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William Wechsler

William Wechsler was Special Adviser to the Secretary of the Treasury from 1999 to 2001. He also served as Director for Transnational Threats on the U.S. National Security Council and as Special Assistant to the Chairman of the Joint Chiefs of Staff under President Clinton. Hel discuss what needs to be done to track the terrorist money trail.


Other segments from the episode on October 31, 2001

Fresh Air with Terry Gross, October 31, 2001: Interview with Jonathan Tucker; Interview with William Wechsler.


DATE October 31, 2001 ACCOUNT NUMBER N/A
TIME 12:00 Noon-1:00 PM AUDIENCE N/A

Interview: Jonathan Tucker discusses the possibility of biological
agents being used as weapons

This is FRESH AIR. I'm Dave Davies, senior writer and city hall reporter for
the Philadelphia Daily News, sitting in today for Terry Gross.

As cases of anthrax contamination continue to appear in the United States,
citizens and policy-makers have begun to consider the possibility of a
terrorist attack using an even more lethal chemical or biological agent, such
as smallpox or botulism. Jonathan Tucker has spent years researching and
writing about the threat of biological and chemical warfare. Tucker was a
member of the United Nations inspection team in Iraq searching for weapons of
mass destruction. He is currently at the Monterey Institute of International
Studies in Washington, where he and his colleagues recently assembled data on
more than 500 incidents of biological and chemical attacks across the world.
His new book, "Scourge: The Once and Future Threat of Smallpox," deals with
the grim history of smallpox epidemics, the successful effort to eradicate the
disease and the unsettling prospect of terrorists using the deadly virus as a

I asked Jonathan Tucker what we've learned about smallpox from earlier

Dr. JONATHAN TUCKER (Monterey Institute of International Studies): Well, the
smallpox virus, unlike anthrax, is contagious from person to person, and
particularly in a population that is genetically vulnerable, that has not been
exposed to the virus before over the generations, as was the case with the
Indians of North and South America, the disease can spread like wildfire
through such a population and cause very high levels of mortality. And in
such an epidemic is a so-called virgin soil epidemic, because the population
has been sheltered from exposure to the organism, and when it encounters it
for the first time, there is a very dramatic epidemic.

In countries such as Europe, which experienced smallpox over a period of
centuries, it gradually became primarily a disease of children, because people
were almost universally exposed to the disease and either died as children or
became--survived the disease and grew to adulthood with permanent immunity.

DAVIES: You make the point that in countries where smallpox remained, that
the epidemics were less devastating over time because those with the most
resistance survived and the population became genetically stronger against the
disease. In the United States, we've now been without smallpox for at least a
couple of generations, and we've no longer been vaccinating since, I
guess--What?--the '70s or '80s. Does that mean that the United States are a
more vulnerable population to a smallpox outbreak today?

Dr. TUCKER: Well, the genetic resistance is something that evolves over
centuries, if not millennia, so that is a much slower process. But we are
definitely immunologically vulnerable to this disease. There is a debate over
how long the protection was produced by vaccination. The rule of thumb is
about 10 years, although some people believe that it was considerably longer.
But the majority of our population either was vaccinated once in childhood or
people born since 1972 in this country were not vaccinated at all as children.
So a substantial portion of our population is susceptible to the disease.

DAVIES: And the vaccine itself, of course, has some risky side-effects. What
about folks who are immuno-compromised, such as people who have the HIV virus?

Dr. TUCKER: Well, people who are immuno-compromised would be extremely
susceptible to infection in the first place, but they would also be vulnerable
to complications from the vaccine. This is--the vaccine is derived not from
the smallpox virus itself but from a related but normally benign virus known
as vaccinia. The original vaccine virus was cowpox. That was Edward Jenner's
great discovery in the late 18th century; that a normally benign infection
called cowpox, which primarily infected milkmaids, could protect them against
a much more lethal disease, smallpox. And at some point over the centuries,
vaccinia, another virus, began to be used in the place of cowpox as the
vaccine virus.

Normally, vaccinia is harmless in someone who is healthy, has a robust immune
system. But in someone whose immune system is compromised, the vaccine virus
can actually replicate out of control and cause very severe complications,
such as what's called vaccinial encephalitis, an inflammation of the brain
that can be fatal or cause permanent brain damage. So the vaccine should not
be given lightly. There's been some debate over whether the entire population
should be vaccinated against the off chance that smallpox might be introduced
by a terrorist. I think that would be an unwise decision. And there are some
characteristics of this vaccine that make it possible to deliver it in a more
targeted way.

