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2005. 

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Report to Congressional Requesters: 

October 2005: 

TERRORIST FINANCING: 

Better Strategic Planning Needed to Coordinate U.S. Efforts to Deliver 
Counter-Terrorism Financing Training and Technical Assistance Abroad: 

[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-06-19]: 

GAO Highlights: 

Highlights of GAO-06-19, a report to congressional requesters: 

Why GAO Did This Study: 

Terrorist groups need significant amounts of money to organize, 
recruit, train, and equip adherents. U.S. disruption of terrorist 
financing can raise the costs and risks and impede their success. This 
report (1) provides an overview of U.S. government efforts to combat 
terrorist financing abroad and (2) examines U.S. government efforts to 
coordinate training and technical assistance. We also examined specific 
accountability issues the Department of the Treasury faces in its 
efforts to block terrorists’ assets held under U.S. jurisdiction. 

What GAO Found: 

U.S. efforts to combat terrorist financing abroad include a number of 
interdependent activities—terrorist designations, intelligence and law 
enforcement, standard setting, and training and technical assistance. 
First, the U.S. government designates terrorists and blocks their 
assets and financial transactions and supports similar efforts of other 
countries. Second, intelligence and law enforcement efforts include 
operations, investigations, and exchanging information and evidence 
with foreign counterparts. Third, U.S. agencies work through the United 
Nations and the Financial Action Task Force on Money Laundering to help 
set international standards to counter terrorist financing. Fourth, the 
U.S. government provides training and technical assistance directly to 
vulnerable countries and works with its allies to leverage resources. 

The U.S. government lacks an integrated strategy to coordinate the 
delivery of counter-terrorism financing training and technical 
assistance to countries vulnerable to terrorist financing. 
Specifically, the effort does not have key stakeholder acceptance of 
roles and procedures, a strategic alignment of resources with needs, or 
a process to measure performance. First, the Department of Treasury 
does not accept the Department of State leadership or the State-led 
Terrorist Financing Working Group’s (TFWG) procedures for the delivery 
of training and technical assistance abroad. While supportive of the 
Department of State’s role as coordinator of TFWG efforts, the 
Department of Justice officials confirmed that roles and procedures 
were a matter of disagreement. Second, the U.S. government does not 
have a clear presentation and objective assessment of its resources and 
has not strategically aligned them with its needs for counter-terrorist 
financing training and technical assistance. Third, the U.S. 
government, including TFWG, lacks a system for measuring performance 
and incorporating results into its planning efforts. 

The Treasury faces two accountability issues related to its terrorist 
asset blocking efforts. First, Treasury’s Office of Foreign Assets 
Control (OFAC) reports on the nature and extent of terrorists’ U.S. 
assets do not provide Congress the ability to assess OFAC’s 
achievements. Second, Treasury lacks meaningful performance measures to 
assess its terrorist designation and asset blocking efforts. OFAC is in 
the process of developing more meaningful performance measures aided by 
its early efforts to develop an OFAC-specific strategic plan. Officials 
stated that OFAC’s new performance measures will be completed by 
December 1, 2005, and its strategic plan will be completed by January 
1, 2006; however, they did not provide us with documentation of 
milestones or completion dates. 

What GAO Recommends: 

GAO recommends that the Secretaries of State and the Treasury implement 
an integrated strategic plan and a Memorandum of Agreement for the 
delivery of training and technical assistance. Congress should also 
consider requiring the Secretaries of State and the Treasury to report 
the status of that implementation. State disagreed with our 
recommendations for an integrated strategy and Memorandum of Agreement. 
Treasury did not directly address these recommendations. While Treasury 
did not disagree with implementing an integrated strategic plan, it 
limited the plan’s coverage to priority countries. We make additional 
recommendations to Treasury concerning Treasury’s terrorist asset 
blocking efforts with which Treasury did not agree. 

www.gao.gov/cgi-bin/getrpt?GAO-06-19. 

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact Loren Yager at (202) 512-
4347 or yagerl@gao.gov. 

[End of section] 

Contents: 

Letter: 

Results in Brief: 

Background: 

U.S. Efforts to Combat Terrorist Financing Abroad Include a Number of 
Interdependent Activities: 

U.S. Government Lacks Integrated Strategy to Coordinate the Delivery of 
Training and Technical Assistance: 

Treasury Faces Two Accountability Issues Related to Its Terrorist Asset 
Blocking Efforts: 

Conclusions: 

Recommendations for Executive Action: 

Matter for Congressional Consideration: 

Agency Comments and Our Evaluation: 

Appendixes: 

Appendix I: Objectives, Scope, and Methodology: 

Appendix II: Key International Counter-Terrorism Financing and Anti- 
Money Laundering Efforts: 

Appendix III: Terrorist Financing Working Group Membership and Program 
Development Process: 

TFWG Membership: 

TFWG Program Development Process: 

Appendix IV: Key U.S. Counter-Terrorism Financing and Anti-Money 
Laundering Training and Technical Assistance for Vulnerable Countries: 

Appendix V: Comments from the Department of Justice: 

GAO Comments: 

Appendix VI: Comments from the Department of State: 

GAO Comments: 

Appendix VII: Comments from the Department of the Treasury: 

GAO Comments: 

Appendix VIII: GAO Contact and Staff Acknowledgments: 

Abbreviations:

ADB: Asian Development Bank: 

CTC: Counter-Terrorism Committee: 

FATF: Financial Action Task Force: 

FinCEN: Financial Crimes Enforcement Network: 

FIU: Financial Intelligence Unit: 

FSRB: FATF-Style Regional Body: 

GPRA: Government Performance and Results Act: 

ILEA: International Law Enforcement Academy: 

IMF: International Monetary Fund: 

NSC: National Security Council: 

OFAC: Office of Foreign Assets Control: 

OPDAT: Office of Overseas Prosecutorial Development, Assistance and 
Training: 

OTA: Office of Technical Assistance: 

TFFC: Terrorist Financing and Financial Crimes: 

TFWG: Terrorist Financing Working Group: 

UN: United Nations: 

Letter:

October 24, 2005: 

The Honorable Charles E. Grassley: 
Chairman: 
Caucus on International Narcotics Control: 
United States Senate: 

The Honorable Susan M. Collins: 
Chairman: 
Committee on Homeland Security and Governmental Affairs: 
United States Senate: 

The Honorable Richard J. Durbin: 
United States Senate: 

After the September 11, 2001, attacks, the United States and its allies 
quickly recognized the urgent need to detect, dismantle, and deter 
terrorist financing networks around the world. Disrupting terrorist 
financing can raise the terrorists' costs and risks of gathering and 
moving assets and is necessary to impede their ability to carry out 
significant operations. Terrorist financiers operate more easily in 
countries with systems that enable them to hide their efforts without 
difficulty. As the United Nations reports, more than ever before, 
security threats are interrelated and a threat to one country is a 
threat to all.[Footnote 1] No country by its efforts alone can make 
itself invulnerable to today's threats. It is in every country's 
interest, accordingly, to cooperate with other countries to address 
their most pressing threats, because doing so will maximize the chances 
of reciprocal cooperation to address its own threat priorities. 

You asked us to address specific U.S. efforts to combat terrorist 
financing abroad as a follow-up to our previous work[Footnote 2] on the 
nature and extent of terrorists' use of alternative financing 
mechanisms.[Footnote 3] In this report, we (1) provide an overview of 
U.S. government efforts to combat terrorist financing abroad and (2) 
examine U.S. government efforts to coordinate the delivery of training 
and technical assistance to vulnerable countries. In addition, you 
requested that we examine specific accountability issues the Department 
of the Treasury (Treasury) faces in its efforts to block terrorists' 
assets held under U.S. jurisdiction. 

In conducting our review, we examined documentation and interviewed 
officials from U.S. agencies, including the Departments of State, the 
Treasury, Justice, Homeland Security, and Defense, as well as from the 
intelligence community. We also assessed information from the United 
Nations (UN), Financial Action Task Force (FATF) on Money Laundering, 
World Bank and International Monetary Fund (IMF). We conducted field 
work in Pakistan, Indonesia, and Paraguay.[Footnote 4] At these 
locations, we assessed information from government, law enforcement, 
nongovernmental organizations, regional organizations, and donor 
government officials, as well as U.S. embassy officials. Although we 
requested a meeting, we did not obtain access to the National Security 
Council (NSC), which is responsible for the overall coordination of the 
interagency framework for combating terrorism including the financing 
of terrorist operations. However, the U.S. agencies provided the 
necessary information that we needed to conduct our work and support 
our findings, conclusions, and recommendations. We performed our work 
from April 2004 to July 2005 in accordance with generally accepted 
government auditing standards. For further details about our scope and 
methodology, see appendix I. 

Results in Brief: 

U.S. government efforts to combat terrorist financing abroad include a 
number of interdependent activities--terrorist designations, 
intelligence and law enforcement, standards setting, and training and 
technical assistance. First, the U.S. government designates terrorists 
and blocks their assets and financial transactions and supports similar 
efforts of other countries. Second, U.S. intelligence and law 
enforcement conduct operations, investigations, and exchange 
information and evidence with each other and their respective 
counterparts abroad. Third, U.S. agencies work primarily through two 
international entities, the UN and the intergovernmental FATF on Money 
Laundering, to help set international standards to counter terrorist 
financing efforts. Fourth, the U.S. government provides training and 
technical assistance directly to vulnerable countries and works with 
its allies to leverage resources for those efforts. 

The U.S. government lacks an integrated strategy to coordinate the 
delivery of counter-terrorism financing training and technical 
assistance to countries it deems vulnerable to terrorist financing. 
Specifically, the effort does not have key stakeholder acceptance of 
roles and procedures, a strategic alignment of resources with needs, or 
a process to measure performance. First, Treasury, a key stakeholder, 
does not accept the Department of State's (State) position that it 
leads all U.S. counter-terrorism financing training and technical 
assistance efforts to vulnerable countries. State's position is based 
on NSC guidance. Moreover, disagreements continue between some Treasury 
and State officials concerning State-led Terrorist Financing Working 
Group (TFWG) coordination for the delivery of training and technical 
assistance to priority countries--about two dozen of the most 
vulnerable countries. While supportive of a State role as coordinator 
of TFWG efforts, the Department of Justice (Justice) confirms that 
State's position as lead of training and technical assistance to 
countries beyond those listed as priority lacks recognition in 
practice. Further, Treasury does not agree with the TFWG procedures for 
coordinating the delivery of training and technical assistance abroad. 
Justice officials noted that having procedures that differ for TFWG 
priority countries and other vulnerable countries has created problems. 
Second, the U.S. government has not strategically aligned its resources 
with its needs to deliver counter-terrorism training and technical 
assistance to vulnerable countries. The U.S. government does not have a 
clear presentation of what funding is available for counter-terrorism 
financing training and technical assistance and TFWG has not assessed 
the suitability of available U.S. and international resources. Third, 
the U.S. government, including TFWG, does not have a system in place to 
measure the performance results of its delivery of training and 
technical assistance to vulnerable countries and to incorporate this 
information into its planning efforts. 

Treasury faces two accountability issues related to its terrorist asset 
blocking efforts. First, federal law requires Treasury to provide 
annual reports to Congress that describe the nature and extent of the 
terrorists' assets held in the United States; however, these reports do 
not provide the reader the ability to assess achievements made. These 
reports are prepared by Treasury's Office of Foreign Assets Control 
(OFAC). Second, Treasury lacks meaningful performance measures to 
assess its terrorist designation and asset blocking efforts. While 
Treasury has developed some limited performance measures, OFAC 
officials acknowledged that the measures could be improved and 
contribute to Treasury's overall goal of disrupting and dismantling 
terrorist financing networks. OFAC officials said they have initiated 
efforts to develop more meaningful performance indicators aided by 
efforts to develop an OFAC-specific strategic plan. In Treasury's 
technical comments on our draft report, officials stated that they 
expect OFAC's new performance measures to be completed by December 1, 
2005, and its new strategic plan to be completed by January 1, 2006; 
however, they did not provide us with documentation of milestones or a 
completion date. 

