Treasury: Taliban's Bankroll Beats Qaeda's

The Taliban are in much stronger financial shape than al Qaeda and rely on a wide range of criminal activities to pay for attacks on U.S. and coalition forces in Afghanistan, a senior Treasury Department official said Monday.

David Cohen, the department's assistant secretary for terrorist financing, said the extremist group extorts money from poppy farmers and heroin traffickers involved in Afghanistan's booming drug trade. The Taliban also demand protection payments from legitimate Afghan businesses, he said during a speech at a conference on money laundering enforcement. (Read Cohen's prepared remarks here)

Cohen's assessment came as President Barack Obama and his top advisers discuss whether many more troops may be needed in the 8-year-old Afghanistan conflict. A critical part of the deliberations is whether the fight should be a more narrow one against al Qaeda or a broader battle against the Taliban-led insurgency.

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According to Cohen, al Qaeda is a cash-strapped organization that is losing its clout. That condition is the product, he said, of a long-running effort by the U.S. and its allies to cut off the terror group's sources of funding by targeting its deep-pocketed donors and interfering with its ability to move money.

In the first half of 2009, he said, al Qaeda's leaders made four public appeals for money to bolster recruitment and training.

"We assess that al Qaeda is in its weakest financial condition in several years, and that, as a result, its influence is waning," Cohen said at the conference, sponsored by the American Banking Association and the American Bar Association.

But Cohen cautioned that situation could reverse quickly because a pool of donors "who are ready, willing and able to contribute to al Qaeda" still exists.

The Taliban, meanwhile, appear to be heading in the other direction despite an international effort to shut down the movement's cash supply. Drugs are a major money maker for the group.

But Richard Holbrooke, the Obama administration's special envoy for Afghanistan and Pakistan, has said the Taliban get most of their cash from private benefactors in the Persian Gulf.

Army Gen. Stanley McChrystal, the top U.S. commander in Afghanistan, said in his 66-page assessment of the war that the diversity of the Taliban's streams of cash makes it difficult to blunt their ability to operate.

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Cohen said portions of the Taliban's illicit proceeds make their way out of the country and into the global financial system. But he did not specify how much or detail the money's suspected entry points.

Cohen's assessment comes as the Taliban pledged to mobilize fighters across Pakistan for more strikes after a suicide car bombing targeting Pakistani troops killed 41 people, the fourth grisly militant attack in just over a week.

The Taliban also claimed responsibility for the 22-hour weekend attack on the nation's heavily fortified army headquarters, saying a cell from Pakistan's most populous province carried out the raid.

The claim that a Punjabi faction of the Pakistani Taliban was behind that strike is a sign the insurgents have forged links with militants outside their main strongholds in Pashtun areas close to the Afghan border, increasing their potency.

"This situation is looking pretty ugly," a senior Pakistani government official told CBS News' Farhan Bokhari after Monday's attack in Shangla district. "The dangerous part of the attack in Shangla is that this was the area from which the Taliban were pushed out," he added. The official spoke on condition of anonymity as he was not authorized to discuss the recent wave of attacks.