DAVIES: My guest is biological weapons expert Jonathan Tucker.

You know the irony that it was the Soviet Union which championed the cause of
the eradication of smallpox in the '30s and '40s but then later developed a
massive and secret biological weapons program. Just how extensive was that

Dr. TUCKER: It was a terrible irony. On the one hand, the Soviets were the
driving force behind the global eradication program, which the United States,
at least initially, was quite reluctant to support. We favored investing
resources in eradicating malaria, and we saw the campaign to eradicate
smallpox as a kind of competition to that effort. And there was--at least for
a while, this public health campaign fell victim to Cold War tensions. But at
some point in the late '60s, when the malaria campaign was faltering, the
United States decided to support the Soviet call for a global campaign, an
intensified global effort to eradicate smallpox. And there were a number of
leading Soviet epidemiologists and virologists who played a very key role in
the eradication campaign, and the Soviet Union contributed 25 million doses of
smallpox vaccine a year.

So on the one hand, the Soviet Union played an indispensable role in the
eradication campaign; at the same time, the Soviet military was secretly
developing smallpox virus as a weapon. It was clearly different people
involved. The public health doctors were, I believe, truly dedicated to the
noble goal of eradicating this horrible disease, and they were betrayed as
much as the rest of the world by the efforts of the Soviet military to turn
smallpox into a weapon.

DAVIES: Of course, the Soviet biological weapons program was going strong
when the collapse of communism occurred. Did the destruction of so much of
the Soviet infrastructure at the time leave the smallpox samples in those
weapons programs vulnerable to theft or sale on the black market?

Dr. TUCKER: Well, that is definitely a concern. The Soviet biological
weapons program was really remarkable and appalling in scale and scope. It
involved roughly 60,000 people at upwards of 50 to 100 facilities scattered
across the Soviet Union; not only in Russia, but in Kazakstan, Uzbekistan and
other republics. And a whole variety of biological warfare agents were
produced, not only smallpox, but also anthrax and plague were manufactured in
large quantities and stockpiled for planned use in World War III. There were
ballistic missiles and strategic bombers that would have delivered these
weapons against American cities, probably in conjunction with a nuclear war,
as a way of killing the survivors of a nuclear exchange. So it was really a
doomsday scenario that the Soviets had developed.

DAVIES: Is there suspicion that Russia was maintaining offensive biological
weapons research even after the collapse of communism?

Dr. TUCKER: There is actually lingering concern to this day about four
military biological facilities that the Russians claim that they are engaged
in defensive research, but these four military microbiology facilities under
the auspices of the Russian Ministry of Defense, remain top-secret, shrouded
in secrecy and are arousing considerable suspicion in the West. So I think if
the Russians want to come clean about what they did in the past and to
reassure us that they are engaged strictly in defensive and legitimate
activities, they should open up these four facilities to visits or inspection,
and reassure the world that they have ended their past behavior.

DAVIES: My guest is biological weapons expert Jonathan Tucker. He is the
author of "Scourge: The Once and Future Threat of Smallpox." We'll talk
more after a short break. This is FRESH AIR.

(Soundbite of music)

DAVIES: This is FRESH AIR. I'm Dave Davies filling in for Terry Gross.
We're speaking with biological weapons expert Jonathan Tucker.

Smallpox as an illness has been eradicated from the Earth, but samples of the
virus remain in the custody of the United States and Russia. And your book
documents a debate which has raged through the '90s about whether these
remaining stocks of the smallpox virus should be destroyed. What's the
argument for keeping them alive?

Dr. TUCKER: The argument--well, there are a number of arguments. Initially,
virologists and other scientists were interested in studying smallpox virus
because it was a uniquely human disease. The virus only affects human beings,
does not have an animal reservoir and, hence, it was exquisitely adapted to
the human immune system. The virus, actually, had a number of--had evolved a
number of countermeasures to deceive the human immune system by, for example,
sending out decoy proteins that would interfere with the human immune response
and enable the virus to replicate out of control and cause disease.

