Quotes of the Day

You'd never guess from the plaintive tone that the man being interrogated is supposed to be one of the world's most dangerous terrorists. Even through a fog of bureaucratic paraphrasing, Riduan Isamuddin—better known as Hambali—appears a very unhappy man. And that's not just because his capture on Aug. 11 in central Thailand delivered him into the hands of his mortal enemy, the U.S. Or that he is facing the prospect of a lifetime behind bars. No, what really seems to bother the 39-year-old Indonesian is that Jemaah Islamiah (JI), the regional network of militant Islamic groups he spent the past decade building up, is now collapsing. That, at least, is his claim, according to records Time has obtained, which summarize the interrogations of Hambali and two of his closest companions.

In a lengthy interrogation session on Aug. 22, Hambali—the man believed to be ultimately responsible for many other bombings across Southeast Asia that have claimed hundreds of lives—complains that JI is in a "very bad" state. "The captive [Hambali] kept insisting that JI was breaking down because of those who had been captured," an anonymous interrogator writes. In addition, Hambali laments, "all the group's savings have been lost to raids and arrests," and "JI is now totally dependent on al-Qaeda for money." In short, says the interrogation summary, JI is essentially "destroyed."

That is an astonishing claim from the man widely believed to have been JI's chief operational commander. It also contradicts what many intelligence officials and analysts assert: that JI has been wounded but remains extremely dangerous. Those same officials warn that the process of separating truth from deliberate misdirection when interrogating such experienced operatives as Hambali is far from easy. Indeed, the American intelligence agents who authored the documents for distribution to senior intelligence and police officials around the region repeatedly remind their readers how slippery Hambali is, prefacing the summaries of each day's interrogation with the same warning: "The following comments came from a senior al-Qaeda prisoner, and could be designed to influence as well as inform. The prisoner may also deliberately withhold information and practice counter-interrogation techniques."

The question of how potent Asia's terrorist networks remain is particularly resonant now, on the eve of the first anniversary of the Oct. 12, 2002, Bali bombings. In the year since the Bali attack, Asian and U.S. security forces have won many battles in the region's war on terror. Police have arrested hundreds of alleged JI operatives across Asia, including the main perpetrators of the Bali blasts and the suspects in the Aug. 5 bombing of Jakarta's JW Marriott hotel. Intelligence agencies in various Southeast Asian countries are also proving more adept at sharing information: Hambali's arrest came after Thai security officials and U.S. intelligence operatives acted on information provided by Malaysian authorities.

Yet experts fear the terror threat in Asia remains as high as ever. Despite JI's clear record of agitation in Indonesia, Jakarta has yet to formally acknowledge the network's existence, largely out of fear of offending the country's Muslim political parties. Al-Qaeda and Taliban fighters have found refuge in Pakistan's lawless tribal areas and are staging deadly cross-border raids into Afghanistan. Cooperation among different countries, though improving, is still hampered by distrust.

Reading between the lines of Hambali's confession, it's clear how much trouble JI is still capable of causing. It retains strong links to al-Qaeda and—at least until Hambali's arrest—had access to large amounts of its cash. What's more, JI operatives are still receiving training in secret locations in Asia and JI can continue to count on a steady supply of disaffected, angry young Muslims ready to kill and die as jihadis. "When you fight terrorism you cannot arrest or kill one or two people, however important they are," says Rohan Gunaratna, author of the book Inside al-Qaeda. "You must criminalize the group, go after their propaganda, their financing, their safe houses and their training facilities. You must target the whole organization, not just one or two people—that's useless."

WHO'S THE BOSS?

One of the key insights gleaned from the interrogation of Hambali—who Time has found out is being held on a joint American-British air base on the remote Indian Ocean island of Diego Garcia—is that the ties between al-Qaeda and JI are even stronger than previously believed. It's particularly revealing that the two aides arrested with Hambali were the Malaysians Mohamad Farik Amin, alias Zubair, and Bashir bin Lap, whose nom de guerre was Lilie. As Hambali himself notes in his confession, neither Zubair nor Lilie are JI members. Rather, they are al-Qaeda operatives who were originally members of a four-man, all-Malaysian suicide squad that pledged a direct oath of fealty to Osama bin Laden to die for the cause. "Lilie stated that bin Laden discussed their commitment to Allah with the group," the interrogator's summary states, "and told them that their duty was to suffer."