In this report we recommend that the Secretary of State and the 
Secretary of the Treasury, in consultation with NSC and relevant 
government agencies, develop and implement an integrated strategic plan 
for the U.S. government to coordinate the delivery of training and 
technical assistance that includes stakeholder involvement, an 
alignment of resources with needs, and a process to measure performance 
and use results. We further recommend that the secretaries of State and 
of the Treasury enter into a Memorandum of Agreement to ensure a 
seamless campaign in providing counter-terrorism financing training and 
technical assistance programs to vulnerable countries. We also 
recommend that the Secretary of the Treasury provide more complete 
information on the nature and extent of asset blocking in the United 
States in its annual Terrorist Assets Report to Congress and complete 
its efforts to develop an OFAC-specific strategic plan and meaningful 
performance measures by January 1, 2006, and December 1, 2005, 
respectively, to guide and assess its asset blocking efforts. In 
addition, Congress should consider requiring that the Secretary of 
State and the Secretary of the Treasury submit an annual report to 
Congress on the status of the development and implementation of the 
integrated strategic plan and Memorandum of Agreement for the delivery 
of training and technical assistance. 

State disagreed with our recommendations for the development and 
implementation of an integrated strategy and Memorandum of Agreement 
concerning the coordination of the delivery of training and technical 
assistance, stating that they already have documents that serve as an 
integrated strategy and an interagency agreement. Treasury did not 
directly address our recommendation for an integrated strategic plan or 
a Memorandum of Agreement. Treasury proposed a new title, "Integrated 
U.S. Strategic Plan Needed to Improve the Coordination of 
Counterterrorism Finance Training and Technical Assistance to Certain 
Priority Countries," which suggests agreement with the recommendation, 
but limits coverage of the integrated strategic plan to cover certain 
priority countries. Further, Justice stated that the fact that it was 
not included as an equal partner with State and Treasury in the 
recommendation and the Memorandum of Agreement was a critical omission. 
We do not agree that the documentation State provided constituted an 
integrated strategy because the effort, in practice, does not have key 
stakeholder buy-in on roles and practices, a strategic alignment of 
resources with needs, or a system to measure performance and use 
results and thus, an integrated strategy is still needed. Moreover, we 
continue to believe that the recommendation and Memorandum of Agreement 
should be directed to the Secretaries of Treasury and State because 
these agencies both primarily fund and support these efforts. 
Additionally, in response to our recommendation that the Secretary of 
the Treasury provide more complete information on the nature and extent 
of asset blocking in the United States in its annual Terrorist Assets 
Report to Congress, Treasury responded in its technical comments that 
we should "instead recommend that Congress consider discontinuing the 
requirement that Treasury produce the annual report altogether." We 
continue to believe that the reports, with incorporated changes, would 
be useful to policy makers and program managers in examining their 
overall achievements of U.S. efforts to block terrorists' assets. 

Background: 

Funds that support terrorist activity may come from illicit activities, 
such as counterfeit goods, contraband cigarettes, and illicit drugs, 
but are also generated through means such as fundraising by legal non- 
profit entities. According to State, it is the terrorists' use of 
social and religious organizations and, to a lesser extent, state 
sponsorship, which differentiates their funding sources from those of 
traditional transnational organized criminal groups. While actual 
terrorist operations require only comparatively modest funding, 
international terrorist groups need significant amounts of money to 
organize, recruit, train, and equip new adherents and to otherwise 
support their activities. 

Simply, the financing of terrorism is the financial support, in any 
form, of terrorism or of those who encourage, plan, or engage in 
it.[Footnote 5] Some international experts on money laundering continue 
to find that there is little difference in the methods used by 
terrorist groups or criminal organizations in attempting conceal their 
proceeds by moving them through national and international financial 
systems. These experts simply define the term "money laundering" as the 
processing of criminal proceeds to disguise their illegal origin in 
order to legitimize their ill-gotten gains. Disguising the source of 
terrorist financing, regardless of whether the source is of legitimate 
or illicit origin, is important to terrorist financiers. If the source 
can be concealed, it remains available for future terrorist financing 
activities. 

The President established a Policy Coordination Committee under the 
auspices of NSC to ensure the proper coordination of counter-terrorism 
financing activities and information sharing among all agencies 
including the departments of Defense, Justice, Homeland Security, 
State, and the Treasury, as well as the intelligence and enforcement 
community. Treasury's OFAC is the lead U.S. agency for administering 
economic sanctions, including blocking the assets of terrorists 
designated either by the United States unilaterally, bilaterally, or as 
a result of UN Security Council Resolution designations.[Footnote 6] 

The international community has acted on many fronts to conduct anti- 
money laundering and counter-terrorism financing efforts. For example, 
the UN has adopted treaties and conventions that once signed, ratified, 
and implemented by member governments have the effect of law and 
enhance their ability to combat money laundering and terrorist 
financing. FATF, an intergovernmental body, has set internationally 
recognized standards for developing anti-money laundering and counter- 
terrorism financing regimes and conducting assessments of countries 
abilities to meet these standards. In addition, the Egmont Group serves 
as an international network fostering improved communication, 
information sharing, and training coordination for 101 Financial 
Intelligence Units (FIU) worldwide.[Footnote 7] See appendix II for 
more information on key international entities and efforts. 

Countries vulnerable to terrorist financing activities generally lack 
key aspects of an effective counter-terrorism financing regime. 
According to State officials, a capable counter-terrorism financing 
regime consists of five basic elements: an effective legal framework, 
financial regulatory system, FIU, law enforcement capabilities, and 
judicial and prosecutorial processes. To strengthen anti-money 
laundering and counter-terrorism efforts worldwide, international 
entities such as the UN, FATF, World Bank and the IMF, as well as the 
U.S. government, agree that each country should implement practices and 
adopt laws that are consistent with international standards.[Footnote 
8] 

U.S. Efforts to Combat Terrorist Financing Abroad Include a Number of 
Interdependent Activities: 

U.S. government agencies participate in a number of interdependent 
efforts to address the transnational challenges posed by terrorist 
financing, including terrorist designations, intelligence and law 
enforcement, international standard setting, and training and technical 
assistance. 

U.S. Government Agencies Use Designations to Disrupt Terrorist 
Networks: 

U.S. agencies participate in global efforts to publicly designate 
individuals and groups as terrorists and block access to their assets. 
According to Treasury officials, international cooperation to designate 
terrorists and block their assets is important because most terrorist 
assets are not within U.S. jurisdiction and may cross borders. 
According to U.S. government officials, public designations discourage 
further financial support and encourage other governments to more 
effectively monitor the activities of the designated individual or 
organization. Importantly, designations may lead to the blocking of 
terrorist assets, thereby impeding terrorists' ability to raise and 
move funds and possibly forcing terrorist to use more costly, less 
efficient, more transparent, and less reliable means of financing. 

U.S. agencies led by State have worked with the UN to develop and 
support UN Security Council resolutions to freeze the assets of 
designated terrorists. For example, in October 1999, the Security 
Council adopted UN Security Council Resolution 1267, which called on 
all member states to freeze the assets of the Taliban, and in December 
2000, the Security Council adopted Resolution 1333, imposing targeted 
sanctions against Osama bin Laden and al Qaeda. Then, in response to 
the attacks of September 11, 2001, the UN Security Council adopted 
Resolution 1373, which required all UN member states to freeze funds 
and other financial assets or economic resources of persons who commit 
or attempt to commit, participate in, or facilitate terrorist acts. 
Later in January 2002 the UN Security Council adopted Resolution 1390, 
which consolidated the sanctions contained in Resolutions 1267 and 1333 
against the Taliban, Osama bin Laden, and al Qaeda. In July 2005, the 
Security Council adopted Resolution 1617, which extends sanctions 
against al Qaeda and the Taliban and strengthens previous related 
resolutions. The UN has listed over 300 individuals and over 100 
entities for worldwide asset blocks. Additionally, State's Bureau of 
International Organization Affairs ensures designations related to al 
Qaeda, the Taliban, or Osama bin Laden are made worldwide obligations 
through the UN Security Council Resolution 1267 Committee and helped to 
craft and aided the adoption of UN Security Council Resolution 1373 and 
assisted in the creation of the UN Counterterrorism Committee to 
oversee its implementation. The United States has also participated in 
bilateral efforts to designate terrorists. For example, as of July 
2005, the United States and Saudi Arabia jointly designated over a 
dozen Saudi-related entities and multiple individuals as terrorists or 
terrorist supporters, according to State. 

U.S. agencies including the Departments of Homeland Security (Homeland 
Security), Justice, State, and Treasury, and other law enforcement and 
intelligence agencies have implemented an interagency process to 
coordinate designating terrorists and blocking their assets. For 
example, State's Economic Bureau coordinates policy implementation at 
the working level, largely through the network of Terrorism Finance 
Coordinating Officers located at embassies worldwide. Through this 
interagency coordination, the agencies work together to develop 
adequate evidence to target individuals, groups, or other entities 
suspected of terrorism or terrorist financing. As the lead agency for 
the blocking of assets of international terrorist organizations and 
terrorism-supporting countries, Treasury's OFAC compiles the evidence 
needed to support terrorist designations conducted under the Secretary 
of the Treasury's authority. State's Office of the Coordinator for 
Counterterrorism follows the same process for terrorist designations 
conducted under the Secretary of State's authority.[Footnote 9] State's 
Bureau of International Organization Affairs may present this evidence 
to the UN for consideration by its members. According to a senior State 
official, the agencies work together on a regular basis to examine and 
evaluate new names and targets for possible designation and asset 
blocking and to consider other actions such as diplomatic initiatives 
with other governments and exchanging information on law enforcement 
and intelligence efforts.[Footnote 10] 

U.S. Government Agencies Conduct Intelligence and Law Enforcement 
Activities Across Borders: 

The U.S. strategy to combat terrorist financing abroad includes law 
enforcement techniques and intelligence operations aimed at identifying 
criminals and terrorist financiers and their networks across borders in 
order to disrupt and dismantle their organizations. Such efforts 
include intelligence gathering, investigations, diplomatic actions, 
sharing information and evidence, apprehending suspects, criminal 
prosecutions, asset forfeiture,[Footnote 11] and other actions designed 
to identify and disrupt the flow of terrorist financing. According to 
State, in order to achieve results, the intelligence community, law 
enforcement, and the diplomatic corps must develop and exploit 
investigative leads, employ advanced law enforcement techniques, and 
increase cooperation between domestic and foreign financial 
investigators and prosecutors. 

U.S. intelligence and law enforcement agencies work together and with 
foreign counterparts abroad, sometimes employing interagency or 
intergovernmental investigative taskforces.[Footnote 12] U.S. agencies 
work domestically and through their embassy attachés or officials or 
send agents on temporary duty to work with their foreign counterparts 
on matters of terrorist financing, including investigations. The 
Federal Bureau of Investigation is the lead domestic law enforcement 
agency on counter-terrorism financing and makes extensive contributions 
to law enforcement efforts abroad, including through their legal 
attachés. Homeland Security's Bureau of Immigration and Customs 
Enforcement attachés and agents conduct work in trade-based money 
laundering and transporting of cash across borders. The Internal 
Revenue Service's Criminal Investigation Division has an expertise in 
nonprofit organizations. The Drug Enforcement Administration focuses on 
the narcotics trafficking nexus. Moreover, Treasury's Financial Crimes 
Enforcement Network (FinCEN) is the U.S. government's FIU and, as such, 
serves as the U.S. government's central point for the collection, 
analysis, and dissemination of financial intelligence to authorized 
domestic and international law enforcement and other authorities. 
Financial intelligence is sent through secured lines among the FIUs 
belonging to the Egmont Group and shared with law enforcement as part 
of these investigations. 

U.S. Government Agencies Are Active Participants in International 
Standards Setting Efforts: 

The U.S. government has taken an active role in the development and 
implementation of international standards to combat terrorist 
financing. The UN conventions and resolutions and FATF recommendations 
on money laundering and terrorist financing have set the international 
standards for countries to develop the legal frameworks, financial 
regulation, financial intelligence unit, law enforcement, and 
judicial/prosecutorial elements of an effective counter-terrorist 
financing regime. Importantly, international cooperation is a 
cornerstone of these international standards. 