So virologists became quite fascinated with studying the mechanisms of the
virus, determining its DNA sequence, how it worked as a kind of molecular
machine. And that was the initial impetus behind the pressure from the
scientific community to delay destruction of the virus. They saw it as a
valuable scientific resource.

More recently, with the growing concern about the possibility that undeclared
stocks of the smallpox virus may exist outside the two official repositories,
there has been a growing pressure from government officials to employ the
existing stocks of smallpox virus to develop better defenses--for example, to
screen anti-viral drugs for activity against smallpox, because at the moment,
even though we have an effective vaccine, there is no good treatment for

DAVIES: What's the likelihood that a rogue state or a terrorist group
possesses a sample of the smallpox virus?

Dr. TUCKER: It's very difficult to quantify the probabilities. The
evidence, at least in the public domain, is all circumstantial, but it does
implicate at least three states: Russia is believed to have undeclared stocks
outside of its official repository; Iraq has been alleged to retain the virus,
as has North Korea. And a number of other countries are named as suspects.
So the evidence, for example, is that states such as Iraq and North Korea have
continued to vaccinate their troops against the disease, but of course, other
countries have, as well. The United States was routinely vaccinating military
recruits until 1990, and we only stopped because of some concerns about the
antidote used to treat complications of the vaccine.

Other types of evidence include the fact that Iraq has admitted that it
experimented with the camel pox virus before the Gulf War. Camel pox is the
closest relative of smallpox among the pox viruses that infect animals. And
this is somewhat suspicious because camel pox does not normally cause disease
in humans, or if it does, it causes a very mild infection. So the question
was: Why was the Iraqi biological weapons program working with this
particular virus? Some people believe that the Iraqis actually had specimens
of a smallpox virus which were too dangerous to work with directly. So they
were, instead, working with camel pox as a surrogate, or model, for the
development, the production and delivery techniques which could then be
readily applied to smallpox.

DAVIES: If a terrorist group were to acquire smallpox from a rogue state,
what challenges would they face in turning it into a weapon? How easy is that
to do?

Dr. TUCKER: Well, the first step--acquiring it from a rogue state--is not
necessarily that straightforward. I mean, the state would have to decide that
it was in its interest to provide this very dangerous virus to a terrorist
group that might easily evade its control. Now one thing about smallpox,
because it is contagious, it's not an easily targetable weapon. If the
disease is not contained, it can easily spread from country to country, and
might well come back to haunt the very people that released it, or at least
the people on behalf they claim to be acting. So that is obviously a concern
on the motivational side: Why would someone want to release what is really a
doomsday weapon?

But assuming that they are motivated--and, of course, terrorists have done
irrational things in the past--there would be a number of hurdles. First,
they would have to grow the virus. It's much more difficult to grow a viral
agent than a bacterial agent such as anthrax. A bacterial agent will simply
grow in a nutrient medium, whereas a viral agent will only grow inside living
cells. And living cells are much more difficult to grow, much more finicky,
require very special culture conditions and nutrients. So it would be quite
challenging for a terrorist organization to produce large quantities of the
smallpox virus.

Then, they would have to develop some means of disseminating the virus through
the air, which is its natural route of delivery. Some people have talked
about the possibility of a very low-tech means of delivery, which would be the
terrorist would, if they had suicidal inclinations, would simply infect
themselves with the disease and then circulate among the target population,
spreading the disease that way. That is possible, though it's not the most
efficient way of spreading the disease.

But there are a number of constraints. For one thing, the window of
opportunity--when people would become contagious, but not easily
detectable--would be quite narrow. That is, people with smallpox only become
contagious with the first appearance of the rash, which initially resembles
chicken pox, red spots on the skin that gradually swell with fluid and then
with puss. But by the time the characteristic smallpox rashes appeared, it
would be impossible to conceal even with makeup, and would be a dead giveaway.

Also, the early phase of the disease is accompanied by severe prostration;
back pain, high fever, exhaustion. It would be very difficult for people to
wander around spreading the disease. And finally, even someone who was
willing to die instantly in a blaze of glory in an explosion might think twice
about a slow, painful and hideous death from smallpox. So one would have to
be an extreme fanatic to be willing to engage in that kind of attack.

DAVIES: You've looked at efforts to fight biological terrorism. How long
will it take before the United States has enough smallpox vaccine to defend
itself against an attack?

