Last month, the Treasury Department announced the formation of an executive office dedicated to combating terrorist financing. In an accompanying statement, Treasury Secretary John Snow declared, "Stopping the flow of money to terrorist groups is a top Treasury Department priority." Confirmed Treasury General Counsel David Aufhauser in recent Senate testimony, "You can stop the killing if you can stop the flow of money."

Problem is, the administration has been saying that for a long time. As far back as October 2001, in the USA Patriot Act, Congress furnished Treasury with anti-money-laundering "special measures" to prosecute terrorist financing in countries with lax banking regulations--such as Saudi Arabia, Kuwait, and the United Arab Emirates--and even to bar any bank, charity, business, or country that represents a money-laundering risk from using U.S. markets. But, for all of the administration's noise about starving terrorists of funding, Treasury has invoked its new powers just twice in the past 18 months--against Ukraine and Nauru, and neither case was related to terrorist financing. Astonishingly, it has yet to deploy them against a single bank in the Middle East.

Crafted to harness U.S. economic clout as a weapon in the war on terrorism, the Patriot Act's anti-laundering special measures--bundled in "Section 311"--represent potentially seminal national security legislation. Experts estimate that terrorists launder hundreds of millions of dollars through U.S. banks annually. (Osama bin Laden boasted to the Pakistani paper Karachi Ummat in fall 2001 that his henchmen are "aware of the cracks inside the Western financial system as they are aware of the lines in their hands.") As Rachel Ehrenfeld, author of the forthcoming book Funding Evil, told TNR, "Money laundering is a major tool for terrorist funding, and many of the people who fund terrorists--particularly the Saudis--are financially savvy and know what channels to use to skirt the law."

The Patriot Act authorized Treasury to seal those channels by requiring domestic and foreign financial institutions--banks, charities, securities firms, currency exchanges, pawnbrokers, casinos, and even jewel dealers--to tighten their anti-laundering controls. Under Section 311, Treasury can now ask any foreign institution to divulge account and transaction information, establish independent oversight, and invest in money-monitoring technology--or face exile from the U.S. financial system. Even hawala, an underground money-transfer method that leaves no paper trail, must now register as a "money service business" and submit to the new reporting standards. If an institution refuses to comply, Treasury can simply order U.S. banks to cease all business with it. "The threat of `special measures' would modify the conduct of Saudi financial institutions in a heartbeat," says Lee Wolosky, former head of transnational threats at the National Security Council (NSC) under Bill Clinton and George W. Bush.

The Bush administration, however, has not wielded that threat seriously. A Canadian intelligence report from late last year stated that Saudi-based charities were funneling $1 to $2 million per month to Al Qaeda's estimated $30 million fortune. The Michigan-based Islamic Assembly of North America (IANA ), for instance, which is funded by the Saudi government and private Saudi donors, has affiliates that continue to pipe money to jihadist groups through U.S. banks. Five members of one IANA spin-off, Help the Needy, were indicted at the end of February for raising $4 million for "unnamed individuals" in Baghdad. According to the FBI's indictment, most of the $4 million was laundered from New York central banks through the Jordan Islamic Bank in Amman. Despite this evidence, Treasury has yet to ban the Jordan Islamic Bank from U.S. markets. "The administration's refusal to use Section three-eleven is shocking and inexplicable," says William Wechsler, who led the effort to target Al Qaeda's funds as head of transnational threats at the NSC under Clinton.

In fact, the administration seems to be doing whatever it can to ensure that financial institutions suspected of funding terrorism are not stopped. In fiscal year 2003, Bush earmarked a paltry $4 million for Treasury to train foreign governments in combating terrorist financing--one-tenth the $40 million recommendation of a recent bipartisan terrorist-financing task force sponsored by the Council on Foreign Relations. Equally bad is that when the American Bankers Association (ABA), which powerfully opposes the reach of these measures, groused last November that the government had deluged them with account information requests related to suspected terrorist funding--the Patriot Act permits such requests without subpoenas--Treasury capitulated and instituted a four-month moratorium on the requests. Given that the hijackers' fiscal habits raised red flags ("Suspicious Activity Reports," in banking parlance) in the months before September 11, 2001, but did not reach the authorities until after the attacks, such a moratorium represented a dangerous opening for terrorist-funders while relatively minor procedural changes were being made by Treasury. Worst of all, in September 2002, Treasury convened a task force to study Section 311's efficacy, but the task force does not intend to make recommendations until June. Thus, it will likely be at least two more months until the White House even thinks about using its most potent counterterrorist financing measures in the Middle East.