The United States has signed each of the relevant UN conventions and 
implemented its obligations pursuant to UN Security Council Resolutions 
related to anti-money laundering and counter-terrorism financing. 
According to State and Justice officials, they have provided training 
on implementing the conventions, and State officials have drafted UN 
Security Council Resolutions concerning terrorist financing. For 
example, according to State, officials from Treasury and State met with 
the UN Security Council Resolution 1267 Committee in January 2005 to 
detail U.S. implementation of the resolution's asset freeze, travel 
ban, and arms embargo provisions and proposed several ideas aimed at 
reinforcing current sanctions including enhancing the sanctions list, 
promoting international standards, and improving bilateral and 
multilateral cooperation. 

The U.S. government also plays a major role within FATF to draft and 
support international standards to combat terrorist financing. 
Treasury's Office of Terrorism and Financial Intelligence chairs the 
U.S. delegation to the FATF and has chaired or co-chaired several FATF 
working groups, such as the FATF Working Group on International 
Financial Institution Issues and the FATF Working Group on Terrorist 
Financing. Treasury also develops U.S. positions, represents the United 
States at FATF meetings, and implements actions domestically to meet 
the U.S. commitment to the FATF. Other components within Treasury, such 
as FinCEN, and other U.S. government agencies, including Homeland 
Security, Justice, and State, and the federal financial regulators, are 
also represented in the U.S. delegation to FATF. For example, according 
to department officials, the Department of Justice provided the initial 
draft for the original eight FATF special recommendations on terrorist 
financing. Additionally, Homeland Security gave significant input into 
Special Recommendation IX on Cash Couriers due to the department's 
expertise on detection of criminals' cross-border movements of cash. 
Moreover, the U.S. government supports efforts to ensure that countries 
take steps to meet FATF standards. As a member of FATF, the United 
States participates in mutual evaluations in which each member's 
compliance with the FATF recommendations is examined and assessed by 
experts from other member countries.[Footnote 13] Treasury also leads 
U.S. delegations to FATF-style regional bodies to assist their efforts 
to support implementation of FATF recommendations and conduct mutual 
evaluations. 

U.S. Government Agencies Provide Training and Technical Assistance to 
Vulnerable Countries: 

The U.S. strategy to combat terrorist financing abroad includes efforts 
to provide training and technical assistance to countries that it deems 
vulnerable to terrorist financing and focuses on the five basic 
elements of an effective anti-money laundering/counter-terrorism 
financing regime (legal framework, financial regulation, FIU, law 
enforcement, and judicial and prosecutorial processes). According to 
State, its Office of the Coordinator for Counterterrorism is charged 
with directing, managing, and coordinating all U.S. government 
agencies' efforts to develop and provide counter-terrorism financing 
programs. The NSC established the State-led interagency TFWG to 
coordinate the delivery of training and technical assistance to the 
countries most vulnerable to terrorist financing.[Footnote 14] These 
countries are known as priority countries of which there are currently 
about two dozen.[Footnote 15] According to State's Office of the 
Coordinator for Counterterrorism, foreign allies inundated the U.S. 
government with requests for assistance; therefore, TFWG developed a 
process to prioritize the use of limited financial and human resources. 
Although other vulnerable countries may be assisted through other U.S. 
government programs as well as through TFWG, according to State, based 
on NSC guidance, overall coordination is to take place through the TFWG 
process. (See appendix III for TFWG membership and process.) TFWG 
schedules assessment trips, reviews assessment reports, evaluates 
training proposals, and assigns resources for training. According to 
State officials, the U.S. government has conducted 19 needs assessment 
missions and provided training and technical assistance in at least one 
of the five areas of an anti-money laundering/counter-terrorist 
financing regime to over 20 countries. 

U.S. offices and bureaus, primarily within the departments of the 
Treasury, Justice, Homeland Security, and State, and the federal 
financial regulators provide training and technical assistance to 
countries requesting assistance through various programs using a 
variety of methods primarily funded by State and Treasury. Methods 
include training courses, presentations at international conferences, 
the use of overseas regional U.S. law enforcement academies or U.S.- 
based schools, and the placement of intermittent or long-term resident 
advisors for a range of subject areas related to building effective 
counter-terrorism and anti-money laundering regimes. For example, 
Justice provides technical assistance on drafting legislation that 
criminalizes terrorist financing and anti-money laundering. Treasury's 
Office of Technical Assistance (OTA) provides assistance to strengthen 
the financial regulatory regimes of countries. In addition, Treasury's 
FinCEN provides training and technical assistance including assistance 
in the development of FIUs, information technology assessments, and 
specialized analytical software and analyst training for foreign FIUs. 
(See appendix IV for key U.S. counter-terrorism financing and anti- 
money laundering training and assistance for vulnerable countries.) 

According to State, the U.S. government has also worked with 
international donors and organizations to leverage resources to build 
counter-terrorism financing regimes in vulnerable countries. According 
to State officials, they have worked with the United Kingdom, 
Australia, Japan, the European Union, the Organization of American 
States, the Asian Development Bank (ADB), IMF, and the World Bank on 
regional and country-specific projects. According to State, they have 
also funded the UN Global Program Against Money Laundering to place a 
mentor in one country for a year to assist with further development of 
its FIU. Similarly, Treasury officials said the department funded a 
resident advisor to the ADB as part of the Cooperation Fund for the 
Regional Trade and Financial Security Initiative. Treasury officials 
also state they have coordinated bilateral and international technical 
assistance with the FATF and the international financial institutions, 
such as the World Bank and IMF, which encompassed the drafting of legal 
frameworks, building necessary regulatory and institutional systems, 
and developing human expertise. According to State officials, efforts 
to share identified priorities and coordinate assistance by the major 
donor countries took a step forward at the June 2003 G-8 Summit with 
the establishment of the Counter-Terrorism Action Group, of which the 
United States is a member. The Counter-Terrorism Action Group has 
partnered with the FATF, providing that organization with a list of 
countries to which its members are interested in providing counter- 
terrorism financing assistance, so that the FATF could assess their 
technical assistance needs. FATF delivered those assessments to the 
Counter-Terrorism Action Group in 2004 and, according to State 
officials, the donors are now beginning to follow through with 
assistance programs. 

U.S. Government Lacks Integrated Strategy to Coordinate the Delivery of 
Training and Technical Assistance: 

The U.S. government lacks an integrated strategy to coordinate the 
delivery of counter-terrorism financing training and technical 
assistance to countries vulnerable to terrorist financing. The effort 
does not have key stakeholder buy-in on roles and practices, a 
strategic alignment of resources with needs, or a process to measure 
and improve performance. As a result, the effort lacks effective 
leadership and consistent practices, an optimal match of resources to 
needs, and feedback on performance into the decision-making process. 

U.S. Effort Lacks Buy-in from Key Stakeholder on Roles and Procedures: 

U.S. interagency efforts to coordinate the delivery of counter- 
terrorism financing training and technical assistance lack key 
stakeholder involvement and acceptance of roles and procedures. As a 
result, the overall effort lacks effective leadership, which leads to 
less than optimal delivery of training and technical assistance to 
vulnerable countries, according to agency officials. We have previously 
found that building a collaborative management structure across 
participating organizations is an essential foundation for ensuring 
effective collaboration; and strong leadership is critical to the 
success of intergovernmental initiatives.[Footnote 16] Moreover, 
involvement by leaders from all levels is important for maintaining 
commitment. 

Treasury, a key stakeholder, does not accept State's position that 
State leads all U.S. counter-terrorism financing training and technical 
assistance efforts and disagreements continue between some Treasury and 
State officials concerning current TFWG coordination efforts. According 
to State officials, State leads the U.S. effort to provide counter- 
terrorism financing training and technical assistance to all countries 
the U.S. government deems vulnerable to terrorist financing. State 
bases its position on classified NSC documents focused primarily on 
TFWG, State documents, and authorizing legislation. Treasury, an agency 
that also funds as well as provides training and technical assistance, 
asserts that State overstates its role; according to Treasury, State's 
role is limited to coordinating other U.S. agencies' provision of 
counter-terrorist financing training and technical assistance in 
commonly agreed upon TFWG priority countries, and that there are 
numerous other efforts outside of States' purview.[Footnote 17] 
Justice, an agency that provides training and technical assistance and 
receives funding from State,[Footnote 18] states that it respects the 
role that State plays as the TFWG chairman and coordinator and states 
that all counter-terrorism financing training and technical assistance 
efforts should be brought under the TFWG decision-making process. While 
supportive, Justice's statement demonstrates that the span of State's 
role lacks clarity and recognition in practice. Two senior Treasury OTA 
officials said they strongly disagree with the degree of control State 
asserts over decisions at the State-led TFWG regarding the delivery of 
training and technical assistance. According to a Treasury Terrorist 
Financing and Financial Crimes (TFFC) Senior Policy Advisor who attends 
TFWG, in practice the TFWG process is broken and State creates 
obstacles rather than coordinates efforts. According to officials from 
State's Office of the Coordinator for Counterterrorism, who chair TFWG, 
the only problems are the lack of Treasury's TFFC and OTA officials' 
acceptance of State's leadership over counter-terrorism financing 
efforts and separate OTA funding. 

Legislation authorizing the Departments of State and Treasury to 
conduct counter-terrorism financing training and technical assistance 
activities does not explicitly designate a lead agency. State derives 
its authority for these activities from the International Security and 
Development Cooperation Act of 1985,[Footnote 19] which mandates that 
the Secretary of State "coordinate" all international counter-terrorism 
assistance. Treasury's primary authority for its assistance programs 
derives from a 1998 amendment to the Foreign Assistance Act of 
1961,[Footnote 20] which authorized the Secretary of the Treasury, 
after consultation with the Secretary of State and the Administrator of 
the U.S. Agency for International Development, to establish a program 
to provide economic and financial technical assistance to foreign 
governments and foreign central banks. This provision further mandates 
that State provide foreign policy guidance to the Secretary of the 
Treasury to ensure that the program is effectively integrated into the 
foreign policy of the United States. 

State and Treasury officials also disagree on procedures and practices 
for the delivery of counter-terrorism financing training and technical 
assistance. State cited NSC guidance and an unclassified State document 
focusing on TFWG as providing procedures and practices for delivering 
training and technical assistance to all countries. Treasury officials 
told us that the procedures and practices were only pertinent to the 
TFWG priority countries and that there is no formal mandate or process 
to provide technical assistance to countries outside the priority list. 
Moreover, Justice officials told us that having procedures and 
practices for TFWG priority countries that differ from those for other 
vulnerable countries creates problems. This issue is further 
complicated by the lack of consistent and clear delineation between the 
countries covered by TFWG and other vulnerable countries also receiving 
counter-terrorism financing and anti-money laundering assistance funded 
through State and Treasury.[Footnote 21] Treasury officials told us 
that TFWG procedures and practices are overly structured and 
impractical and have not been updated to incorporate stakeholder 
concerns and that the overall process does not function as it should. 
State and Treasury officials cited numerous examples of disagreements 
on procedures and practices. For example: 

* State and Treasury officials disagree on the use of OTA funding and 
contractors. According to Treasury officials, OTA funding should 
primarily be used to support intermittent and long-term resident 
advisors, who are U.S. contractors, to provide technical 
assistance.[Footnote 22] According to State officials, OTA should 
supplement State's program, which primarily funds current employees of 
other U.S. agencies. 

* State, Justice, and Treasury officials disagree on whether it is 
appropriate for U.S. contractors to provide assistance in legislative 
drafting efforts on anti-money laundering and counter-terrorism 
financing laws. State officials cited NSC guidance that current Justice 
employees should be primarily responsible for working with foreign 
countries to assist in drafting such laws and voiced strong resistance 
to use of contractors. Justice officials strongly stated that 
contractors should not assist in drafting laws and gave several 
examples of past problems when USAID and OTA contractor assistance led 
to problems with the development of foreign laws. In two examples, 
Justice officials stated that USAID and OTA contractor work did not 
result in laws meeting FATF standards. In another example, Justice 
officials reported that a USAID contractor assisted in drafting an anti-
money laundering law that had substantial deficiencies and as a result 
Justice officials had to take over the drafting process. According to 
OTA officials, their contractors provide assistance in drafting laws in 
non-priority countries and OTA makes drafts available to Justice and 
other U.S. agencies for review and comment and ultimately the host 
country itself is responsible for final passage of a law that meets 
international standards.[Footnote 23] 

* Treasury and State officials disagree on the use of confidentiality 
agreements[Footnote 24] between contractors and the foreign officials 
they advise. State officials said OTA's use of confidentiality 
agreements impedes U.S. interagency coordination. State officials said 
the issue created a coordination problem in one country because a 
poorly written draft law could not be shared with other U.S. agencies 
for review and resulted in the development of an ineffective anti-money 
laundering law. Moreover, State officials said the continued practice 
could present future challenges. However, according to Treasury 
officials, this was an isolated case involving a problem with the 
contract and they said they have taken procedural steps to ensure the 
error is not repeated. 

