Following The Terror Money Trail

British police raid a second house after an earlier raid on the same street Aug. 10, 2006 in High Wycombe, England. Police continued their search after the arrests of 21 people for an alleged terror plot to explode 1o trans-Atlantic planes. (Photo by Gareth Cattermole/Getty Images)
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Investigators in London and Pakistan are following a money trail that's likely to lead to more arrests in the foiled plot to blow up 10 airplanes. CBS News correspondent Sheila MacVicar says the trail begins in the rubble of last year's earthquake in Pakistan and bears the fingerprints of al Qaeda.

Moved by the plight of the victims, mosques and charities around the world raised millions of dollars. Much of it was spent legitimately — but for months, as the suspected liquid bomb plotters were under surveillance, terror-financing investigators in Britain and Pakistan watched them make suspicious bank transfers.

"We know that there are charities who claim that they were doing a lot of work and they raise millions of pounds," says Nasir Ahmed a respected British Pakistani businessman and member of the House of Lords. "That money hasn't done there, so where has it gone."

Pakistan has arrested three men on suspicion of laundering money back to the British plotters. One of them, Rashid Rauf, is British and a key figure suspected of linking the plot to Al Qaeda. Their father, Abdul Rauf, immigrated to Britain from the Mirpur district of Pakistan several decades ago and his five children were all born in Britain. Rauf was picked up along the Pakistan-Afghanistan border, and is believed to have connections to a senior al Qaeda leader in Afghanistan.

Last week, the Bank of England froze the accounts of 19 of the suspects who were in British custody. Intelligence sources say that beginning in February, the suspects — trying to avoid detection — transferred relatively small amounts of money; $1,000 here, a few thousand there, from Pakistan into various accounts in Britain.

"If the arrests in Pakistan identify some of those flows, and it looks as if one of those arrests will, then it may lead back to networks in Europe and particularly in the United Kingdom," says Michael Clarke, a professor of defense studies at Kings College in London.

MacVicar also reports that community leaders in London say some of the young men arrested in the terror plot traveled to Pakistan last fall, ostensibly to help in earthquake relief efforts — but instead, investigators say they believe the me attended militant training camps.

On Monday, the British government downgraded its terror threat level from critical to severe, saying intelligence suggested an attack was no longer imminent after security forces foiled an alleged plot to bring down packed trans-Atlantic planes heading to the United States.

The critical level was declared last week when police rounded up 23 people suspected of involvement in the terror plot. Police questioned all but one of the suspects Sunday, but authorities remained silent on what, if anything, they have learned.

"I want to stress ... that the change in the threat level does not mean that the threat has gone away," Home Secretary John Reid said. "There is still a very serious threat of an attack. The threat level is at severe, indicating the high likelihood of an attempted terrorist attack at some stage, and I urge the public to remain vigilant."

U.S. Homeland Security chief Michael Chertoff said Sunday there was a risk that other groups might try to cause bloodshed on the false assumption that law enforcement and intelligence services might be distracted.

He also called for taking a renewed look at U.S. laws that could give authorities the flexibility to detain suspects for longer periods of time. Britain recently passed controversial legislation giving the government up to 28 days to hold terror suspects without charge. The jetliner plot is the first major test of how those new powers will be utilized.

Meanwhile, U.S. Attorney General Alberto Gonzales warned that security measures such as the ban on carrying liquids and gels onto commercial planes may be permanent if officials cannot figure out how to screen the kinds of materials the terror suspects allegedly plotted to use.

With the reduction in the threat level, Britain's Department of Transport said passengers would be allowed to carry a single, briefcase-sized bag aboard aircraft, and that books, laptop computers and iPods would be permitted again. However, Heathrow and other major airports said they would not adopt the relaxed regulations until Tuesday.

Reid said the downgraded terror threat level was not a response to airport congestion and flight cancellations.

Some airlines have accused BAA PLC, which operates Heathrow, Gatwick and Stansted airports serving London, of failing to cope with the new anti-terror security requirements, and others appealed to the British government to use police and army reservists to speed up searches at overloaded airport security checkpoints.

"If we the industry and the government don't work together to have sensible security ... we are going to hand these extremists a terrific PR success," Michael O'Leary, the chief executive of budget airline Ryanair, told Sky News television. "We don't need to be body-searching young children traveling with their parents on holiday to Spain."