Dr. TUCKER: Well, the Bush administration has been moving very rapidly to
increase the available supply. The first step they're doing is to take the
stocks left over from the global eradication campaign--which number somewhere
between 7.5 million and 15 million doses--and see if they can be diluted
either fivefold or tenfold--probably fivefold is more realistic. But that
would substantially increase the number of doses as a stopgap until more
vaccine can be produced.

At the same time, the Health and Human Services Department has issued
contracts initially for 54 million doses to a company called Acambis. And now
Secretary Thompson has announced that he wants to acquire, beyond that, an
additional 250 million doses by the end of next year. So if that actually
materializes--which I think will be challenging, but perhaps feasible--by the
end of next year or early 2003, we should have enough vaccine for every man,
woman and child in the country.

Now it's important to stress that if there were a reasonably small or
medium-sized outbreak, we would not need to vaccinate the entire country. The
vaccine would be delivered in a more targeted way so that anyone who was
either exposed or potentially exposed to someone with the contagious phase of
the disease would be vaccinated in the manner of creating a firebreak to break
the chain of human-to-human transmission, and snuff out the flame of infection
before it could spread further. And this is the strategy--this targeted
strategy was used very successfully in the eradication campaign of the 1960s
and '70s.

But if the disease was not recognized--if the outbreak was not recognized at
an early enough stage and had spread substantially--for example, to multiple
states--at that point, it might be necessary to vaccinate the entire country.
So I think that is the rationale for having enough vaccine on the shelf for
every citizen, even though I don't think it makes sense to vaccinate

DAVIES: You and your colleagues at the Monterey Institute of International
Studies compiled a database of more than 500 incidents of chemical and
biological attacks. And in writing about this research, I guess some months
ago, you suggested that public officials and certainly the media had
exaggerated the threat of a biological terrorist attack. Given the recent
discoveries of anthrax, do you feel differently today?

Dr. TUCKER: Well, one of our main conclusions was that very few terrorist
organizations were motivated to inflict indiscriminate casualties. And of
those, very few of that subset had the capability to carry out a large-scale
biological attack. And I think we would still stick by that assessment.

We were looking at both the motivational side and the capability side of the
equation. And drawing from the historical record, we found that the
likelihood of a large-scale biological attack by terrorists was quite small;
not zero, but small. Of course, there is always some risks in trying to
extrapolate from history into the future. There could be historical
discontinuities, and I think we have seen some aspects of the current events
that we could not have predicted from the past.

DAVIES: Well, Jonathan Tucker, I want to thank you very much for speaking
with us.

Dr. TUCKER: Thank you.

DAVIES: Jonathan Tucker is director of the Chemical and Biological Weapons
Nonproliferation Program at the Monterey Institute of International Studies.
His new book is "Scourge: The Once and Future Threat of Smallpox."

I'm Dave Davis. This is FRESH AIR.


* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *

Interview: William Wechsler, former special adviser to the
secretary of the Treasury, discusses terrorist financing

This is FRESH AIR. I'm Dave Davies, sitting in for Terry Gross.

Soon after the September 11th attacks, President Bush announced he would
freeze the assets of suspected terrorists and their confederates and promised
to get tough with foreign banks and governments that shield their operations.
William Wechsler has spent years tracking the shadowy financial transactions
and money laundering of drug dealers, criminal syndicates and international
terrorists. In the Clinton administration, he was director for transnational
threats at the National Security Council, where he directed the US
investigation of Osama bin Laden's financial network, and he was special
adviser to the secretary of the Treasury.

Congress recently approved new financial regulations as part of an
anti-terrorism package, which was signed by President Bush. I asked Wechsler
why new controls are needed.

Mr. WILLIAM WECHSLER: What needs to happen is that the US government, the
Treasury Department in particular now, needs to provide explicit guidance to
the US financial industry, looking at all the case studies that we have, that
we know of terrorists' money raising and money movement in the United States
and around the world, and finding the specific patterns that are applicable to
terrorist financing, and giving that information to the US financial industry
so they know what to look for, so that they know when to issue what's called a
suspicious activity report to the federal government, something that might
help spur a law enforcement case.

DAVIES: What are some of the suspicious patterns of terrorist financing?