* State and Treasury officials disagree on the procedures for 
conducting assessments of country's needs for training and technical 
assistance. Moreover, Treasury stated that their major concern is with 
State's coordination process for the delivery and timing of assistance. 
According to TFWG procedures for priority countries, if an assessment 
trip is determined to be necessary, State is to lead and determine the 
composition of the teams and set the travel dates.[Footnote 25] This is 
complicated when a vulnerable country becomes a priority country. For 
example, in November 2004 Treasury conducted an OTA financial 
assessment in a nonpriority frontline country and subsequently reached 
agreement with that country's central bank minister to put a resident 
advisor in place to set up a FIU.[Footnote 26] However, in May 2005, 
State officials denied clearance for Treasury official's visit to the 
country, which has created a delay of 2.5 months (as of the end of July 
2005). Treasury officials provided documentation to show that State was 
aware of their intention to visit the country in November 2004 to 
determine counter-terrorism and financial intelligence technical 
assistance needs, the official leading the segment of work was part of 
a larger on-going OTA effort in country, and that Treasury kept TFWG 
informed of the results of OTA's work and continuing efforts. State 
officials expressed concern that the country had recently become a 
priority country. According to State TFWG officials, Treasury work 
needed to be delayed until a TFWG assessment could be completed. 
However, the U.S. embassy requested that Treasury proceed with its 
placement of a resident advisor and that the TFWG assessment be 
delayed. 

U.S. Effort Does Not Strategically Align Resources with Need: 

The U.S. government does not strategically align its resources with its 
mission to deliver counter-terrorism financing training and technical 
assistance. For strategic planning to be a dynamic and inclusive 
process, alignment of resources is a critical element.[Footnote 27] 
However, the U.S. government has no clear presentation of its available 
resources. Further, neither the U.S. government nor TFWG has made a 
systematic and objective assessment of the full range of available U.S. 
and potential international resources. As a result, decision-makers do 
not know the full range of resources available to match to the needs 
they have identified in priority countries and to determine the best 
match of remaining resources to needs for other vulnerable countries. 

U.S. government does not have clear presentation of budget resources 
available: 

Because funding is embedded with anti-money laundering and other 
programs, the U.S. government does not have a clear presentation of the 
budget resources that the departments of State and the Treasury 
allocate for training and technical assistance to counter terrorist 
financing. State and Treasury receive separate appropriations that can 
be used for training and technical assistance either by the agencies 
themselves, by funding other agencies, or by funding contractors. State 
primarily transmits its training and technical assistance funds to 
other agencies while Treasury primarily employs short and long term 
advisors through personal service contracts.[Footnote 28] Although 
various officials told us that funding for counter-terrorism financing 
training and technical assistance is insufficient, the lack of a clear 
presentation of available budget resources makes it difficult for 
decision-makers to determine the actual amount allocated to these 
efforts.[Footnote 29] 

State officials told us that they have two primary funding sources for 
State counter-terrorism financing training and technical assistance 
programs: 

* Non-Proliferation, Anti-Terrorism, Demining, and Related Programs 
funding, which State's Office of the Coordinator for Counterterrorism 
uses to provide counter-terrorism financing training and technical 
assistance to TFWG countries. Based on our analysis of State records, 
budget authority for this account included $17.5 million for counter- 
terrorism financing training and technical assistance for fiscal years 
2002 to 2005.[Footnote 30] 

* International Narcotics Control and Law Enforcement funding, which 
State's Bureau of International Narcotics Control and Law Enforcement 
uses to provide counter-terrorism financing and anti-money laundering 
training and technical assistance to a wide range of countries, 
including seven priority countries between fiscal years 2002 and 2005, 
as well to provide general support to multilateral and regional 
programs. Based on our analysis of State records, budget authority for 
this account included about $9.3 million for anti-money laundering, 
counter-terrorism financing, and related multilateral and regional 
activities for fiscal years 2002-2005.[Footnote 31] 

State officials also told us that other State bureaus and offices 
provide counter-terrorism financing and anti-money laundering training 
and technical assistance (e.g., single-course offerings or small-dollar 
programs) as part of regional, country-specific, or broad-based 
programs.[Footnote 32] 

Treasury officials told us that OTA's counter-terrorism financing 
technical assistance is funded through its Financial Enforcement 
program. Based on our analysis of Treasury records, Treasury OTA 
received budget authority totaling about $30.3 million for all 
financial enforcement programs for fiscal years 2002 to 2005. Counter- 
terrorism financing technical assistance and training funding is 
embedded within this program and cannot be segregated from anti-money 
laundering and other anti-financial crime technical assistance. One OTA 
official told us that as much as one third of the funds may be spent on 
programs countering financial crimes other than terrorist financing in 
any given year. 

U.S. government does not have a systematic and objective assessment of 
suitability of available U.S. resources to meet needs: 

The U.S. government, including the TFWG, has not made a systematic and 
objective assessment of the suitability of available resources. 
According to State and Treasury officials, no systematic analysis has 
been done to evaluate the effectiveness of contractors and current 
employees in delivering various types of counter-terrorism training and 
technical assistance. Decisions at TFWG appear to be made based on 
anecdotal information rather than transparent and systematic 
assessments of resources. According to the State Performance and 
Accountability Report for fiscal year 2004, a shortage of anti-money 
laundering experts continues to create bottlenecks in meeting 
assistance needs of requesting nations, including priority countries. 
State co-chairs of TFWG repeated this concern to us. According to State 
officials, U.S. technical experts are particularly stretched because of 
their frequent need to split their time between assessment, training, 
and investigative missions. Moreover, officials from State's Office of 
the Coordinator for Counterterrorism cited the lack of available staff 
as a reason for their slow start in disbursing funding at TFWG's 
inception.[Footnote 33] 

Treasury agrees with State that there may be a shortage of anti-money 
laundering experts in the U.S. government agencies who are available to 
provide technical assistance in foreign countries, however, according 
to Treasury there is not a shortage of U.S. experts who are recent 
retirees from the same U.S. government agencies. According to OTA 
officials, OTA can provide contractors, who are primarily recently 
retired U.S. government employees with years of experience from the 
same agencies that provide training to priority countries through State 
funding.[Footnote 34] However, State officials stated strong opinions 
that current U.S. government employees are better qualified to provide 
counter-terrorism financing training and assistance than contractors. 
State added that it is TFWG's policy that current U.S. government 
experts should be used whenever possible, and that, when they are not 
available, the use of contractors in those instances should be 
coordinated with the expert agency or office. State officials cited 
several examples of priority and non-priority countries in which they 
felt that the work of OTA's resident advisors did not result in 
improvements. However, State officials praised the work of one OTA 
resident advisor in a priority country as a best practice, and other 
agency and foreign officials supported this view. Further, one State 
official commended the quality of OTA's law enforcement technical 
assistance. Nonetheless, State officials repeatedly stated that they 
need OTA funding and not OTA-contracted staff to meet current and 
future needs.[Footnote 35] 

A senior OTA official said that OTA has sought actively to provide 
programs in more priority countries, but State, as chair of the TFWG, 
has not supported their efforts. Specifically, as a portion of funds 
that OTA has obligated for financial enforcement related assistance 
between fiscal years 2002 and 2005, OTA has obligated approximately 11 
percent to priority countries.[Footnote 36] State officials said that 
they welcomed more OTA participation in priority countries as part of 
the mix of applicable resources; however, they questioned whether OTA 
consistently provides high-quality assistance. Without a systematic 
assessment of the suitability of resources, the decision-makers do not 
have good information to consider when determining the best mix of 
government employees and contractors to meet needs. 

TFWG has not made a systematic and objective assessment of potential 
international resources to meet needs: 

TFWG has a stated goal to encourage allies and international entities 
to contribute resources to help build the counter-terrorism financing 
capabilities of vulnerable countries and coordinate training and 
technical assistance activities, but it has not developed a specific 
strategy to do so. No one office or organization has systematically 
consolidated and synthesized available information on the counter- 
terrorism financing training and technical assistance activities of 
other countries and international entities and integrated this 
information into its decision-making process. State and Treasury 
officials stated that instead they have an ad hoc approach to working 
with allies and international entities on resource sharing for training 
and technical assistance. Resource sharing is not considered a priority 
at TFWG meetings because U.S. officials state that interagency issues 
take higher priority and little time is left to discuss international 
activities. At one TFWG meeting, U.S. agency officials discovered that 
different countries and organizations were putting resources into a 
priority country without any central coordination. TFWG found that 
Australia was already providing assistance to the FIU in this priority 
country and cancelled the assistance it was planning to provide in this 
area. Without a systematic way to consolidate, synthesize, and 
integrate information about international activities into the U.S. 
interagency decision-making process, the U.S. government cannot easily 
capitalize on opportunities for resource sharing with allies and 
international entities. 

U.S. Government Lacks System to Measure Performance and Incorporate 
Results: 

The U.S. government, including TFWG, does not have a system in place to 
measure the performance results of its efforts to deliver training and 
technical assistance and to incorporate this information into 
integrated planning efforts. Without such a system the U.S. government 
cannot ensure that its efforts are on track. In August 2004, we found 
no system in place to measure the performance of U.S. training and 
technical assistance to combat terrorist financing. According to an 
official from Justice's Office of Overseas Prosecutorial Development, 
Assistance and Training (OPDAT), an interagency committee led by OPDAT 
was set up to develop a system to measure results. In November 2004, 
OPDAT had an intern set up a database to track training and technical 
assistance provided through TFWG and related assistance results for 
priority countries. Because the database was not accessible to all TFWG 
members, OPDAT planned to serve as the focal point for entering the 
data collected by TFWG members.[Footnote 37] 

OPDAT asked agencies to provide statistics on programs, funding, and 
other information, including responding to questions concerning results 
by function which corresponded to the five elements of an effective 
counter-terrorism financing regime. OPDAT also planned to track key 
recommendations for training and technical assistance and progress made 
in priority countries as provided in FATF and TFWG assessments. 
However, little progress has been made in further development of the 
performance measures as the responsible OPDAT official told us they 
were waiting to hire the next intern to input the data. As of July 
2005, a year later, at our exit meetings with OPDAT and the State TFWG 
chairs, OPDAT was still waiting for an intern to be hired to complete 
the project. Further, OPDAT and State officials confirmed that the 
system had not yet been approved or implemented by TFWG and, therefore, 
TFWG did not have a system in place to measure the performance results 
of its training and technical assistance efforts and incorporate this 
information into its planning. 

Treasury Faces Two Accountability Issues Related to Its Terrorist Asset 
Blocking Efforts: 

Treasury faces two accountability issues related to its terrorist asset 
blocking efforts. First, Treasury's OFAC reports on the nature and 
extent of terrorists' U.S. assets do not provide Congress the ability 
to assess OFAC's achievements. Second, Treasury lacks meaningful 
performance measures to assess its terrorist designation and asset 
blocking efforts. While Treasury has developed some limited performance 
measures, OFAC officials acknowledged that the measures could be 
improved and are in the process of developing more meaningful 
performance measures aided by the development of an OFAC-specific 
strategic plan. 

