"He was watching the bombing," Hanning told CNN in an exclusive interview. "I know this," Hanning told CNN without elaborating on his source of information.
After bin Laden escaped from the mountain in December 2001 Hanning said he had agents feeding him information about the al Qaeda's chief's movements.
Frustratingly however, their information never led to actionable intelligence that would have allowed Western agencies to move against al Qaeda's leader.
"We have got information always on where he was. And that's the problem -- days, week later. But he was present there. He hadn't left the region," Hanning told CNN.
Hanning says that after bin Laden escaped from Tora Bora the search for al Qaeda's leader became much harder.
It was an opportunity the international community and the United States in particular have good reason to regret. His assessment of bin Laden's ability to inspire and lead today might make him more dangerous today than back then.
"I knew there was a chance in Afghanistan I think immediately before Tora Bora and in Tora Bora ... I think there was a real opportunity to catch him and afterwards in Pakistan it became very difficult," Hanning told CNN.
"He's not operational but I think he knows the basics. He makes strategic decisions, and of course he's a symbolic figure and figures are important. "
Hanning, who was appointed State Secretary in the German Federal Interior Ministry at the end of 2005 -- one of the country's most senior counter-terrorism positions -- retired late last year.
He says he agrees with recent comments by an unnamed senior NATO official to CNN last month that bin Laden is alive and well in Pakistan.
"I think there are still a lot of hints that he is in Pakistan, and according to my estimates he is in the tribal areas in the region near Peshawar: the border region between Pakistan and Afghanistan," Hanning told CNN.
Pakistani officials consistently deny bin Laden's presence on their soil. Hanning believes rogue elements in their intelligence service, the ISI, are hiding him.
"It's hard for me to believe that they know nothing," he said, and in some ways the al Qaeda leader is useful to Pakistan. "So long [as] bin Laden is in Pakistan so Pakistan will get support from the Americans' fight against terrorism."
And Pakistan would be in a bind if bin Laden were caught, because to some Pakistanis he is a hero. "If he were caught the Pakistani government would be in a very difficult situation, because the Americans would ask the Pakistanis to extradite him."
Hanning believes bin Laden's presence in Pakistan is one of the United States' most delicate diplomatic problems and one that needs to be solved before U.S. troops can safely withdraw from Afghanistan -- because given the chance al Qaeda would return to Afghanistan.
"If they would have the opportunity to operate in Afghanistan they would use this opportunity as well," Hanning said -- because al Qaeda's assumption is that once Western troops were withdrawn it would be difficult for them to return.
It is a problem that would become more pressing if serious negotiations between the Afghan government and the Taliban developed. Hanning and other intelligence officials believe it would be difficult for the Taliban to abandon Osama bin Laden because of his stature as a leader of global jihad.