Mr. WECHSLER: Some of them involve where the money comes from and some of
them involve how the money is used. Some of the money comes from banks in
specific regions around the world that deserve a higher level of scrutiny than
banks in other regions around the world. Some of it comes through the
underground hawala banking system, which has been used for centuries by Middle
Eastern people. Some of it comes from the Islamic banking system. Some of it
comes in wires from abroad of a large amount, which then over a period of time
is cut up into much smaller pieces and moved into different accounts.

Some of it is raised through charitable organizations, even perhaps in the
United States through the guise of giving, to, say, orphans and widows in the
fight against Chechnya but actually then goes for terrorist organizations.
And then some of it comes from standard criminal fraud, smuggling, things that
you should be on the lookout for anyway.

DAVIES: I'd you to explain the hawala system, this low-tech system of
international money transfers which some believe has been used extensively by

Mr. WECHSLER: The first thing to understand about the hawala system is that
there is absolutely nothing inherently illegitimate about it. If the world
history had gone a different way, the hawala system would have evolved into
the banking system that we use, instead of the banking system that was created
by the Medicis in Italy. The hawala system was created centuries ago, mostly
to support Arab traders on their way back and forth to the subcontinent. It's
run by south Asians, Indians and Pakistanis, who have basically been doing
this work for generations and generations. In fact, hawala, depending on who
you listen to, comes from an Arabic word meaning `change,' and also a Hindi
word meaning `trust,' and that basically encaptures the main elements of the
hawala system. It's a system of money transfer without money movement. The
money goes from one place to another, but there is no movement of money
between those two points.

DAVIES: How does it work?

Mr. WECHSLER: Give you a quick example. Say you are in the United States,
and you want to move money back to your mother in Pakistan, in a very rural
part. You could just go to your bank, say Citibank, and try to wire the money
to your mother's account, or you could try to send a check. But the problem
with that might be that there might not be any Citibank branch where your
mother lives, or it might be very difficult to get that check in, and there
might be onerous government provisions that make it difficult for your mother
to get the money.

Or you could just go down to your neighborhood hawaladar, probably in the back
of a store, and give that person the amount of money that you want to send in
cash, say, $1,000, give that person a little fee. What the hawaladar then
does is picks up the phone or sends an e-mail or sends a fax to his colleague
in Pakistan, and that colleague takes the same amount of money, takes the
$1,000 out of his store of cash, and simply just gives it to your mother. The
money has been transferred from you to your mother, but no money has moved.
No money has moved physically, no money has moved through any wire transfer or
the established, above-ground banking system.

DAVIES: And it is a practice that the records are then destroyed at both

Mr. WECHSLER: Quite often the records are destroyed. Sometimes there are
very limited records in the first place. This system operates on trust. It
operates because one hawaladar in New York and another hawaladar in Pakistan
trust each other. They most likely are related somewhere way back in the
generations. They know that neither one of them is going to cheat the other
one, that they're both good for the money, they're good for clearing the
books, records don't have to be kept at the same level of specificity that we
would imagine in the West.

DAVIES: So it's an easy, non-traceable way of delivering a few thousand
dollars for buying weapons, or flying lessons, for example. How do you get a
hold of that?

Mr. WECHSLER: Well, you're absolutely right. The system itself is not
illegitimate, but it provides a lot of advantages that any terrorist would
want. It provides no records. It provides a degree of secrecy. It is a
well-established network that operates literally all around the world, and the
sad fact is, is that the ethnic populations that have operated the hawala
system for a long time are very convenient for the al-Qaeda network. It's,
again, run by south Asians for the Middle East, Middle Eastern people and
Arabs, and has for centuries and centuries.

How you deal with it is, you bring the system out from underground to above
ground. How you deal with it is by, in the United States, for instance,
passing a regulation that would require these hawaladars to register as
formal, official businesses that would then be required to abide by the same
requirements that all financial institutions abide by. If you try to make it
illegal, then you'll just drive it further underground, but if you try to
bring it out from underground and bring it into the regular financial system,
then I think you'll have some success over time.

DAVIES: So how do the new banking regulations enacted by Congress affect

Mr. WECHSLER: What Congress did is Congress formally required the Treasury
Department to pass a kind of--to write and issue this kind of regulation.
Actually, one of the sad things is is right near the end of the Clinton
administration, we did issue this kind of regulation that would require all
hawaladars to register. It was going to come into effect at the end of this
year, because it takes some time to communicate to all the hawaladars their
new requirements. The Bush administration, as one of their first decisions,
postponed this regulation again. In the wake of September 11th, however, and
certainly in the wake of this action by the US Congress, I believe that
they've reconsidered this decision and will now bring this regulation into
force at the end of the year.

