In the 90s, Islamist fighters in Bosnia paid for their illegal weapon purchases with money funneled through Vienna. Today, stricter rules apply. However, it is still very difficult to prove money laundering. That's why investigators push for a reversal of the burden of proof in such cases.

UNO-City, OPEC headquarters, international relief organizations - all of this gives Vienna international significance. As the federal capital, the Danube metropolis is also home to over a hundred embassies and consulates. This benefits not only the city but all of Austria - financially and in terms of image. In the vicinity and sometimes under the guise of international representations and organizations, individuals have been able to establish themselves in Vienna whose interests were not necessarily world peace or good diplomatic relations. They conducted proven criminal activities here. Is Vienna a central European money laundering hub? It is certainly documented that, for example, large money transfers were made through Vienna to finance the Bosnian War.

Employees of international representations and organizations sometimes receive diplomatic passports, granting them political immunity. They are largely protected from prosecution. Although in principle this aligns with international standards of civilized states, it also creates a good environment for illegal activities. This is evident in the incidents surrounding a "relief organization" located near Belvedere Palace.

The Vienna Al-Qaeda Connection and the "Bosnian Model"

Friendly bank employees, anonymous accounts, and a police force that didn't ask too many questions - Vienna has long been seen as a paradise for secret agents.

That may have been the reason why in the 1980s, the "Third World Relief Agency" (TWRA) established itself here. The agency may not have had the assistance of needy people in mind. According to intelligence services, the TWRA financially and logistically supported radical Islamist units in the Bosnian War between 1992 and 1995.

The agency was founded in 1987 by the Sudanese brothers Elfatih and Sukarno Hassanein. The headquarters was located at 36 Prinz Eugen Strasse in Vienna's 4th district. Branch offices were set up in Sarajevo, Budapest, Moscow, and Istanbul.

Before coming to Vienna, Elfatih Hassanein was the Eastern Europe representative of the National Islamic Front (NIF), the leading Islamic party in Sudan. Between 1991 and 1996, the NIF regime housed Al-Qaeda leader Osama bin Laden after he had to leave Saudi Arabia.

In March 1992, Hassanein was accredited in Austria as the Sudanese Cultural Attaché and provided with a diplomatic passport that protected him from police investigations. In the same year, Bosnian Foreign Minister Haris Silajdžić issued a mandate for the TWRA, indicating Bosnia's approval. This made it easier for the "relief organization" to open an account at GiroCredit (later Erste Bank) on Graben in Vienna.

The seating of the Supervisory Board already revealed that the agency had little to do with assisting the needy. For example, the Bosnian Deputy Minister of Defense Hasan Čengić was given a seat on the TWRA control committee. The radical Islamic politician, who also served as an Imam, was suspected of working for the Iranian secret service. TWRA founder Elfatih Hassanein was additionally granted a Bosnian diplomatic passport alongside his Sudanese one.

Years later, it was revealed through intelligence reports who the agency actually "helped": Through the TWRA, large sums of money flowed to Bosnia between 1992 and 1995, against the UN arms embargo on Yugoslavia, financing a large part of the weapons for the Balkan War.

50 Million Dollar Cash

How did the transactions actually take place? For example, in 1994, a cash delivery of $50 million (over 90 kilograms of banknotes) arrived at Vienna-Schwechat Airport. The funds apparently came from a Ramadan fundraising initiative for Bosnia from the Middle East. The "aid money" was deposited into the TWRA account at GiroCredit in Vienna.

Weekly, between three and five million US dollars - disguised as "diplomatic luggage" and therefore uncontrolled - were transported by car from Vienna to Sarajevo.

At least half of the money transferred to Bosnia was said to have been used for the purchase and smuggling of weapons. For example, in September, 120 tons of assault rifles, launchers, mines, and ammunition from former Soviet stocks were transported by cargo plane from Khartoum (Sudan) to Maribor, Slovenia. The goods, declared as "humanitarian aid," were then brought to Bosnia. The war material was financed with funds from the Near and Middle East.

The TWRA in Vienna also maintained close connections with the "Saudi High Commission for Relief of Bosnia and Herzegovina" (SHC), which provided alone $600 million - officially for relief and religious purposes - between 1992 and 2001. There were also contacts with the recently deceased Egyptian Sheikh Abdel Rahman, who was imprisoned in the US for the 1993 World Trade Center bombing.

Bosnian Mujahideen

The connection is not surprising. Several thousand volunteers from Arab states and Iran fought in the Bosnian War alongside the Muslim-nationalist government of President Alija Izetbegović. Even Osama bin Laden's Al-Qaeda provided fighters. Future attackers like Khalid Sheikh Mohammed - the mastermind of the September 11, 2001 terrorist attacks - gained combat experience in Bosnia.

What took place at 36 Prinz Eugen Strasse in Vienna did not go completely unnoticed by Austrian authorities, but they do not seem to have acted with the necessary vigor. This impression is based solely on the timelines. While Hassanein had to leave Austria in 1994 "for misusing Austrian hospitality" - the official version - (he reportedly continued his business from Istanbul), and a raid was conducted at TWRA in 1995. It was about suspicions of arms trading and smuggling. However, it was only six years later, in 2001, that the special unit EDOK, responsible for combating terrorism at that time, froze the agency's account and confiscated all data on it. As expected, no money was found, the account was empty.

2.5 Billion Dollar Washing Machine

A report by the Bosnian government, compiled several years after the end of the war in collaboration with Western intelligence services, revealed that during the war years, $2.5 billion was laundered through the TWRA. The agency, as described, maintained close ties with politicians, "holy warriors," and Osama bin Laden's terrorist network.