Treasury Reports Do Not Provide a Clear Explanation of the Nature and 
Extent of Asset Blocking: 

Treasury's annual reports to Congress on terrorists' assets do not 
provide a clear description of the nature and extent of terrorists' 
assets held in the United States. Federal law requires the Secretary of 
the Treasury, in consultation with the Attorney General and appropriate 
investigative agencies, to provide an annual report to Congress 
"describing the nature and extent of assets held in the United States 
by terrorist countries and organizations engaged in international 
terrorism."[Footnote 38] Each year Treasury's OFAC provides Congress 
with a Terrorist Assets Report that offers a year-end snapshot of 
dollar amounts held in U.S. jurisdiction for two types of entities: 
international terrorists and terrorist organizations and terrorism- 
supporting governments and regimes. In 2004 OFAC reported that the 
United States blocked almost $10 million in assets belonging to seven 
international terrorist organizations and related designees.[Footnote 
39] The 2004 report also noted that the United States held more than 
$1.6 billion in assets belonging to six designated state sponsors of 
terrorism.[Footnote 40] 

While each annual report provides year-end statistics for each of the 
different entities, they do not provide a clear description of the 
nature and extent of assets held in the United States.[Footnote 41] The 
reports do not make a comparison of blocked assets over the years or 
offer explanations for many of the significant shifts between 
years.[Footnote 42] For example, the 2004 report stated that the United 
States held $3.9 million in al Qaeda assets, but it did not state that 
this represented a 400 percent increase in the value of al Qaeda assets 
held by the United State in 2003 or offer an explanation for this 
increase. In addition, the reports for years 2000 to 2004 offer no 
explanation for the decline in the value of U.S.-held Iranian 
government assets, which decreased from $347.5 million in 2000 to $82 
million in 2004. While the 2000 report showed that the U.S. blocked 
$283,000 of Hizballah assets, future reports did not name Hizballah 
again or explain the status of these blocked assets. Senior OFAC 
officials acknowledge that the Terrorist Asset Reports do not provide a 
clear description of the nature and extent of assets blocked and is not 
useful to assessing progress on asset blocking. 

Treasury's Performance Measures Do Not Adequately Assess Terrorist 
Designation and Asset Blocking Efforts: 

Treasury lacks effective performance measures to assess its terrorist 
designation and asset blocking efforts and demonstrate how these 
efforts contribute to Treasury's goals of disrupting and dismantling 
terrorist financial infrastructures and executing the nation's 
financial sanctions policies. Among the performance measures in 
Treasury's 2004 Performance and Accountability Report that are related 
to designations and asset blocking are: 

* An increase in the number of terrorist finance designations for which 
other countries join the United States, 

* An increase in the number of drug trafficking and terrorist-related 
financial sanctions targets identified and made public,[Footnote 43] 
and: 

* An estimated number of sanctioned entities no longer receiving funds 
from the United States.[Footnote 44] 

Treasury officials recognize that these measures do not adequately 
assess progress made in designating terrorists and blocking their 
assets. In addition, they note that these measures do not help assess 
how efforts to designate terrorists and block their assets contribute 
to Treasury's overall goals of disrupting and dismantling terrorists' 
financial infrastructure and executing the nation's financial sanctions 
policies. First, these measures are not specific to terrorist 
financing. Two of the three measures do not separate data on terrorists 
from data on other entities such as drug traffickers, hostile foreign 
governments, corrupt regimes, and foreign drug cartels, though OFAC 
officials acknowledged that they could have reported the data 
separately. Second, Treasury officials said that progress on asset 
blocking cannot simply be measured by totaling an amount of blocked 
assets at the end of the year, as the amounts may vary over the year as 
assets are blocked and unblocked. Third, Treasury has not developed 
measures to track other activities and benefits related to terrorist 
designations and asset blocking. For example, according to Treasury 
officials, Treasury's underlying research to identify terrorist 
entities and their support systems is used to aid U.S. financial 
regulators, law enforcement, and other officials. However, Treasury 
does not have measures to track the use of this research when used for 
other agency activities, such as law enforcement investigations. 

Treasury officials also stated that terrorist designations have a 
deterrent value by discouraging further financial support. Measuring 
effectiveness in terms of deterrence can be very difficult, in part 
because the direct impact on unlawful activity is unknown, and in part 
because precise metrics are hard to develop for illegal and clandestine 
activities. According to Treasury officials, measuring effectiveness 
can also be difficult because many of these efforts run across U.S. 
government agencies and foreign governments and are highly sensitive. 
Treasury's annual report and strategic plan, however, do not address 
the deterrent value of designations or discuss the difficulties in 
measuring its effectiveness. According to the Government Performance 
and Results Act (GPRA) of 1993, when it is not feasible to develop a 
measure for a particular program activity, the executive agency shall 
state why it is infeasible or impractical to express a performance goal 
for the program activity.[Footnote 45] 

OFAC officials told us that they are in the process of developing 
better measures for assessing its efforts related to designations and 
asset blocking (both quantitative and qualitative) and achievements 
made. In addition, OFAC officials are in the process of developing a 
strategic plan to guide OFAC's efforts. This strategic planning effort 
will help OFAC develop measures to assess how their activities, 
including terrorist designations and asset blocking, contribute to 
Treasury's goals of disrupting and dismantling the financial 
infrastructure of terrorists and executing the nation's financial 
sanctions policies.[Footnote 46] According to GPRA, executive agency 
strategic plans should include a comprehensive mission statement, a set 
of general goals and objectives and an explanation of how they are to 
be achieved, and a description of how performance goals and measures 
are related to the general goals and objectives of the program. OFAC 
officials said they have initiated efforts to develop an OFAC-specific 
strategic plan and performance measures. In their technical comments in 
response to our draft report, officials stated that the new performance 
measures will relate to OFAC's research, outreach, and sanctions 
administration. Additionally, officials stated that they expect OFAC's 
new performance measures to be completed by December 1, 2005, and its 
new strategic plan to be completed by January 1, 2006. However, OFAC 
officials did not provide us with documentation to demonstrate that 
they have established milestones or a completion date to accomplish 
these projects. 

Conclusions: 

Without a strategy that integrates the funding and delivery of training 
and technical assistance by State and Treasury's OTA, the U.S. 
government will not maximize the use of its resources in the fight 
against terrorist financing. Meanwhile, due to disagreements over 
leadership and procedures, some energy and talent of staff are wasted 
trying to resolve interagency disputes. By making decisions based on 
anecdotal and informal information rather than transparent and 
systematic assessments, managers cannot effectively address problems 
before they grow and become crises. Moreover, given the scarce 
expertise available to address counter-terrorism financing, by not 
focusing efforts on how all available U.S. and international resources 
can be integrated into a U.S. strategy the U.S. government may miss 
opportunities to leverage resources. Finally, without dedicating 
resources to complete a performance measurement system, the State-led 
TFWG effort does not have the information needed for optimal 
coordination and planning. 

The lack of accountability for Treasury's designations and asset 
blocking program creates uncertainty about the department's progress 
and achievements. U.S. officials with oversight responsibilities need 
meaningful and relevant information to ascertain the progress, 
achievements, and weaknesses of U.S. efforts to designate terrorists 
and dismantle their financial networks as well as hold managers 
accountable. Meaningful information may also help these officials 
understand the importance of asset blocking in the overall U.S. effort 
to combat terrorist financing as well as make resource allocation 
decisions across programs. The development of a strategic plan for OFAC 
could help facilitate the development of meaningful performance 
measures. 

Recommendations for Executive Action: 

To ensure that U.S. government interagency efforts to provide counter- 
terrorism financing training and technical assistance are integrated 
and efficient, particularly with respect to priority countries, we 
recommend that the Secretary of State and the Secretary of the 
Treasury, in consultation with NSC and relevant government agencies, 
develop and implement an integrated strategic plan for the U.S. 
government that does the following: 

* designates leadership and provides for stakeholder involvement; 

* includes a systematic and transparent assessment of U.S. government 
resources; 

* delineates a method for aligning the resources of relevant U.S. 
agencies to support the mission; and: 

* provides processes and resources for measuring and monitoring 
results, identifying gaps, and revising strategies accordingly. 

To ensure a seamless campaign in providing counter-terrorism financing 
training and technical assistance programs to vulnerable countries, we 
recommend that the Secretaries of State and the Treasury enter into a 
Memorandum of Agreement concerning counter-terrorism financing and anti-
money laundering training and technical assistance. The agreement 
should specify: 

* the roles of each department, bureau, and office with respect to 
conducting needs assessments and delivering training and technical 
assistance; 

* methods to resolve disputes concerning OTA's use of confidentiality 
agreements in its contracts when providing counter-terrorism financing 
and anti-money laundering assistance; and: 

* coordination of funding and resources for counter-terrorism financing 
and anti-money laundering training and technical assistance. 

To ensure that policy makers and program managers are able to examine 
the overall achievements of U.S. efforts to block terrorists' assets, 
we also recommend that the Secretary of the Treasury provide in its 
annual Terrorist Assets Report to Congress more complete information on 
the nature and extent of asset blocking in the United States. 
Specifically, the report should include such information as the 
differences in amounts blocked between the years, when and why assets 
were unfrozen, the achievements and obstacles faced by the U.S. 
government, and a classified annex if necessary. In addition, as part 
of the Treasury's ongoing strategic planning efforts, we recommend that 
the Secretary of the Treasury complete efforts to develop an OFAC- 
specific strategic plan and meaningful performance measures by January 
1, 2006, and December 1, 2005 respectively, to guide and assess its 
asset blocking efforts. 

Matter for Congressional Consideration: 

In view of congressional interest in U.S. government efforts to deliver 
training and technical assistance abroad to combat terrorist financing 
and the difficulty in obtaining a systematic assessment of U.S. 
resources dedicated to this endeavor, Congress should consider 
requiring the Secretary of State and the Secretary of the Treasury to 
submit an annual report to Congress on the status of the development 
and implementation of the integrated strategic plan and Memorandum of 
Agreement. 

Agency Comments and Our Evaluation: 

We provided draft copies of this report to the Departments of Defense, 
Homeland Security, Justice, State, and Treasury for review. We received 
comments from the Departments of Justice, State, and the Treasury (see 
apps. V, VI, and VII). We did not receive agency comments from the 
Departments of Defense or Homeland Security. 

State did not agree with our recommendation that the Secretaries of 
State and Treasury, in consultation with the NSC and relevant 
government agencies, develop and implement an integrated strategic plan 
to coordinate the delivery of training and technical assistance abroad. 
State asserted that it has an integrated strategic plan and believes 
that a series of NSC documents and State's Office of the Coordinator 
for Counterterrorism's Bureau Performance Plan serve this purpose. We 
reviewed the NSC documentation which included minutes, an agreement, 
and conclusions, all of which serve as the NSC guidance for the TFWG. 
We also reviewed State's Office of the Coordinator for 
Counterterrorism's Bureau Performance Plan which we found included the 
Bureau's objectives and performance measures for counterterrorist 
financing programs. We do not agree that this NSC guidance and Bureau 
performance plan constitute an integrated strategy that addresses the 
issues raised in this report because the effort, in practice, does not 
have key stakeholder buy-in on roles and practices, a strategic 
alignment of resources with needs, or a system to measure performance 
and use results and thus, an integrated strategy is still needed. It is 
also noteworthy that Treasury did not state in their comments that an 
integrated strategic plan existed or was in place, and they did not 
highlight these specific documents as serving this purpose. 

Treasury did not directly address our recommendation for an integrated 
strategic plan and proposed a new title, "Integrated U.S. Strategic 
Plan Needed to Improve the Coordination of Counterterrorism Finance 
Training and Technical Assistance to Certain Priority Countries," which 
suggests agreement with the recommendation, but limits coverage of the 
integrated strategic plan to cover certain priority countries. Treasury 
also stated its agreement with the need for performance measures. It is 
useful to note that Treasury repeatedly placed the focus of efforts for 
improvement on priority countries and, as noted in its technical 
comments, does not recognize State's leadership over the delivery of 
training and technical assistance other than to priority countries. For 
example, in Treasury's technical comments Treasury stated that "State's 
role is coordinating each U.S. government agency's personnel and 
expertise to allow them to deliver the needed training in commonly 
agreed upon priority countries." This comment further supports the need 
to better integrate efforts. Justice stated that with its role and 
expertise in providing training and technical assistance the fact that 
it was not included as an equal partner with State and Treasury in the 
recommendation was a critical omission. We note that Justice is one of 
a number of agencies referred to as relevant government agencies in the 
recommendation. Justice receives funding from State and, according to 
Justice, State has been supportive of Justice's training and technical 
assistance efforts. 