DAVIES: My guest is William Wechsler, who investigated terrorists' financial
networks during the Clinton administration. We'll talk more after a break.
This is FRESH AIR.

(Soundbite of music)

DAVIES: My guest is William Wechsler. He headed the Clinton administration's
efforts to investigate Osama bin Laden's financial network. President Bush
recently signed a new anti-terrorism bill, enacted by Congress, which included
some financial and banking provisions. How will they help?

Mr. WECHSLER: They will go a long way to helping us in the fight against
al-Qaeda's financial network and money laundering at large. They do two
fundamental things. First, at home, they strengthened our own domestic
anti-money laundering regime. There are several loopholes in our current
situation, the most glaring of which is that the anti-money laundering laws
mainly apply to banks and depository institutions and don't apply to
non-depository financial institutions. Talking about stock brokers, talking
about the wire transmitters, talking about insurance companies, casinos, all
of these kinds of entities which perform many of the same functions of banks
for people who might want to launder money, and now they will be brought into
the US anti-money laundering regime.

The second thing that the new law does is it gives the secretary of the
Treasury a whole set of new authorities by which he can, in a graduated,
targeted fashion, take action against what's called primary money laundering
concerns: a foreign country, a foreign bank, a foreign type of transaction
that is identified as particularly helping a criminal or terrorist network
move dirty money. At the highest and what this would mean is that the
secretary of the Treasury would be able to block US financial institutions, US
banks from being allowed to have correspondent relationships with foreign
banks that he designates as playing a significant role in laundering, say,
al-Qaeda's money.

DAVIES: When you testified before Congress I believe last year, you made the
point that it is very easy for even a small nation to become a money
laundering center. What did you mean?

Mr. WECHSLER: Well, the world has changed and the world has changed because
of globalization, because of advances in bankings and communications
technology, because of the Internet. In the old days when you look back at
your James Bond or John Le Carre novels, you heard about Switzerland and the
Cayman Islands being famous places for people to go to receive `no questions
asked' banking secrecy. And they definitely were, and they became very, very
wealthy because of it. What they had in common was physical proximity to
major money centers. That, provided with their strict bank secrecy laws, gave
them an edge-up against all the competition in this regard. It was an easy
thing to do for a banker, say, in London to travel to Zurich with a suitcase
full of cash or, for that matter, a banker in New York or Miami to go to the
Cayman Islands.

But in recent years, physical proximity doesn't matter. The Internet exists.
You can be anywhere in the world and set up a Web site and suddenly find that
you can have customers everywhere else in the world. It didn't take long for
a number of countries to figure this out, and places that many people might
not have heard of in, say, the South Pacific, places like Nauru and Vanuatu
and Nive, places in the Caribbean that are a little more difficult to get to,
places like Dominica and Grenada, places in the middle of Europe, like
Liechtenstein. All these places changed their laws, made it harder for
foreign law enforcement to track the money back there. In fact, they
explicitly created laws that disallowed customer identification, that
prevented foreign law enforcement from gaining any information, that
established very, very strict bank secrecy. Then they put up Internet sites,
and they blatantly advertised. They said, `Put your money in our bank and the
FBI can't get you.' This was all out in the open. And it was a market change
in the world environment that allowed lots of money to move in ways that the
US government, international institutions, other legitimate authorities could
not see.

DAVIES: Some of these are Pacific Island nations with small populations where
their bank deposits amount to literally tens of millions per resident. Given
that they're so invested in that kind of illicit banking relationships, what
pressure could the United States exert which would change their behavior?

Mr. WECHSLER: Well, I'll tell you what we did do at the end of the Clinton
administration. We decided a couple of things. First of all, that in order
to end this problem, in order to really address it successfully, you needed a
multilateral approach. Secondly, that the approach had to harness market
forces in order for it to be really effective. And so what we did was the
United States' secretary of the Treasury, Larry Summers, led the fight. The
United States went with its allies in the G-7 nations and broader through an
organization called the Financial Action Task Force, and these 29 nations
looked at a whole bunch of countries around the world, a lot of these small
countries but a lot of larger countries as well, and really thoroughly
examined their laws and regulations that made up their anti-money laundering

The result of it was a naming and shaming process that named the countries
that were deemed non-cooperative in the global fight against money laundering.
These countries included a lot of these small island nations, but also include
countries like Israel and Russia and Panama and Philippines. No favorites
were played, no favors were given. This coincided intentionally with a couple
of other sister projects, one through the OECD, which did the same thing
towards tax havens around the world, and another through an organization
called the Financial Stability Forum, which did the same thing in offshore
jurisdictions whose lax supervision contributed potentially to macroeconomic
instability. These three naming and shaming processes all ended, all
completed their work, all named and shamed the countries before the G-7
meeting last year.