Indeed, the one moment when Section 311 might have made its mark was shockingly brief. On November 26, 2002, The Washington Post reported that the NSC had recommended that Bush send an ultimatum to the Saudi royals: Crack down on terrorist financiers or face a stern U.S. response. By that afternoon's White House press briefing, Ari Fleischer made it clear the administration had no such plans. "What was the name of the individual who said something about an ultimatum?" Fleischer glowered in response to a reporter's question about the NSC plan. "The president thinks that Saudi Arabia has been a good partner in the war on terrorism."

To be sure, the administration has made some stabs at controlling terrorist cash. Since September 11, 2001, Bush has frozen the assets of some 260 individuals and organizations around the world; won the adoption of U.N. Security Council resolutions demanding that member nations help dismantle sham transfer networks such as Somalia-based Al Barakaat; and assigned trans-agency terrorist-financing task forces to resolve intramural bickering. Acting in concert, U.S. law enforcement, intelligence agencies, and Treasury blocked over $110 million in the year following the terrorist attacks. But, since January 2002, the U.S. government has blocked just $15 million in terrorist assets. "Success should be measured by disrupting key nodes of our network, and a lot of that work remains," says Wechsler. "We've gone after the low-hanging fruit, and three-eleven could now help us get to those top branches."

hy has the administration failed to brandish 311 more than twice in 18 months? One reason is predictable enough: Bush's anti-regulatory bent. While the White House saw the political benefit of ratifying the Patriot Act in the wake of September 11, 2001, it has been less enthusiastic about asking U.S. banks to enact intrusive "know thy customer" protocol. Banks howled when the Clinton administration tried to pass similar anti-laundering legislation in 2000, and Republican Senator Phil Gramm from Texas, then-chairman of the Senate Banking Committee, killed the bill at their behest. Though the ABA muted its criticism of the Patriot Act when it passed after the September 11 attacks, Charles A. Intriago, publisher of Money Laundering Alert, told TNR that, within a few months, "most banks and security dealers fought ardently, which caused the Treasury to delay the implementation [of the special measures authorized by three-eleven]." Indeed, Big Finance helped wage a protracted fight to carve an exemption into Section 312, which can target offshore accounts of prime money-laundering concern. The exemption would have freed financial institutions from exercising "due diligence" for any offshore bank not located in a suspect jurisdiction--a gaping loophole that the Patriot Act sought to close. As Senators Charles Grassley, John Kerry, and Carl Levin, the co-architects of the Patriot Act's anti-laundering laws, pointed out in an October letter to Treasury, "This exemption has no statutory basis, no foundation in the legislative history, contradicts clear legislative intent, and should be removed."

Another hurdle to 311 is the administration's squeamishness about playing rough with Saudi Arabia and other ostensibly friendly oil states. But wielding--or even threatening to wield--311 against one of the nine major banks in the kingdom or demanding more transparency from a few Saudi charities would not imperil the traditionally symbiotic U.S.-Saudi rapport. Rather, it would provide the obstinate banks--who each do a staggering amount of business in U.S. markets annually--with the basic economic incentive to reform.

In the wake of the September 2001 terrorist attacks, Bush vowed to use "every resource at our command to win the war against terrorists, every means of diplomacy, every tool of intelligence, every instrument of law enforcement, every financial influence." Now it seems he would rather save our strongest financial influence for a rainy day. Will there need to be yet another attack on U.S. citadels before the clouds gather over Riyadh?