THREE years ago, an Islamic charity in Saudi Arabia gave 10m riyals ($2.7m) to an Afghan religious scholar to build a mosque, two football-fields and a school in a rural area just outside Quetta, a city in Pakistan close to the border with Afghanistan. When the charity checked the project recently, says Nawaf Obaid, a Saudi analyst, it found that nothing had been bought except a piece of barren land with rubbish on it. Most of the money had disappeared, along with the Afghan scholar. The charity fears that it found its way to the Taliban and to al-Qaeda terrorists.

People trying to track down al-Qaeda's money believe that charities are terrorists' biggest source of money. The problem arises, says David Aufhauser, general counsel of America's Treasury Department, partly because charities have outposts in areas of conflict: their networks reach out to what he calls the world's “breeding-grounds for terrorists”.

So far, though, America has confined most of its actions against charities to its own turf. Prosecutors recently charged a Yemeni cleric, alleging that he had used collections from a mosque in Brooklyn to finance al-Qaeda. In February the head of Benevolence International Foundation, a Chicago-based charity, pleaded guilty to diverting money to help Chechens to fight Russians and Bosnian Muslims to fight Serbs. America has frozen the assets of more Islamic charities, including two of the biggest in the country, the Global Relief Foundation, also in Illinois, and the Holy Land Foundation for Relief and Development, in Texas.

Tackling charities overseas, particularly in the Middle East and South-East Asia, is far harder. During the cold war, charities and private donors in Saudi Arabia and elsewhere gave money to the mujahideen in Afghanistan to fight Soviet troops. Al-Qaeda is thought to have taken over some of that financing network. Saudi charities are now trying to account for the money they have sent abroad in the past few years, says Mr Obaid. He reckons that some $40m-58m has gone astray.

Bowing to pressure from America, the Saudi government has introduced controls. Charities must co-ordinate all overseas donations with the foreign ministry, and a new oversight body has been established. Such moves are encouraging, says Mr Aufhauser, “but we want further assurance that there are real plans with real consequences on the ground.”

The next stage for America and its allies is to go and evaluate those consequences on the ground—in Saudi Arabia and elsewhere. In October 2001 the Financial Action Task Force (FATF), a global body set up to fight money laundering, published eight recommendations to combat terrorist financing and said it would start a process in June 2002 to take counter-measures against countries that flouted them. The FATF and the counter-terrorism committee of the UN are poised to send people out to check what countries are doing. America and its allies at the FATF have to decide where to visit first. “If we used an alphabetical list going backwards from Z,” jokes one official who is designing the process, “we could quickly get to Yemen, the United Arab Emirates and Saudi Arabia.”

If charities were to keep a closer eye on their money, a crucial source of terrorist finance could be whittled down. Many of the measures needed are quite simple. The FATF says, for instance, that charities should make field trips to verify that their money is being used properly. But the FATF and UN will not, officially, check up on charities when they visit countries, because the FATF's pronouncements on the subject are too vague to be used as a standard against which countries can usefully be judged.

Members of the FATF cannot agree even on what a charity is, and they also tend to think their own regulatory systems are best. Britain believes its Charity Commission is superior to anything in America, where charities are overseen chiefly for tax purposes. An American official boasts that “we're light years ahead of the rest of the G7.” In parts of Europe, she says, many charities are not even registered.

More profoundly, America and Europe disagree over which organisations charities should be allowed to support. The United States regards both the military and political branches of Hamas, a Palestinian Islamist movement, and Hizbullah, a Lebanese-based political and military group as terrorists. Britain and some European countries consider only their military arms as terrorists.

Most of the charities investigated so far have been Islamic, although the FATF's push will apply to all. America's Department of Justice has received and may now be investigating a report passed on from the State Department that a charity in Maryland funds affiliates of Rashtriya Swayamsevak Sangh (RSS), a militant Hindu group linked to the killing of Muslims in Gujarat last year. Britain's Charity Commission recently started investigating a charity, Hindu Swayamsevak Sangh, for links to extremist groups.

One financier of terrorism on America's list, says a British official, began by donating money strictly for refugees. It was only later that he took the step of giving to a charity that passed the funds to terrorists. A possible consequence of war against Iraq, says the official, an action that is unpopular in much of the Middle East, is that people who are today too fastidious to finance terrorism may be readier to do it tomorrow. Whether or not that happens, says Mr Aufhauser, “there is no excuse for giving money to kill people.”