Shall we judge Saudi reforms or Saudi results?

Despite (phony) “oversight” of its central bank over Saudi charities, despite cash courier “restrictions,” despite freezing assets of prominent terrorist financiers, despite an admonition by Saudi Arabia’s Grand Mufti about being careful about where you donate your zakat, and despite forming a financial intelligence unit of its own, money for terror just seems to keep leaking (and leaking and leaking) out of Arabia’s borders like water through a sieve.

This article from Zawya yesterday puts it a little more politely, but basically makes the same point:

Terrorism funding remains a concern

Tuesday, Apr 20, 2010

The trial in Indonesia of a Saudi man accused of financing a militant group that attacked two hotels in Jakarta last year highlights the challenges the Saudi government faces in closing loopholes used for terrorist financing.

Ali Abdullah is accused of giving Rp54m ($5,816) to a militant group and of raising money from Saudi Arabia to support terrorism. He has pleaded not guilty.

Analysts say financial reforms have disrupted funding from inside the country for al-Qaeda . In a crackdown after a series of attacks from 2003-06 , thousands of suspected militants were arrested, assets of suspected financiers were frozen and unauthorised charities closed.

While the measures have caused much potential financing for al-Qaeda to dry up, curbing funding for groups in Afghanistan and Pakistan remains a concern for the US administration. During a visit to Kuwait, Saudi Arabia and UAE earlier this year, Neal Wolin, deputy US treasury secretary, asked authorities to strengthen cross-border cash reporting to block terror funding, and urged Kuwait to pass a law against money laundering.

“We continue to be very much focused on identifying and trying to stop the flow of funds that support terrorism, much of which emanates from the Gulf, including Saudi Arabia,” said Mr Wolin.

With the US escalating the campaign in southern Afghanistan, efforts to curb financing to militants have become even more pressing.

After the attacks on September 11 2001, charities in the Gulf came under global scrutiny. The government formed a financial investigation unit that reports to Prince Mohamed bin Naif, the country’s counterterrorism chief. The unit works closely with the Financial Action Task Force, an international body, to ensure that Saudi Arabia complies with its recommendations.

The Saudi Arabia Monetary Agency, the Saudi central bank, has to approve transactions of more than $15,000. Saudi banks close inactive accounts and require their holders to verify their residency and identification periodically.

However, informal money transfer agents, known as hawala , continue to send unknown sums overseas.

The hawala , although illegal in Saudi Arabia, remain popular, particularly among Asian migrant workers who send remittances home at lower fees without having to open bank accounts.

While the government regulates foreign charitable activity through the Saudi Organisation for Charities Abroad, personal charitable donations, or zakat , are hard to monitor because Muslims are discouraged from flaunting assistance to the poor. Meanwhile, with millions of pilgrims travelling to Saudi Arabia each year, cash from legitimate shopping and other costs incurred are extensive.

General Mansour al-Turki, spokesman for the interior ministry, says that suicide bombings do not need significant funding and that a small donation can finance an attack. While the government cannot stop people paying zakat , he says, it urges them to monitor where their money ends up.

But experts complain that whatever steps Saudi Arabia takes might not be effective as long as other countries in the Gulf have more relaxed regulations.

“Financing terrorism is not institutionalised any more in Saudi Arabia,” says a western observer in Riyadh. “We are concerned that the main finance activities are shifting to countries perceived as tolerant by the west, like Dubai or Qatar, because they did not face the same scrutiny as Saudi Arabia.”

By Abeer Allam in Riyadh