Hiding Holes in Financial War on Terrorism. (Political Notebook)

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Treasury Secretary Paul O'Neill lauded in February the close cooperation now under way between the United States and the European Union in efforts to cut off terrorists from their sources of funding. He cited as an example an order issued to U.S banks to block assets of 21 people identified as members of the Basque group ETA, which has mounted a violent separatist campaign in Spain since 1968.

The collaboration that gave rise to the information that led to the order "symbolizes a new and extremely important chapter in the financial war against terrorism," O'Neill said. The wire agencies and some newspapers dutifully carried the story, but failed to question whether the emperor is as fully suited as one would hope for a financial war against terror.

Immediately on the heels of the Sept. 11 attacks on the United States, Bush officials, including O'Neill, ear-marked the seizing of assets as a crucial element in any long-term operations to take down Osama bin Laden's al-Qaeda network and other major terrorist groups. President George W. Bush emphasized his determination to cut off the supply of money that funds terrorism.

But the blocking order to U.S. banks concerning ETA, which is battling to establish an independent state in Spain's northern Basque region, is not groundbreaking stuff, nor will it damage America's chief foe of the moment, al-Qaeda.

First, ETA hardly is a terrorist group of global reach, despite its "fraternal" ties with the Irish Republican Army and the Palestinian al-Fatah group. ETAs bombings and assassinations, appalling though they may be, generally have been confined to Spain, where the group has killed about 800 people during me fast three decades.

Second, it isn't clear that ETA will be affected one iota by the U.S. blocking order. The Treasury Department was unable to say whether any of the 21 individuals named have assets in the United States, but intelligence sources tell political notebook it is unlikely.

And third, it hardly is wondrous stuff that Spain shared information about the 21 with the United States. That kind of information has been exchanged routinely between America and Europe for years via Interpol and mutual legal-assistance pacts.

In short, O'Neill's announcement was window dressing that doesn't amount to a major development. It also diverted attention from what isn't going smoothly in the financial war on terrorism.

Some of the problems are here at home in the United States, say law-enforcement officials and private-sector experts. Encouraged by the White House, Congress in October dramatically expanded anti-money-laundering laws -- they were included in the USA PATRIOT Act -- but failed to think through some of the provisions and neglected to increase the resources available to law-enforcement agencies tasked with policing the new wide-ranging rules. …