Hambali says he recruited the four members of the cell on behalf of Khalid Shaikh Mohammed, the alleged mastermind of 9/11 who was al-Qaeda's military commander until his March 1 arrest in Pakistan. Mohammed—known within al-Qaeda as Mukhtar, an Arabic title meaning headman—told Hambali that the cell's mission involved hijacking a plane. In the end, the hijacking never happened. But Hambali's recollection of these plans shows once again how closely interlinked JI and al-Qaeda had become.

In their confessions, Hambali and his two al-Qaeda lieutenants Zubair and Lilie describe in chilling detail how they spent months exploring targets in Thailand. The U.S. and British embassies in Bangkok, as well as several nightclubs in tourist hot spots such as Phuket and Pattaya, were all cased. This March, according to Zubair, the group also surveyed the facilities at Bangkok's Don Muang airport, specifically the check-in counter for flights to Israel. Zubair reported that the ticket counter was well guarded by Thai police. He also said that though he could spot the parked Israeli planes from a passing bus, they were protected by a high fence, making an attack impractical.

Another Bangkok target that was studied carefully was an Israeli-owned restaurant and travel agency near famed backpacker district Khao San Road, called United Traveler's Connection, which displays a large Star of David above a sign in English and Hebrew. According to the interrogation summaries, Hambali called off the strike only when Lilie told him there was a police station nearby. A Thai intelligence official says the three men then turned their attention to the JW Marriott hotel in downtown Bangkok, which may have been saved from attack by Hambali's capture. "They had identified it as a weak spot," says the official. "They were looking for explosives."

SHOW ME THE MONEY

"I am starting a business and I need capital," read the message sent via e-mail from a computer in Indonesia to Thailand in late May. The author of the e-mail, Malaysian Azahari bin Husin, had no doubt his message would be understood. Within weeks, Azahari, an expert in explosives and a top JI operative who is now on the lam, received $45,000 from Hambali. The money was hand-delivered through a chain of couriers stretching from Thailand, through Malaysia and into Indonesia. Along with this cash, Hambali sent a message instructing Azahari to set aside $15,000 for the families of the Bali bombers, and to use the rest to help fund his "business"—the bombing of Jakarta's JW Marriott.

In the war on terror, no challenge is greater than halting the flow of money to fund such attacks. And yet, as this anecdote from Hambali's interrogation transcript shows, Hambali still had access to large amounts of cash and the ability to move it swiftly across the region even while he was on the run. "He did it all through couriers," observes a regional intelligence official, "and it's almost impossible to stop. It's an issue we need to look at more closely."

As Hambali's confession suggests, JI's ability to cause havoc has stemmed in large part from its financial ties to al-Qaeda. Hambali says almost all JI funding for more than a year came directly from al-Qaeda military commander Mohammed. Regional intelligence officials believe that at one point in 2002 Hambali had as much as $500,000 in his jihad fund, which he used, according to Zachary Abuza, an expert on terrorism, "to support the cost of travel to and training of members in al-Qaeda camps in Afghanistan and the Philippines, and to purchase arms and explosives and subsidize JI-run madrasahs." Hambali says that al-Qaeda money helped fund the Bali bombings as well as the attack on the JW Marriott. Alarmingly, Hambali told his captors that JI militants in Indonesia and the Philippines have been sent $70,000 since June to fund terrorist strikes. Because bombing the JW Marriott wouldn't have cost much, intelligence officials believe tens of thousands of dollars are still in JI hands for future operations.

In some cases, charities have been used directly by al-Qaeda to funnel money into JI's hands. In May, a Saudi-funded charity in Cambodia was closed after a joint U.S.-Cambodian investigation detected large sums of money deposited into the charity's bank account. "We're talking about huge inflows of cash here," says a senior diplomat in Phnom Penh. "Amounts so large they set alarm bells ringing all over the place." One of the men arrested at the charity, Thai national Abdul Azi, has admitted to police that he knew Hambali and had helped him hide out in Cambodia earlier this year. A senior official at Cambodia's Interior Ministry told Time that Azi was "was in charge of accounts for Hambali [in Cambodia]. The two had a close relationship." Azi, says a Thai intelligence official, also had links to four Thai JI members arrested in Thailand in June.

