries has been frozen since Sept 11, including US dollars 10m in Britain. It’s a pretty modest haul for the most intensive asset-hunt in history. Much more, however, is probably being tracked.

Intelligence agencies have struggled to disentangle the links between terrorist individuals and organizations, as well as identify their sources of money. The United Nations reported last September that Al Qaeda operates a large portfolio of ostensibly legitimate businesses in the Middle East and Africa, worth between US dollars 30m and US dollars 300m.

Rich Saudis, militant charities and, of course, “rogue states” have been accused of making donations. Unregulated and informal hawala banks, widely used by people in developing countries to make low-cost transfers of money that leave no paper trail, are also assumed to have “extremists” among their customers.

It seems unlikely, therefore, that offshore trusts, anonymous bank accounts and bogus brass-plate companies play as large a role in the covert financing of terrorists as they do of more conventional organized crime gangs.

Nonetheless, America has forced several offshore jurisdictions, from the Caribbean to the Channel Islands, to enter into punishing information exchange treaties. Pressure from the Organization for Economic Co-operation and Development has also led several leading tax havens to take new measures against money-laundering.

Not all havens are perceived to have been brought to heel, but increased co-operation has occasionally thrown up information of greater interest to Western tax authorities than to any anti-terrorist operations.

Last year, for example, a major UK bank took the unprecedented step of providing the British Government with complete access to the account details of its clients in Jersey, a tax haven whose banking secrecy is normally tight. Law enforcement sources say the agency most interested in the Jersey documents was the Inland Revenue.

In fact, there are a number of ways in which the Revenue is finding itself an unexpected beneficiary of the war on terror.

The new Asset Recovery Agency, which strengthens the state’s powers to confiscate criminal money, has been designed primarily as a bulwark against terrorists and organized criminals. But if it works, this will be a powerful weapon against the black economy too.

The Proceeds of Crime Act, which is coming into force in stages, was hastened through Parliament in the wake of the terrorist attacks. But it could also help plug the gaps in the public finances.

The Act will require professionals in the finance industry to tell the authorities about any evidence they uncover — however small — that suggests money laundering. There are dire penalties for those who fail to comply.

This measure is designed to throw a searchlight on crimes that, while serious, may involve relatively small sums of money, such as paedophilia and, of course, terrorism.

But it will also force accountants, lawyers and financial advisers to confess what they know about another crime that has not always been considered serious: tax evasion. The government must be delighted.—Dawn/The Guardian News Service.