At that time, a banking connection between Sudan or the Al Shamal Islamic Bank and Austria (GiroCredit in Vienna) also became public. The US intelligence CIA connected the Sudanese bank to bin Laden.

Austria reacted to all these indications by forming a task force consisting of members of the EDOK, the Oesterreichische Nationalbank, and the Ministry of Finance - and with another account freeze. The news magazine Profil wrote in October 2001 that the bank account in Sudan suggested that bin Laden's Al-Qaeda may have transferred money to or through Austria. However, the EDOK did not find sufficient grounds for suspicion.

Money Laundering: What Authorities Do

In the past, significant amounts with criminal backgrounds have been transferred through Austria - presumably for financing terrorism. And what about the present? The Federal Criminal Police Office (BK) in Vienna collects all "money laundering suspicion reports." According to the BK Money Laundering Report, there was a noticeable increase last year: 2,150 suspicion reports were registered in 2016, compared to 1,793 in 2015. There was also an increase in reports in the area of terrorism financing (174).

However, the increase is not a reliable indicator of the actual number of money laundering activities in Austria. Experts believe that due to international pressure - not least through the "Financial Action Task Force" (FATF) located at the OECD - attention has increased, and therefore authorities are receiving more reports of suspicious cases.

Very few suspicion reports lead to convictions
Example: "In 2016, there were 2,150 suspicion reports of money laundering under § 165 of the Criminal Code, resulting in 46 reports and 36 convictions." According to the Financial Market Authority (FMA), it is crucial for investigators to know where the money comes from and what happens or happened to it. From which country was it transferred? Who owns it? Are politically exposed persons involved in any way? Is the respective business structure unusual? The answers to these questions determine whether a report becomes a case for the authorities that ends up in court (see graph).

According to the Financial Market Authority (FMA), it is crucial for investigators to know where the money comes from and what happens or happened to it. From which country was it transferred? Who owns it? Are politically exposed persons involved in any way? Is the respective business structure unusual? The answers to these questions determine whether a report becomes a case for the authorities that ends up in court.

Where do the clues come from? Who provides investigators with the necessary leads to follow suspicious money flows? These are primarily reporting institutions (banks, insurance companies, securities firms) and reporting professional groups (lawyers, notaries, accountants, business owners such as jewelers). Professional groups like bankers or lawyers are legally required to involve authorities if they have indications of money laundering.

However, a look at the statistics reveals a remarkable asymmetry: while banks filed 2,002 suspicion reports last year, only 19 came from lawyers, notaries, and auditors. Experts suspect that one reason for this imbalance could be that banks and similar institutions are subject to strict oversight by the FMA, while the mentioned professional groups are not.

Out of the 2,150 suspicion reports in 2016, only 46 cases (two percent) could ultimately be forwarded to the public prosecutor's office. This is because it is extremely difficult to find sufficient evidence and proof of money laundering due to the international entanglements and connections of the structures in question. But more importantly, authorities can only investigate if there is an "underlying offense." This means it must be established that the money comes from a criminal act. As a result, convictions under the money laundering provisions are rare. In 2016, there were only 36.

Reversal of the Burden of Proof

To make judicial prosecution more efficient, criminal investigators suggest reversing the burden of proof. This would mean that a suspect or group would have to prove that the relevant sums come from legal sources or businesses. Comparable regulations were implemented in Italy in the fight against the mafia.

A central problem is shell companies. The flexible international offshore industry and the lack of central registries that could provide information about the beneficial owners of companies make investigations particularly difficult. The creation of a EU-wide register revealing the economic beneficiaries of companies has so far failed because not all 28 EU countries are willing to participate. The issue lies in the fundamental decision between transparency and data protection.

In Austria, the commercial register provides a good insight into most companies, but there are exceptions. Any type of assets can still be transferred to an independent and ownerless legal entity, namely a foundation. While the founder must be named in the foundation deed, the beneficiary does not have to be disclosed. Therefore, authorities and the public do not necessarily know who benefits from the funds in the foundation. Thus, a foundation can become a legally sanctioned concealment structure. Currently, there are around 3,300 private foundations in Austria.

Expert Insights from the Outside

The Financial Action Task Force (FATF) develops standards to protect the global financial system in order to combat money laundering and terrorism financing. Since June 2000, it has also been publishing a list of NCCT countries (non-cooperative countries and territories) and regions to show where there is a lack of regulations and therefore not enough is being done against money laundering.

Austria attested by the FATF in its September 2016 report a solid legal and institutional framework for combating money laundering and terrorist financing. However, it criticized that each authority in Austria would have its own concept of money laundering and terrorist financing risks. This does not appear coordinated or compatible. The auditors criticized, among other things, that Austria would not prioritize its anti-money laundering efforts as befitting an international financial center. Therefore, the country was classified as "low" (low standard) in two out of eleven "Effectiveness Ratings" - and only as "partially compliant" (penultimate level) in 14 out of 40 "Technical Assessments".

TERRORISM on SPARTANAT: 

Part 1:Criminals, Heroes, Freedom Fighters

Part 2: The History of Terrorism in Europe, Visualized

Part 3: What's New in the New Terrorism? 

Part 4: The German Autumn 1977

Part 5: Small Lexicon of Jihadist Culture

Part 6: For Home and Wife in Jihad

Part 7: Hinterland Austria

More to come …

This article was first published on October 6, 2017 on ADDENDUM. Copyright Text: ADDENDUM. Graphics: Addendum, Archive.

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