Osama Bin Laden's al-Qaeda network has largely eluded a US-led effort to find and freeze its financial assets, the Washington Post says, partly by moving its money into commodities such as gold and diamonds.

Now we are finding tentacles into all kinds of precious stones and metals

Unnamed financial investigator

The Post quotes American and international officials saying that al-Qaeda shifted its funds from areas such as Swiss bank accounts into precious stones - even before the 11 September attacks.

"It was a paradigm shift in the financial organization that we missed," one unnamed investigator told the paper.

"Everyone was trying to find bank accounts in Geneva when al-Qaeda was greatly reducing their exposure in the formal financial sector," the investigator said.

"Now we are finding tentacles into all kinds of precious stones and metals."

Diamonds, tanzanite and sapphires became part of the al-Qaeda's portfolio, the paper says, because they are easy to store and move, if necessary.

Small amounts can also be put on the market at a time to avoid alerting authorities.

As a result, much of the network's money has eluded a worldwide effort to cut off terrorist financing, the Post reports.

International efforts

US President George Bush ordered a clampdown on terrorist financing after 11 September, blocking the bank accounts linked to a dozens of groups and individuals.

The UN and EU backed move resulted in the freezing of more than $100m worth of alleged terrorist funds around the world.

But since February, much has been unfrozen because of lack of evidence, the Post said.

More than $100m in alleged terrorist funds was frozen

All 189 UN members were supposed to file reports on their compliance with a Security Council resolution to crack down on terrorist funding, but only 43 have done so.

Of those, more than half said they found no terrorist funds to freeze at all.

The efforts to track al-Qaeda's cash flow have also been hindered by a lack of co-ordination between various US agencies such as the Central Intelligence Agency, the Federal Bureau of Investigation, and the Treasury and Justice departments, the paper reported.