It was an amazing effect. What you saw immediately were banks around the
world and major money centers cutting off their correspondent relations with
banks in the countries that were named. These are the countries that were
named having difficulties getting bond issuances at the same rates as they
were before. You saw Standard & Poor's lower their own ratings on banks in,
say, Liechtenstein and you saw a real diplomatic, a political reaction where
country after country on these lists immediately took strong actions to change
their entire laws, their entire regulations, and really come up to
international standards. Many of these countries have been refusing to do
this for years and years, and suddenly, they found the political will. That's
how you do it. You do it through a multilateral effort that harnesses market
forces that really drives home the point where it matters, in the wallet.

DAVIES: Pressuring international banks that may conduct illicit operations is
one thing, but there's also the issue of United States banks, which have
correspondent relationships with banks in countries where regulations are lax.
What exactly are these relationships and how do they benefit US banks?

Mr. WECHSLER: Correspondent relationships is a very wide term, and what it
basically means are the way one bank talks to another bank. If you are doing
a transaction between your bank and another bank--and this could mean any
credit card transaction, any financial transaction that you do every day--one
bank has to talk to another bank to know how to get money out of your account
or put money into your account. That at a fundamental basis is what
correspondent relationships are all about. A large bank--a Citibank or a
Chase--will have hundreds and hundreds and hundreds, maybe thousands of
correspondent relationships around the world with foreign banks. And if the
United States government was to shut off those entry points, it would be
devastating to those foreign banks, so it gives the United States a large
amount of leverage by which we can go out to the world and try to make sure
that these foreign banks are not aiding and abetting, say, the al-Qaeda
terrorist network, whether willingly or totally unwittingly.

DAVIES: So the new rules would require banks to know exactly who they're
dealing with?

Mr. WECHSLER: Banks are already required to know their customer, is the term.
There have been a lot of instances where after the fact, the US government has
thought that individual banks in the United States have done a very poor job
of knowing their customer. Very famously, Citibank's private banking unit,
for instance, provided services to Raul Salinas, the brother of the president
of Mexico, when he was involved in drug dealing, and he had millions and
millions of his dollars in his accounts, and there are a number of other
examples like this. What the new legislation would do is in a general case,
require a higher level of due diligence from these banks about who they do
business with and who their correspondent banks do business with, and on a
more targeted basis, raise the bar even higher when the US government has
reason to believe that an individual foreign bank is a real problem out there.

DAVIES: The banking industry isn't fond of this. Last year, Texas Senator
Phil Gramm effectively blocked measures which would have tightened these
rules, and they unsuccessfully, I believe, tried to get Congress to separate
the banking provisions from the recent anti-terrorism bill, right?

Mr. WECHSLER: Yes, yes, they did. And that was really unfortunate. What was
fortunate was in the end, thanks to pressure from Senator Daschle, the
Democratic leader of the Senate, and Senator Sarbanes, the Democratic head of
the Banking Committee in the Senate, that the House Republicans were forced to
include it in the overall terrorism package, and Senator Gramm was forced to
go along. Senator Gramm did get several technical changes, which were quite
acceptable, and the main point is in the wake of September 11th, the arguments
that were made last year, that Senator Gramm made last year that prevented
this anti-money laundering law from even getting a vote in a committee, even
getting a hearing in the first place, these arguments were thrown out the
window, and there was a widespread recognition that we really needed to do
something about the flows of dirty money around the world if you wanted to
prevent the kind of horrible terrorist actions that we saw on September 11th.

DAVIES: My guest is William Wechsler, who investigated terrorist financial
networks during the Clinton administration. We'll talk more after a break.
This is FRESH AIR.