State did not agree with our recommendation that the Secretaries of 
State and Treasury enter into a Memorandum of Agreement concerning 
counter-terrorism financing and anti-money laundering training and 
technical assistance. State stated that they have an interagency 
agreement. Based on our review, the classified document serving as an 
interagency agreement lacks clarity, familiarity, and buy-in from all 
levels of leadership within TFWG, particularly Treasury. State added 
that if there were to be a Memorandum of Agreement, they believe it 
should include all agencies engaged in providing training and technical 
assistance, not just State and Treasury. Treasury did not address this 
recommendation. However, Treasury stated that it wished to improve the 
effectiveness of U.S. technical assistance to combat terrorist 
financing particularly with respect to certain priority countries and 
stated that they would welcome suggestions as to how Treasury, together 
with relevant U.S. government agencies, can better achieve that goal. 
Justice again stated that the report's critical flaw is omitting 
Justice from equal standing with State and Treasury. Justice noted that 
it is a key player and therefore should be involved in all interagency 
deliberations and decisions. We continue to believe that the Memorandum 
of Agreement should include the Secretaries of State and Treasury. 
State and Treasury both primarily fund and support U.S. government anti-
money laundering and counter-terrorist financing training and technical 
assistance programs, and in Treasury's case also provides considerable 
training and technical assistance abroad through current U.S. 
government employees and contractors. It is important that their 
programs and funding are integrated to optimize results. Other agencies 
are important stakeholders as they are recipients of this funding and 
support and should benefit from improved coordination between these two 
agencies. 

In response to our recommendation that the Secretary of the Treasury 
provide more complete information on the nature and extent of asset 
blocking in the United States in its annual Terrorist Assets Report to 
Congress, Treasury responded in its technical comments that we should 
"instead recommend that Congress consider discontinuing the requirement 
that Treasury produce the annual report altogether." Treasury officials 
also stated that the Terrorist Assets Reports, "based upon the input of 
numerous government agencies, provides a snapshot of the known assets 
held in the United States by terrorist-supporting countries and 
terrorist groups at a given point in time. These numbers may fluctuate 
during each year and between years for a number of policy-permissible 
reasons. The amount of assets blocked under a terrorism sanctions 
program is not a primary measure of a terrorism sanctions program's 
effectiveness, and countries that have been declared terrorist 
supporting, and whose assets are not blocked by a sanctions program, 
are already weary of holding assets in the United States." Moreover, in 
its technical comments Treasury states that Terrorist Assets Reports 
were "not mandated or designed as an accountability measure for OFAC's 
effectiveness in assisting U.S. persons in identifying and blocking 
assets of persons designated under relevant Executive orders relating 
to terrorism." We acknowledge that the language in the mandate for the 
Terrorist Assets Reports did not explicitly designate the reports as an 
accountability measure; however, nothing in the statutory language or 
in the congressional intent underlying the mandate precludes Treasury 
from compiling and reporting information in the manner in which we have 
suggested in this report. Furthermore, we believe that inclusion of 
comparative information and additional explanation regarding 
significant shifts between years will enhance program reporting and 
congressional oversight. Justice did not comment on this 
recommendation. State commented that this recommendation was incomplete 
in that it makes no mention of State's role in blocking assets and 
promoting international cooperation to achieve it; however, we did not 
include State in this recommendation because it is the Secretary of the 
Treasury who is responsible for producing the annual Terrorist Assets 
Reports. 

Treasury's technical comments state that "OFAC officials have advised 
that OFAC's new performance measures are expected to be completed by 
December 1, 2005, and its new strategic plan is expected to be 
completed by January 1, 2006." We modified our recommendation to 
incorporate this new information. State suggested in its technical 
comments that we revise this recommendation to read, "In addition, we 
recommend that the Secretary of the Treasury, in consultation with the 
Departments of State and Justice and the other departments and agencies 
represented on the Terrorist Finance Policy Coordination Committee, 
establish milestones for developing a strategic plan and meaningful 
performance measures to guide and asses its asset blocking process." We 
did not include the Secretary of State or the Attorney General in this 
recommendation because the scope of this objective focused solely on 
the accountability issues Treasury faces in its efforts to block 
terrorists' assets. However, we recognize that State has an important 
role in targeting individuals, groups, or other entities suspected of 
terrorism or terrorist financing and added language to the section of 
the report on terrorist designations to clarify the roles of the 
multiple agencies involved in this effort. 

Treasury's comments also suggested that we replace, in its entirety, 
our report's third objective on the accountability of Treasury's 
terrorist asset blocking efforts with revised text that Treasury 
officials had prepared. We reviewed the revised text and noted that 
many of Treasury's points were already covered in our report. In some 
cases we added technical information to our report to help clarify the 
challenges that Treasury faces in assessing the impact of terrorist 
designation activities. 

None of these agencies provided comments on our matter for 
congressional consideration. 

As agreed with your offices, unless you publicly announce the contents 
of this report earlier, we plan no further distribution until 30 days 
from the report date. At that time, we will send copies to the Attorney 
General, the Secretary of Defense, the Secretary of the Homeland 
Security, the Secretary of State, the Secretary of the Treasury, and 
interested congressional committees. We also will make copies available 
to others upon request. In addition the report will be available at no 
charge on the GAO Web site at http://www.gao.gov. 

If you or your staff have any questions about this report, please 
contact me at (202) 512-4347 or [Hyperlink, yagerl@gao.gov]. Contact 
points for our Offices of Congressional Relations and Public Affairs 
may be found on the last page of this report. GAO staff who made major 
contributions to this report are listed in appendix VIII. 

Signed by:

Loren Yager: 
Director, International Affairs and Trade: 

[End of section] 

Appendixes: 

Appendix I Objectives, Scope, and Methodology: 

Chairman of the Senate Caucus on International Narcotics Control, 
Charles E. Grassley; Senator Richard J. Durbin; and Chairman of the 
Senate Committee on Homeland Security and Governmental Affairs, Senator 
Susan M. Collins, asked us to (1) provide an overview of U.S. 
government efforts to combat terrorist financing abroad and (2) examine 
U.S. government efforts to coordinate the delivery of training and 
technical assistance to vulnerable countries. In addition, they 
requested that we examine specific accountability issues the Department 
of the Treasury (Treasury) faces in its efforts to block terrorists' 
assets held under U.S. jurisdiction. 

To provide an overview of U.S. government efforts to combat terrorist 
financing abroad we reviewed documents and interviewed officials of 
U.S. agencies and departments and their bureaus and offices. We 
reviewed legislation, strategic plans, performance plans, and other 
agency documents, as well as relevant papers, studies, CRS and our own 
work to identify specific agency responsibilities and objectives. We 
assessed this information to identify key efforts and obtain further 
details and clarification and then validated and deconflicted 
information across agencies and departments in the United States and 
overseas in Indonesia, Pakistan, and Paraguay. We based country 
selection on Department of State (State) reporting of a nexus of 
terrorist financing, State reporting of assistance to the country, and 
the use of alternative financing mechanisms in the country. In each 
country, we discussed key challenges with responsible foreign and U.S. 
embassy officials, as well as with international entity officials. 

We grouped the different types of responsibilities into four categories 
(designations, intelligence and law enforcement, standards setting, or 
training) and validated these categories during meetings with U.S. 
government officials. Our scope and methodology were limited by lack of 
complete access to sensitive and classified information. We reviewed 
documents or interviewed officials from the following U.S. departments 
and agencies: 

* the Central Intelligence Agency; 

* the Department of Defense (Defense Intelligence Agency); 

* the Department of Homeland Security (Immigration and Customs 
Enforcement and Customs and Border Protection); 

* the Department of Justice (Bureau of Alcohol, Tobacco, Firearms, and 
Explosives; Criminal Division's Asset Forfeiture and Money Laundering 
Section, Counter Terrorism Section, and Office of Overseas 
Prosecutorial Development, Assistance and Training; Drug Enforcement 
Administration; Federal Bureau of Investigation); 

* the Department of State (Bureau of Economic and Business Affairs; 
Bureau for International Narcotics and Law Enforcement Affairs; Office 
of the Coordinator for Counterterrorism; Bureau of International 
Organizations; U.S. Mission to the United Nations; U.S. Agency for 
International Development; U.S. Missions to Indonesia, Pakistan, and 
Paraguay); 

* the Department of the Treasury (Office of Technical Assistance, 
Office of Foreign Assets Control, Financial Crimes Enforcement Network, 
the Office of Terrorist Financing and Financial Crime, IRS's Criminal 
Investigation Division). 

We also verified U.S. government efforts through documentation or 
interviews with officials from international entities including the 
Financial Action Task Force on Money Laundering, the International 
Monetary Fund (IMF), the World Bank, the United Nations (UN), and the 
Organization of American States. 

To examine U.S. government efforts to coordinate the delivery of 
training and technical assistance to vulnerable countries, we examined 
relevant laws; reports to Congress; National Security Council (NSC) 
guidance; strategic plans; policies and procedures; budget and 
expenditure information; agency and international entity training data, 
documents, and reports; contractor resumes; communications between 
embassies and agencies; interagency communications; web site 
information; and GAO criteria for strategic planning, collaboration, 
and performance results.[Footnote 47] In conjunction we interviewed 
U.S. agency officials involved in the Terrorist Financing Working Group 
(TFWG), U.S. officials involved in the delivery of training and 
technical assistance abroad, and others with a stake in counter- 
terrorism financing training and technical assistance, including 
officials of international entities, foreign government officials, and 
experts. We also observed a TFWG meeting. We requested an interview 
with the NSC, but the NSC declined our request. We assessed U.S. 
efforts to coordinate its efforts to deliver training and technical 
assistance to vulnerable countries using applicable elements of a sound 
strategic plan and identified those areas in which the U.S. effort is 
lacking. 

We assessed documentation and interviewed officials from: 

* the Department of Homeland Security (Immigration and Customs 
Enforcement); 

* the Department of Justice (Criminal Division's Asset Forfeiture and 
Money Laundering Section, Counter Terrorism Section, and Office of 
Overseas Prosecutorial Development, Assistance and Training; Federal 
Bureau of Investigation); 

* the Department of State (Bureau for International Narcotics and Law 
Enforcement Affairs, Office of the Coordinator for Counter-terrorism, 
Bureau of International Organizations, U.S. Mission to the United 
Nations, U.S. Agency for International Development; three U.S. 
embassies abroad): 

* the Department of the Treasury (Office of Technical Assistance, 
Office of Foreign Assets Control, Financial Crimes Enforcement Network, 
the Executive Office for Terrorist Financing and Financial Crime, IRS's 
Criminal Investigation Division); 

* the Financial Action Task Force on Money Laundering (FATF); 

* International financial institutions including the International 
Monetary Fund (IMF), World Bank, Asian Development Bank (ADB); and 
Inter-American Development Bank; 

* the United Nations (UN), including the Counter Terrorism Committee 
and relevant UN Security Council resolutions sanctions committees and 
monitoring mechanisms; and: 

* the Organization of American States. 

To examine specific issues the U.S. government faces in holding 
Treasury accountable for its efforts to block terrorists' assets held 
in the United States, we interviewed officials from the Department of 
the Treasury's Office of Foreign Assets Control (OFAC) in Washington, 
D.C. We reviewed applicable laws, regulations, and executive orders to 
determine reporting requirements. In addition, we examined OFAC's 
annual Terrorist Assets Reports for calendar years 1999 to 2004. Our 
examination focused on comparing the nature and extent of blocked 
assets by year for OFAC's three programs targeting international 
terrorists and terrorist organizations and five programs targeting 
terrorism-supporting governments and regimes to understand how OFAC 
communicated changes in an organization or country's blocked assets 
over time. We also compared and contrasted the performance measures for 
designation and asset blocking included in Treasury's Strategic Plan 
for fiscal years 2003-2008 with those indicated in its Annual 
Performance and Accountability Report fiscal years 2003 and 2004. We 
reviewed testimony and speeches by OFAC and other Treasury officials, 
as well as information from OFAC's website, to learn more about key 
issues and progress made on designating terrorists and blocking their 
assets. We reviewed relevant information from the Congressional 
Research Service and our own work. To assess the extent that Treasury's 
performance measures for designating terrorists and blocking assets 
focused on factors critical to assessing performance, we reviewed a 
range of our previous reports examining factors that were necessary 
components for meaningful measures.[Footnote 48] 

We performed our work from March 2004 through July 2005 in accordance 
with generally accepted government auditing standards. 

[End of section] 

Appendix II: Key International Counter-Terrorism Financing and Anti- 
Money Laundering Efforts: 

Entity and importance: International standard-setters. 

