Leading Edge R&D:

U.S. CUSTOMS DATABASE USED TO TRACK TERRORIST FINANCING

As reported by Sharon Theimer, Investigators tracking terrorist finances are making use of a huge U.S. Customs Service database designed to detect drug-money laundering, contraband smuggling and trade fraud.

The Numerically Integrated Profiling System -- referred to as NIPS, in part for "nipping away at crime" -- allows investigators to examine, commodity by commodity, whether Osama bin Laden and other suspected terrorists are using trade to make or launder money.

The system lets Customs drill through import and export records, banks' suspicious activity reports, individuals' entries into and exits from the United States and other information to spot questionable shipments and transactions.

While past use of the decade-old NIPS has focused on drug and merchandise smuggling and money laundering, Customs officials believe terrorists use many of the same techniques to hide sources and movements of cash.

Operation Green Quest, a multiagency task force targeting terrorist financing after the Sept. 11 attacks, is using NIPS to investigate whether terrorists are using trade, as Customs suspects they are, to disguise the global movement of illegal money, said Customs Commissioner Robert Bonner.

"Over the years, this program has played a crucial role in Customs' ability to detect sophisticated, trade-based money-laundering schemes," Bonner said in a recent interview.

Honey is among commodities drawing scrutiny; the Treasury Department last month identified three businesses in Yemen dealing with honey and believed by U.S. authorities to be a secret money conduit for bin Laden's al-Qaida network.

Authorities also have identified diamonds and gems such as tanzanite as possible sources of al-Qaida financing.

NIPS helps investigators find discrepancies in export and import reports and spot goods being overvalued or undervalued, exported or imported in unusual quantities or being exported from or imported into unlikely countries to launder money.

To track down the people involved, investigators can use other data collected by government, such as airline passenger information and forms that help track movement of people and money into and out of the United States.

The system lets Customs do in a matter of keystrokes what it would take countless days of legwork to do without it, drilling through massive amounts of data to look for patterns or anomalies.

Investigators say 100-gigabyte searches of data are now typical. That's the equivalent of manually scouring roughly 30 million full, single-spaced pages.

The probe into terrorist financing likewise will involve scrutiny of millions of pages of documents using NIPS, Customs spokesman Dean Boyd said.

Here's a look at how it works: The database shows $13 billion in gold bullion, the purest form of gold, entering the United States in the past decade. An investigator can query the system to see where it came from, including each country and unit price, and the average price per gram, then compare that with prices paid for gold scrap.

NIPS showed some shipments of scrap going for three times the average price for gold bullion. An investigator can check the database to see which shipments, ports and entities were involved, then look for corporate and other records.

That's how Customs tracked down a shipment of overvalued gold and other metals from Argentina to the United States, which had defrauded the Argentine government of $130 million in export rebates from 1992-96.

The fraud and money laundering case resulted in the indictments last year of more than a dozen people, including bankers, lawyers and metal company executives.

NIPS has helped root out the smuggling of refrigerators, tennis shoes and other goods from the United States to Colombia to launder drug money and make hefty profits on the black market.

Authorities could target the smuggling commodity-by-commodity last year after Colombia provided Customs with import data, which allowed the two countries to look for discrepancies in import-export reports on shipments from the United States to Colombia.

The smuggling illustrates how criminal networks diversify money laundering techniques to lessen the chance they will be found out, Customs officials said.

NIPS also can be used to spot shipments of dual-use goods -- equipment with both civilian and military uses -- to countries barred from receiving U.S. military goods.

Last year, Customs and the Defense Department used the database to teach Eastern European governments how to spot illegal movement of dual-use goods that could become ingredients in chemical, biological and nuclear weapons.

NIPS, which costs about $150,000 a year to maintain, can be used on laptops by agents in the field.

The system gets high marks from Jack Blum, former special counsel to the Senate Foreign Relations Committee.

Still, as useful as it is, a flaw in the way American law enforcement is organized makes investigation into the financing of terrorist operations less effective than it could be, Blum said.

While terrorists, smugglers and other criminals practice "equal opportunity" by taking advantage of whatever criminal opportunity presents itself, U.S. law enforcement agencies are organized by sections of the federal criminal code. Each is responsible for some aspect of the investigation, Blum said.

Richard Ward, criminal justice dean at Sam Houston State University in Huntsville, Texas, said communication among agencies and their databases remains an issue.

"The major problem with all of these is they don't talk to each other, for a variety of reasons -- some for security reasons, some because organizations don't want to cooperate," Ward said.

Customs spokesman Boyd said NIPS merges data from several agencies, including Customs, the Internal Revenue Service, the Immigration and Naturalization Service and the Commerce Department.

Customs officials acknowledge improvement needs to be made. For example, the data do not always arrive from domestic and foreign agencies in real time or in the most useful format.