(Soundbite of music)

DAVIES: I'm Dave Davies, back with our guest, William Wechsler, who spent
years tracking the financial dealings of drug syndicates and international

What are some successes that one might point to in the effort to track the
financial dealings of terrorists?

Mr. WECHSLER: Most of the successes are, by their very nature, secret. The
quid pro quo is--the assistance is given to the United States, and what the
other country gets is that the assistance is secret, so I can't speak of many
of them. But one that I can speak of involves Ariana Airlines, the national
airline of Afghanistan. The United States government, after a lot of work,
came to the conclusion that Ariana Airlines was being used to ferry money,
personnel and materiel for al-Qaeda in and out of Afghanistan and then to
places where it could go around the world. We had designated the Taliban
already as deserving of US sanctions, and it wasn't too hard to figure out
that Ariana Airlines, as the national airline of Afghanistan, was owned or
controlled by the Taliban. We saw who was running the organization, and it
was a Taliban-run organization. So we designated Ariana Airlines.
Immediately, the question was how much money is blocked? And then the answer
to that was was not too much. And people said, `Well, this doesn't really
matter because Ariana Airlines doesn't land in the United States, so who cares
if the US has put sanctions on it?'

But that thought missed the point. The point was is then you could go quietly
to other governments around the world who had allowed Ariana land rights in
the United States and had regular, in many cases daily, flights from Ariana
Airlines. And you could then say to them, `Your airports would hate to be put
in a position of having to choose between having Ariana land there and having,
say, American or United Airlines landing there.' And quietly, behind the
scenes, many countries came to the obvious decision and decided to block
Ariana from having anymore landing rights in their airports. This was later
internationalized overtly through a UN Security Council resolution on which
the US and Russia worked very closely. That's the kind of process by which an
important node in the network that raises and moves money and materiel for
al-Qaeda can be disrupted, at least for a time, and disruption is, again, the
goal here. It's a valuable thing to do. When elements are disrupted, that
means it takes al-Qaeda time and personnel and money and effort to re-create
it, and while they're doing that and while they're spending that time and
money and effort, they're not spending that time and money and effort blowing
something up.

DAVIES: Shutting down Afghanistan's national airline certainly must have had
effects beyond its ability to transfer money for al-Qaeda, and, you know, it's
a struggling economy. Does that seem like a bit of a blunt instrument to try
and get at financial transactions?

Mr. WECHSLER: It wasn't, because it was a targeted effort made, once it was
determined that Ariana Airlines was being used for this purpose. These
weren't sanctions that were done willy-nilly against all elements of the
Afghan economy. These were done against particular entities that were being
used in this fashion, and that's the way to do sanctions. That's the way to
do sanctions effectively, and that's the way to have an effect on the
terrorism network writ large.

DAVIES: How much effect do we think that this kind of activity will have on
terrorists? Can we shut them down with this kind of work?

Mr. WECHSLER: You'll not wake up tomorrow and read in a newspaper headline
that we have frozen all of Osama bin Laden's money and, therefore, al-Qaeda is
no more. That's simply not how it works. But over the long run, following
the money, attacking the financial network, is an invaluable, is an essential
part of the overall coordinated efforts to take down the terrorist
organization. Look at, say, our efforts against organized crime here in the
United States. It was a long time ago that we put Al Capone in jail for tax
evasion. And ever since then, we've been going after the financial network
that supports organized crime in the United States as part of our coordinated
law enforcement efforts against organized crime. Organized crime still
exists. The financial network that supports organized crime still exists in
the United States.

So even after this many decades, you haven't scored a knockout blow against
organized crime. Now that said, organized crime today is nowhere near what it
was 30 or 40 years ago. It's a mere shadow of the influence and power and
money that it had back then. That's success. That's success over the long
term. That's success without a ticker tape parade, without a clear moment of
victory. But that is exactly the kind of success that we need to envision as
we go after the al-Qaeda financial network.

DAVIES: William Wechsler, thanks very much for joining us.

Mr. WECHSLER: Thank you.

DAVIES: William Wechsler investigated the financial dealings of terrorists
and drug traffickers as a special adviser during the Clinton administration.


DAVIES: For Terry Gross, I'm Dave Davies.
Transcripts are created on a rush deadline, and accuracy and availability may vary. This text may not be in its final form and may be updated or revised in the future. Please be aware that the authoritative record of Fresh Air interviews and reviews are the audio recordings of each segment.

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