Entity and importance: United Nations (UN): Of the key international 
entities, the UN has the broadest range of membership and the ability 
to adopt treaties or international conventions that have the effect of 
law in a country once signed and ratified, depending on a country's 
constitution; 
Efforts: International standard-setters: United Nations Convention 
Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances 
(1988) (The Vienna Convention): Defines concept of money laundering. 
Most widely accepted definition. Calls upon countries to criminalize 
the activity. Limited to drug trafficking as predicate offense[A] and 
does not address the preventative aspects. 

Efforts: International standard-setters: Entity and importance: 
International Convention Against Transnational Organized Crime (2000) 
(The Palermo Convention): Came into force in September 2003. Obligates 
ratifying countries to criminalize money laundering via domestic law 
and include all serious crimes as predicate offenses of money 
laundering, whether committed in or outside of the country, and permit 
the required criminal knowledge or intent to be inferred from objective 
facts; establish regulatory regimes to deter and detect all forms of 
money laundering, including customer identification, recordkeeping, and 
reporting of suspicious transactions; authorize the cooperation and 
exchange of information among administrative, regulatory, law 
enforcement, and other authorities, both domestically and 
internationally; consider the establishment of a financial intelligence 
unit to collect, analyze, and disseminate information; and promote 
international cooperation. 

Efforts: International standard-setters: Entity and importance: 
International Convention for the Suppression of the Financing of 
Terrorism (1999): Came into force in 2002. Requires ratifying countries 
to criminalize terrorism, terrorist organizations, and terrorist acts. 
Unlawful for any person to provide or collect funds with the intent 
that the funds be used for, or knowledge that the funds be used to 
conduct certain terrorist activity. Encourages states to implement 
measures that are consistent with FATF Recommendations. 

Efforts: International standard-setters: Entity and importance: 
Security Council Resolutions 1267 and 1390: Adopted October 15, 1999 
and January 16, 2002, respectively. Obligates member states to freeze 
assets of individuals and entities associated with Osama bin Ladin or 
members of al Qaeda or the Taliban that are included on the 
consolidated list maintained and regularly updated by the UN 1267 
Sanctions Committee. 

Efforts: International standard-setters: Entity and importance: 
Security Council Resolution 1373: Adopted September 28, 2001, in direct 
response to events of September 11, 2001. Obligates countries to 
criminalize actions to finance terrorism and deny all forms of support, 
freeze funds or assets of persons, organizations, or entities involved 
in terrorist acts; prohibit active or passive assistance to terrorists; 
and cooperate with other countries in criminal investigations and 
sharing information about planned terrorist acts. 

Efforts: International standard-setters: Entity and importance: 
Security Council Resolution 1617: Adopted July 29, 2005. Extended 
sanctions against al Qaeda, Osama bin Laden, and the Taliban, and 
strengthened previous related resolutions. 

Efforts: International standard-setters: Entity and importance: 
Convention Against Corruption (2003) Not yet in force--First legally 
binding multilateral treaty to address on a global basis the problems 
relating to corruption. As of July 11, 2005, 29 countries had become 
parties to the Convention (30 are required for the Convention to enter 
into force). Requires parties to institute a comprehensive domestic 
regulatory and supervisory regime for banks and financial institutions 
to deter and detect money laundering. Regime must emphasize 
requirements for customer identification, record keeping, and 
suspicious transaction reporting. 

Efforts: International standard-setters: Entity and importance: Global 
Program Against Money Laundering: research and assistance project 
offering technical expertise, training, and advice to member countries 
on anti-money laundering and counter-terrorism financing upon request 
to raise awareness; help create legal frameworks with the support of 
model legislation; develop institutional capacity, in particular with 
the creation of financial intelligence units; provide training for 
legal, judicial, law enforcement, regulators and private financial 
sectors including computer-based training; promote regional approach to 
addressing problems; maintain strategic relationships; and maintain 
database and perform analysis of relevant information. 

Efforts: International standard-setters: Entity and importance: 
Financial Action Task Force on Money Laundering (FATF): Formed in 1989 
by the G-7 countries,[A] FATF is an intergovernmental body comprised of 
31 member jurisdictions and two regional organizations whose purpose is 
to develop and promote policies, both at the national and international 
levels, to combat money laundering and the financing of terrorism. Its 
mission expanded to include counter- terrorism financing in October 
2001. FATF has developed multiple partnerships with international and 
regional organizations in order to constitute a global network of 
organizations against money laundering and terrorist financing.: The 
Counter Terrorism Committee (CTC): Established via Security Council 
Resolution1373 to monitor the performance of the member countries in 
building a global capacity against terrorism. Countries submit a report 
to the CTC on steps taken to implement resolution's measures and report 
regularly on progress. CTC asked each country to perform a self-
assessment of existing legislation and mechanism to combat terrorism in 
relation to Resolution 1373. CTC identifies weaknesses and facilitates 
assistance, but does not provide direct assistance. 

Entity and importance: Financial Action Task Force on Money Laundering 
(FATF): Formed in 1989 by the G-7 countries,[A] FATF is an 
intergovernmental body comprised of 31 member jurisdictions and two 
regional organizations whose purpose is to develop and promote 
policies, both at the national and international levels, to combat 
money laundering and the financing of terrorism. Its mission expanded 
to include counter-terrorism financing in October 2001. FATF has 
developed multiple partnerships with international and regional 
organizations in order to constitute a global network of organizations 
against money laundering and terrorist financing; 
Efforts: International standard-setters: The 40 Recommendations on 
Money Laundering: Constitute a comprehensive framework for anti-money- 
laundering designed for universal application. Permit country 
flexibility in implementing the principles according to the country's 
own particular circumstances and constitutional requirements. Although 
not binding as law, have been widely endorsed by international 
community and relevant organizations as the international standard for 
anti-money laundering. 

Efforts: International standard-setters: Entity and importance: The 
Special Recommendations on Terrorist Financing: FATF adopted eight 
special recommendations and recently added a ninth. FATF members use a 
self-assessment questionnaire of their country's actions to come into 
compliance. The nine deal with both formal banking and non-banking 
systems: Ratification and implementation of UN instruments; Criminalize 
the financing of terrorism and associated money laundering; Freeze and 
confiscate terrorist assets; Reporting suspicious transactions related 
to terrorism; International co-operation; Impose anti-money laundering 
requirements on alternative remittance systems; Strengthen customer 
identification measures in international and domestic wire transfers; 
Ensure that non-profit organizations are not misused; Detecting and 
preventing cross-border transportation of cash by terrorists and other 
criminals. 

Efforts: International standard-setters: Entity and importance: The Non-
Cooperative Countries and Territories (NCCT) List: One of FATF's 
objectives is to promote the adoption of international anti-money 
laundering/counter-terrorism financing standards by all countries. 
Thus, its mission extends beyond its own membership, although FATF can 
only sanction its member countries and territories. Thus, in order to 
encourage all countries to adopt measures to prevent, detect, and 
prosecute money launderers (i.e., to implement the 40 Recommendations) 
FATF adopted a process to identify non-cooperative countries and 
territories that serve as obstacles to international cooperation in 
this area and place them on a public list. An NCCT country is 
encouraged to make rapid progress in remedying its deficiencies or 
counter-measures may be imposed which may include specific actions by 
FATF member countries. Most countries make a concerted effort to be 
taken off the NCCT list because it causes significant problems to their 
international business and reputation. 

Efforts: International standard-setters: Entity and importance: 
Monitoring Member's Progress: Facilitated by a two-stage process: self 
assessments and mutual evaluations. In the self-assessment stage, each 
member annually responds to a standard questionnaire regarding its 
implementation of the recommendations. In the mutual evaluation stage, 
each member is examined and assessed by experts from other member 
countries. Ultimately, if a member country does not take steps to 
achieve compliance, membership in the organization can be suspended. 
There is, however, a sense of peer pressure and a process of graduated 
steps before these sanctions are enforced. 

Efforts: International standard-setters: Entity and importance: 
Methodology for Anti-money laundering/Counter-terrorist Financing 
Assessments: FATF developed and adopted a comprehensive mutual 
assessment methodology for the 40 and special recommendations based on 
consultations with IMF, World Bank, and other standard setters, which 
provides international agreement and cooperation among standard setters 
and others for a methodology for assessing anti-money-
laundering/counter terrorist-financing regimes based on the 40 and 
special recommendations. 

Efforts: International standard-setters: Entity and importance: 
International capacity-builders: Typologies Exercise: FATF issues 
annual reports on developments in money laundering through its 
typologies report, which keeps countries current with new techniques or 
trends. 

Entity and importance: International capacity-builders. 

Entity and importance: International Monetary Fund (IMF) and World 
Bank: World Bank helps countries strengthen development efforts by 
providing loans and technical assistance for institutional capacity 
building. The IMF mission involves financial surveillance and the 
promotion of international monetary stability; 
Efforts: International standard-setters: Research and Analysis and 
Awareness-Raising: Conducted work on international practices in 
implementing anti-money laundering and counter-terrorist financing 
regimes; issued Analysis of the Hawala System discussing implications 
for regulatory and supervisory response; and developed comprehensive 
reference guide on anti-money-laundering/counter terrorist-financing 
presenting all relevant information in one source. Conducted Regional 
Policy Global Dialogue series with country, World Bank and IMF, 
development banks, and FATF-style regional bodies covering challenges, 
lessons learned, and assistance needed; and developed Country 
Assistance Strategy that covers anti-money laundering and counter-
terrorism in greater detail in countries that have been deficient in 
meeting international standards. 

Efforts: International standard-setters: Entity and importance: 
Assessments: Worked in close collaboration with FATF and FATF-style 
regional bodies to a produce single comprehensive Methodology for anti- 
money laundering/counter-terrorist financing assessments; and engaged 
in a successful pilot program of assessments of country compliance with 
FATF recommendations. In 2004, adopted the FATF 40 and special 9 
recommendations as one of the 12 standards and codes for which Reports 
on the Observance of Standards and Codes can be prepared and made anti- 
money laundering/counter-terrorist financing assessments a regular part 
of IMF/World Bank work. World Bank and IMF staff participated in 58 of 
the 92 assessments conducted since 2002. 

Efforts: International standard-setters: Entity and importance: Egmont 
Group of Financial Intelligence Units: A forum for Financial 
Intelligence Units (FIU) to improve support for their respective 
national anti-money laundering and counter-terrorism financing 
programs. In June 2005 there were 101 member countries. The group 
fosters development of FIUs and the exchange of critical financial data 
among the FIUs.: Training and Technical Assistance: Organized training 
conferences and workshops, delivered technical assistance to individual 
countries, and coordinated technical assistance. Substantially 
increased technical assistance to member countries on strengthening 
legal, regulatory, and financial supervisory frameworks for anti-money- 
laundering/counter terrorist-financing. In 2002-2003 there were 85 
country-specific technical projects benefiting 63 countries and 32 
projects reaching more than 130 countries. Between January 2004 and 
June 2005 the World Bank and IMF delivered an additional 210 projects. 
In 2004, IMF and the World Bank decided to expand the anti-money 
laundering/counter-terrorist financing technical assistance work to 
cover the full scope of the expanded FATF recommendations following the 
successful pilot program of assessments. 

Entity and importance: Egmont Group of Financial Intelligence Units: A 
forum for Financial Intelligence Units (FIU) to improve support for 
their respective national anti-money laundering and counter-terrorism 
financing programs. In June 2005 there were 101 member countries. The 
group fosters development of FIUs and the exchange of critical 
financial data among the FIUs; 
Efforts: International standard- setters: The group is involved in 
improving interaction among FIUs in the areas of communications, 
information sharing, and training coordination. The Egmont Group's 
Principles for Information Exchange Between Financial Intelligence 
Units for Money Laundering Cases include conditions for the exchange of 
information, limitation on permitted uses of information, and 
confidentiality. Members of the Egmont Group have access to a secure 
private website to exchange information. As of 2004, 87 of the members 
were connected to the secure web. The group has produced a compilation 
of one hundred sanitized cases about the fight against money laundering 
from its member FIUs. Within the group there are five working groups--
Legal, Outreach, Training/Communications, Operations, and Information 
Technology. The Egmont group is focusing on expanding its membership in 
the Africa and Asia regions. 

