The al Qaeda terrorist organization has transferred its money out of banks and into “untraceable commodities, including gold and diamonds,” according to a June 18 report in the Washington Post.

The story by Post staff writers Karen DeYoung and Douglas Farah alleges that al Qaeda began to move its money out of banks and into gold and “precious stones such as diamonds, tanzanite, and sapphires,” before Sept. 11. The article cites “U.S. and international officials” as sources.

This shift, which may have begun in 1998 after al Qaeda attacked two U.S. embassies in Africa, is making it more difficult to track the organization’s finances and freeze its assets, according to the Post article.

During an interview on National Public Radio’s All Things Considered, Farah explained al Qaeda’s strategy: “They decided to limit their exposure in the formal financial sector as much as they could, and then they moved into commodities such as gold, diamonds, sapphires, honey, where they buy things that could hold their value, are relatively easy to move, and could not be traced.” Farah also mentioned emeralds, and in a later conversation with JCK, he named lapis as well.

In a June 18 Associated Press report, Treasury Secretary Paul O’Neill disputed the Post article and denied that asset transfers were hurting the campaign to freeze al Qaeda’s funds. O’Neill said he had expected the terrorists to change their financial operations and noted that he had talked to leaders of Saudi Arabia, Kuwait, the United Arab Emirates, and Bahrain about tracking “those who would transfer assets around the world in diamonds and gold and the rest of that,” according to the AP.

Another government official who’s involved in the financial side of the war on terrorism, Deputy Treasury Secretary Kenneth W. Dam, said in a speech to the Council on Foreign Relations on June 8 that al Qaeda will use “informal methods” to move money. “They may avoid storing value in currency at all, instead preferring commodities like gold or diamonds, converting the commodities to cash only as needed.”