June 14, 2007
HP-458

Fact Sheet: Targeted Financial Measures to Protect our National Security

"Treasury's strategy uses conduct-based, intelligence-grounded, targeted financial measures to harness the power of the private sector and form the basis of multilateral coalitions, adding an innovative financial dimension to our national security effort."

"The challenge and importance of protecting the integrity of our global financial network have never been greater. Our financial system also presents us with enormous opportunities because technology and integration have made it more difficult for anyone using the financial system to hide. Illicit actors who otherwise try to avoid detection often use the formal financial system because there is no good alternative and, in many cases, no alternative at all.

These transactions typically leave a trail of detailed information which we can follow to identify key actors and their networks. The starting point for Treasury's approach to targeted financial measures is information. And the global financial system is a rich source of the information we need. Recognizing this, Congress and the President have provided an expanded set of tools that allow innovative and more focused uses of financial intelligence. These targeted financial measures are proving to be quite effective… We have based our actions on clear evidence and encouraged the private sector and other nations to follow suit.

These measures have also led to a base of international, private sector support. When we use reliable financial intelligence to build conduct-based cases, it is much easier to achieve a multilateral alignment of interests. It is difficult for another a nation, even one which is not a close political ally, to disagree with targeted measures to isolate actors who are demonstrably engaged in conduct that threatens human rights or global security. And multilateral support is critical to the success of financial measures in today's world. "

"Treasury continues an intensive effort to track and disrupt terrorist financing that has been effective on several levels. This effort has involved government-wide cooperation, applying law enforcement, military, intelligence, and financial tools depending on the target and situation. While individual terrorist attacks may be inexpensive to carry out, global terrorist groups need large sums of money to pay operatives, to recruit and train members, to acquire false documents and travel. By exploiting the financial intelligence generated by that activity and combining it with other available information, we have made progress in mapping these terrorist networks."

– Treasury Secretary Henry M. Paulson, Jr.

Since September 11, 2001, Treasury has engaged in a more focused effort against global terrorist threats, beginning with a September 23, 2001 Executive order that authorized the identification and designation of terrorists and their facilitators worldwide.

• When the United States designates a terrorist supporter, U.S. entities and persons – wherever located – must freeze the target's assets, block all transactions, and stop conducting business with the designated entity.
• The Treasury's Office of Foreign Assets Control has designated 470 individuals and entities as terrorists, their financiers or facilitators, since Executive Order 13224 was issued.
• Over 40 of these designations have targeted charities, exposing and disrupting a conduit used by groups such as al Qaida, Hamas, Palestinian Islamic Jihad and Hizballah to funnel funds and exploit charitable giving to advance terrorism.
• The U.S. designated Adel Batterjee, one of the world's leading terrorist financiers, who employed his private wealth and a host of charitable fronts to fund al Qaida.  Following the U.S. action, the United Nations followed suit, leading to a worldwide freeze of his assets, including in his home country of Saudi Arabia.

These designations often make an impact beyond their legal reach, as many banks around the world screen their customers and transactions against the U.S. list of designated terrorist supporters, even though they are not obligated to do so.

Treasury cut off Iran's Bank Saderat from the U.S. financial system in September 2006, due to its facilitation of transactions flowing from Iran to Hizballah, Hamas, and other terror groups.

The USA PATRIOT Act of 2001 amended the Bank Secrecy Act to strengthen the anti-money laundering (AML) controls of U.S. financial institutions, with new safeguards to counter terrorist financing and other illicit financial activity.

• The Act gives Treasury expanded authority to regulate the financial services community and share information with partners in the financial sector.
• Section 311 of the PATRIOT Act authorizes the Treasury to protect the U.S. financial system from abuse from foreign jurisdictions, banks, or classes of transactions that are found to be of "primary money laundering concern."

The Treasury Department has coupled its domestic actions with coordinated multilateral efforts and engagement of the international financial community. Through bilateral cooperation and multilateral action by the United Nations, more than 170 countries have implemented blocking orders to freeze the assets of terrorists.