The closure of this one charity in Cambodia was a useful but rare victory. For the most part, say regional-terrorism experts, efforts to shut off the financing of terror in Asia remain woefully incomplete. "Money is the terrorist's lifeblood," says Gunaratna. "It is the difference between big and small operations, between many people dying and just a few. Going after the financing is absolutely critical."

YOUNG GUNS

Meanwhile, JI appears to have little trouble attracting new recruits. Indonesia has yet to take action against the handful of pesantren, or Muslim boarding schools, that have been breeding grounds for future terrorists, and young Muslim men are still making their way to similar institutions in countries such as Pakistan to be imbued with jihadist fervor. A fortnight ago, a group of 17 Indonesians and Malaysians was arrested in the country on suspicion of involvement with terrorist activities. "We still don't have a clear idea of the extent of the Indonesian presence in Pakistan," says Sidney Jones, a Jakarta-based expert on JI. "But there are hundreds upon hundreds of students there who are potential recruits."

One of those arrested in Pakistan was Hambali's younger brother, 26-year-old Rusman (Gun Gun) Gunawan. He and the others who were detained insist they were attending school in the country merely to get a religious education. Yet in his confession, Hambali himself fingers Gunawan as one of his chief conduits to al-Qaeda. Gunawan, a student at Abu Bakr University in Karachi, acted for a year-and-a-half as a messenger between Hambali and his al-Qaeda contacts, Hambali says. "After giving some phone numbers and addresses to his brother or vice versa," says the interrogator's report, "al-Qaeda's operatives began to make direct contact with the captive's messenger and made specific operational actions/transactions, including money transfers." Though no charges have been filed against Gunawan, Western diplomats and Pakistani officials claim he may in fact have been plotting a terrorist action and not simply serving as an alleged courier. "He and the others were arrested to prevent a major disaster," says Aftab Ahmed Shaikh, an adviser to the Home Minister of Sindh province.

Likewise, the Philippines remains another potential terrorism hotbed where JI appears to have made important inroads. Hambali estimates that a "large number of members of Jemaah Islamiah Indonesia are hiding in the Philippines and supporting the MILF." The Moro Islamic Liberation Front, which is fighting for an independent Muslim state in Mindanao in the southern Philippines, denies it has ties to JI or al-Qaeda, but regional intelligence officials say JI operatives continue to train in MILF-protected camps. Hambali lends credence to suspicions that such ties exist between the MILF and JI: he told his interrogators that he sent about $27,000 to the MILF as recently as June.

THE NEXT BOMB

With Asia's terrorist networks still clearly in place, the threat of further attacks seems undiminished. Hambali himself concedes that JI remains formidable in Indonesia, where it has "always found strong support at the grassroots level." Even more troubling, interrogations of captured militants have led Indonesian police to conclude that JI operatives are in possession of up to 300 kilos of explosives already largely assembled as bombs and ready for quick use. "There are two bombs still out there," says police general I Made Mangku Pastika, who led the successful Bali investigation. "One of them is a vest bomb. We are worried about this. Frankly, we don't know where they are. They could be anywhere."

There is also the risk of complacency—and sheer exhaustion—setting in as the tedious but vital war on terror drags on. From border checkpoints to embassies, from airports to hotels, it can be hard to ensure that the people on the front lines continue to sustain the heightened state of alertness produced by the devastation in Bali. "People need to be reminded every three or six months" about the threat of terrorism, says Tan Guong Ching, permanent secretary at Singapore's Ministry of Home Affairs, which oversees domestic security. "It is not a war in the conventional sense." A Western diplomat based in Asia echoes that sentiment: "In 2001 and last year, it felt like war. Now it's just a grind. It's going to require a sustained commitment and hard work to keep going. But it's really the only way." Words to live by. Literally.

• Simon Elegant and Andrew Perrin
• One year after the carnage of Bali, a top terrorist's confessions suggest Asia is as vulnerable as ever