• These authorities allow the United States to effectively implement our international obligations under United Nations Security Council Resolutions 1267 and 1373, which respectively target the networks supporting al Qaida, the Taliban, Usama bin Laden, and global terrorists.

"The targeted financial measures used against terrorists and their supporters are likely to be as effective in combating proliferation networks. Those who participate in a proliferation transaction because of profit, rather than ideology, are susceptible to being deterred from such transactions if we can credibly threaten to publicly expose and isolate them."

– Treasury Secretary Henry M. Paulson, Jr.

In 2005, President Bush issued a new Executive order authorizing Treasury to target proliferators and their support networks in the same way terrorists and their supporters are targeted.

• A designation under Executive Order 13382 freezes any assets the designee may have under U.S. jurisdiction, denies the targeted entities access to the U.S. financial and commercial systems and puts the international community on notice about the threat posed to global security.
• These prohibitions have a powerful effect, as the financiers and facilitators of proliferation networks tend to have commercial presences and accounts around the world that make them vulnerable to exactly this kind of financial action. 

Since E.O. 13382 was issued, the Treasury Department has designated 41 proliferators and their supporters involved in North Korean, Syrian and Iranian proliferation efforts.

As a result of Treasury's outreach and targeted measures, financial institutions around the world are more sensitive than ever about the very substantial risks posed by doing business with Iran.

Treasury has also designated several North Korean entities involved in weapons programs. And even greater impact has come from the information made public in conjunction with these actions. Worldwide, private financial institutions decided to terminate their business relationships with the designated entities as well as others suspected of engaging in similar conduct. The result is North Korea's virtual isolation from the global financial system.

These multilateral efforts have yielded critical success in the fight against proliferation financing.

• United Nations Security Council Resolution 1540 calls on all states to develop and implement authorities to combat proliferation, including by denying proliferators and their supporters access to the financial system.
• North Korea: The Security Council has required specific financial action against North Korean proliferators. United Nations Security Council Resolutions 1695 and 1718 obligate states to prevent the flow of financial and economic resources to, and freeze the assets of, entities involved or supporting North Korean WMD and missile proliferation.
• These financial measures are part of a wider campaign to change North Korean behavior, including the State Department-led effort to bring about a denuclearized Korean Peninsula.
• Iran: The United States and our allies worked together to unanimously pass United Nations Security Council resolution 1747 on March 27, 2007 to blacklist Bank Sepah.  Resolution 1747 reaffirms and expands UN Security Council Resolution 1737 of December 2006. These resolutions target Iran's nuclear and missile programs, and among other requirements, obligate states to freeze the assets of named entities and individuals associated with those programs. Now the entire world must freeze Bank Sepah's assets, and isolate it from the global financial system.

"One of the greatest challenges of this century will be to keep the most dangerous weapons out of the hands of dangerous people. As I travel and meet with my colleagues in finance ministries around the world, everyone acknowledges that we must find effective ways to deal with these threats, short of military measures. Yet other nations are not moving quickly enough to accomplish this goal."

– Treasury Secretary Henry M. Paulson, Jr..

Since 9/11, terrorists have struck a number of cities around the world, including London, Madrid, Jakarta, Mumbai, Amman, Bali and Istanbul. Several of our allies who support the global effort against terrorism have yet to take basic steps, such as adequately criminalizing money laundering and terrorist financing.

"Specifically, nations must implement the laws necessary to give their finance ministries the authority to access and use intelligence, and they must move to integrate financial and security functions. And, these authorities must be available for use against terrorist financing, money laundering and the dangerous, emerging practice of proliferation financing.

My finance ministry counterparts and I have the same responsibility: to broaden our role beyond economic stewardship and become valuable contributors to help ensure our countries' and our citizens' security. In performing these dual roles we seek essentially the same end: preserving the global financial system's integrity, which will enhance economic security and prosperity for people around the world."