Entity and importance: Counterterrorism Action Group (CTAG): CTAG 
includes the G-8 (Canada, France, Germany, Italy, Japan, Russia, the 
United Kingdom, and the United States) as well as other states, mainly 
donors, to expand counterterrorism capacity building assistance; 
Efforts: International standard-setters: CTAG goals are to analyze and 
prioritize needs and expand training and assistance in critical areas 
including counter-terrorism financing and other counterterrorism areas. 
CTAG also plans to work with the UN Counter-Terrorism Committee to 
promote implementation of Security Council Resolution 1373. In 2004, 
CTAG coordinated with FATF to obtain assessments of countries CTAG 
identified as priorities. 

Entity and importance: Regional entities. 

Entity and importance: FATF-Style Regional Bodies (FSRBs): Modeled 
after FATF, these groups have anti-money-laundering/counter terrorist- 
financing efforts as their objectives; Efforts: International standard-
setters: FSRBs encourage implementation and enforcement of FATF's 40 
recommendations and special recommendations. They administer mutual 
evaluations of their members, which are intended to identify weaknesses 
so that the member may take remedial action. They provide members 
information about trends, techniques, and other developments for money 
laundering in their typology reports. The size, sophistication, and the 
degree to which the FSRBs can carry out their missions vary greatly. 
The FSRBs are Asia/Pacific Group on Money Laundering, Caribbean 
Financial Action Task Force, Council of Europe MONEYVAL, Eastern and 
Southern African Anti-Money Laundering Group, Eurasian Group on 
Combating Money Laundering and Financing of Terrorism, Financial Action 
Task Force Against Money Laundering in South America, Middle East and 
North Africa Financial Action Task Force, Inter-governmental Action 
Group Against Money Laundering (West Africa). 

Entity and importance: Organization of American States--CICAD: Regional 
body for security and diplomacy in the Western Hemisphere with 34 
member states; Efforts: International standard-setters: In 2004, the 
commission amended model regulations for the hemisphere to include 
techniques to combat terrorist financing, development of a variety of 
associated training initiatives, and a number of anti-money 
laundering/counter-terrorism meetings. Its Mutual Evaluation Mechanism 
included updating and revising some 80 questionnaire indicators through 
which the countries mutually evaluate regional efforts and projects. 
Worked with International Development Bank and France to provide 
training for prosecutors and judges. Based on agreement with Inter-
American Development Bank for nearly $2 million, conducting two-year 
project to strengthen FIUs in eight countries. Evaluating strategic 
plans and advising on technical design for FIUs in region. 

Entity and importance: Asian Development Bank (ADB): Established in 
1966, the ADB is a multilateral development finance institution 
dedicated to reducing poverty in Asia and the Pacific. The bank is 
owned by 63 members, mostly from the region and engages in mostly 
public sector lending in its developing member countries; Efforts: 
International standard-setters: According to the ADB, it was one of the 
first multilateral development banks to address the money laundering 
problem, directly and indirectly, through regional and country 
assistance programs. The ADB Policy Paper, adopted on April 1, 2003, 
has three key elements: (1) assisting developing member countries in 
establishing and implementing effective legal and institutional systems 
for anti-money laundering and counter-terrorism financing, (2) 
increasing collaboration with other international organizations and aid 
agencies, and (3) strengthening internal controls to safeguard ADB's 
funds. The bank provides loans and technical assistance for a broad 
range of development activities including strengthening and developing 
anti-money laundering regimes. 

Entity and importance: Industry sector standard-setters. 

Entity and importance: Basel Committee on Banking Supervision: 
Established by the central bank Governors of the Group of Ten countries 
in 1974, formulates broad supervisory standards and guidelines and 
recommends statements of best practice in the expectation that 
individual authorities will take steps to implement them through 
detailed arrangements - statutory or otherwise - which are best suited 
to their own national systems; Efforts: International standard- 
setters: Three of the Basel Committee's supervisory standards and 
guidelines concern money laundering issues: (1) Statement on Prevention 
of Criminal Use of the Banking System for the purpose of Money 
Laundering (1988), which outlines basic policies and procedures that 
bank managers should ensure are in place; (2) Core Principles for 
Effective Banking Supervision (1997), which provides a comprehensive 
blueprint for an effective bank supervisory system and covers a wide 
range of topics including money laundering; and (3) Customer Due 
Diligence (2001), which also strongly supports adoption and 
implementation of the FATF recommendations. 

Entity and importance: International Association of Insurance 
Supervisors: Established in 1994, an organization of supervisors from 
more than 100 different countries and jurisdictions that promotes 
cooperation among regulators, sets international standards, provides 
training, and coordinates with other financial sectors; Efforts: 
International standard-setters: Anti-Money Laundering Guidance Notes 
for Insurance Supervisors and Insurance Entities (2002) is a 
comprehensive discussion on money laundering in the context of the 
insurance industry. Guidance is intended to be implemented by 
individual countries taking into account the particular insurance 
companies involved, the products offered within the country, and the 
country's own financial system. Consistent with FATF 40 Recommendations 
and Basel Core Principles for Effective Banking Supervision. Paper was 
updated as Guidance Paper on Anti-Money Laundering and Combating the 
Financing of Terrorism (2004) with cases of money laundering and 
terrorist financing. A document based upon these cases is posted on Web 
site and updated, and new cases that might result from the FATF 
typology project are to be added. 

Entity and importance: International Organization of Securities 
Commissions (IOSCO): Members regulate and administer securities and 
laws in their respective 105 national securities commissions. Core 
objectives are to protect investors; ensure that markets are fair, 
efficient, and transparent; and reduce systematic risk; Efforts: 
International standard-setters: Passed "Resolution on Money Laundering" 
in 1992. Principles on Client Identification and Beneficial Ownership 
for the Securities Industry (2004) is a comprehensive framework 
relating to customer due diligence requirements and complementing the 
FATF 40 recommendations. IOSCO and FATF have discussed further steps to 
strengthen cooperation among FIUs and securities regulators in order to 
combat money laundering and terrorist financing. 

Source: GAO, using information from FATF, United Nations, U.S. 
Department of State, U.S. Department of Treasury, and World Bank/IMF, 
Egmont Group, Asian Development Bank, Basel Committee on Banking 
Supervision, and CTAG. 

[A] A predicate offense is the underlying crime that produces the 
proceeds that are the subject of money laundering. 

[B] G-7 is short for "Group of 7" whose members are Canada, France, 
Germany, Japan, Italy, the United Kingdom, and the United States.

[End of table] 

[End of section] 

Appendix III: Terrorist Financing Working Group Membership and Program 
Development Process: 

According to the State, TFWG is made up of various agencies throughout 
the U.S. government and convened in October 2001 to develop and provide 
counter-terrorism finance training to countries deemed most vulnerable 
to terrorist financing. TFWG is co-chaired by State's Office of the 
Coordinator for Counterterrorism and the Bureau for International 
Narcotics and Law Enforcement Affairs and meets on a bi-weekly basis to 
receive intelligence briefings, schedule assessment trips, review 
assessment reports, and discuss the development and implementation of 
technical assistance and training programs. 

TFWG Membership: 

Agencies and offices participating in the TFWG include: 

Department of State: 

Office of the Coordinator for Counterterrorism: 
Bureau for International Narcotics and Law Enforcement Affairs, Crime 
Programs: 
Regional bureaus: 
Bureau for Economic and Business Affairs: 
Bureau of Diplomatic Security Office of Antiterrorism Assistance: 
United States Agency for International Development: 

Department of the Treasury: 

Terrorist Financing and Financial Crimes: 
Office of Technical Assistance: Financial Crimes Enforcement Network: 
Office of the Comptroller of the Currency: 
Internal Revenue Service--Criminal Investigation: 

Department of Justice: 

Office of Oversea Prosecutorial, Development, Assistance and Training, 
Asset Forfeiture, and Money Laundering Section: 
Counter Terrorism Section: 
Federal Bureau of Investigation: 
Drug Enforcement Administration: 

Department of Homeland Security: 

Bureau of Customs and Border Protection: 
Bureau of Immigration and Customs Enforcement: 

Other Participants: 

National Security Council: 
Central Intelligence Agency: 
Federal Deposit Insurance Corporation: 
Federal Reserve Board: 

TFWG Program Development Process: 

According to State the process is as follows: 

1. With input from the intelligence and law enforcement communities, 
State, Treasury, and the Department of Justice (Justice), identify and 
prioritize countries needing the most assistance to deal with terrorist 
financing. 

2. Evaluate priority countries' counter-terrorism finance and anti- 
money laundering regimes with Financial Systems Assessment Team (FSAT) 
onsite visits or Washington tabletop exercises. State-led FSAT teams of 
6-8 members include technical experts from State, Treasury, Justice, 
and other regulatory and law enforcement agencies. The FSAT onsite 
visits take about one week and include in-depth meetings with host 
government financial regulatory agencies, the judiciary, law 
enforcement agencies, the private financial services sector, and non- 
governmental organizations. 

3. Prepare a formal assessment report on vulnerabilities to terrorist 
financing and make recommendations for training and technical 
assistance to address these weaknesses. The formal report is shared 
with the host government to gauge its receptivity and to coordinate 
U.S. offers of assistance. 

4. Develop counter-terrorism financing training implementation plan 
based on FSAT recommendations. Counter-terrorism financing assistance 
programs include financial investigative training to "follow the 
money," financial regulatory training to detect and analyze suspicious 
transactions, judicial and prosecutorial training to build financial 
crime cases, financial intelligence unit development, and trade-based 
money laundering for over/under invoicing schemes for money laundering 
or terrorist financing. 

5. Provide sequenced training and technical assistance to priority 
countries in-country, regionally, or in the United States. 

6. Encourage burden sharing with our allies, international financial 
institutions (e.g., IMF, World Bank, regional development banks), and 
through international organizations such as the UN, United Nations, the 
UN Counterterrorism Committee, FATF on Money Laundering, or the Group 
of Eight (G-8) to capitalize on and maximize international efforts to 
strengthen counter-terrorism finance regimes around the world. 

[End of section] 

Appendix IV: Key U.S. Counter-Terrorism Financing and Anti-Money 
Laundering Training and Technical Assistance for Vulnerable Countries: 

Department/agency: State, Justice, Homeland Security, and the Treasury; 
Bureau/division/office: Multiple; 
Description of effort: International Law Enforcement Academies (ILEAs). 
Regional academies led by U.S. agencies partnering with foreign 
governments to provide law enforcement training including anti-money 
laundering and counter- terrorism financing. ILEAs in Gaborone, 
Botswana; Bangkok, Thailand; Budapest, Hungary; and Roswell, New 
Mexico, train over 2,300 participants annually on topics such as 
criminal investigations, international banking and money laundering, 
drug-trafficking, human smuggling, and cyber-crime. 

Department/agency: Board of Governors of the Federal Reserve System; 
Bureau/division/office: [Empty]; 
Description of effort: Provides financial regulatory training and 
technical assistance to central banks, foreign banking supervisors, and 
law enforcement officials in Washington, D.C. and abroad, and 
participates in U.S. interagency assessments of foreign government 
vulnerabilities. 

Department/agency: Federal Deposit Insurance Corporation; 
Bureau/division/office: [Empty]; 
Description of effort: Provides financial regulatory training through 
seminars and regional conference presentations in Washington, D.C. and 
abroad, and participates in U.S. interagency assessments of foreign 
government vulnerabilities. 

Department/agency: Homeland Security; Bureau/division/office: Bureau of 
Customs and Border Protection and Bureau of Immigration and Customs 
Enforcement; 
Description of effort: Provides law and border enforcement training and 
technical assistance to foreign governments, in conjunction with other 
U.S. law enforcement agencies and the ILEAs. Participates in 
assessments of foreign countries in the law and border enforcement 
arena. 

Department/agency: Justice; Bureau/division/office: Asset Forfeiture 
and Money Laundering Section; 
Description of effort: Assists in the drafting of money laundering, 
terrorist financing, and asset forfeiture legislation compliant with 
international standards for international and regional bodies and 
foreign governments. Provides legal training and technical assistance 
to foreign prosecutors and judges, in conjunction with Justice's Office 
of Overseas Prosecutorial Development, Training and Assistance. 
Sponsors conferences and seminars on transnational financial crimes 
such as forfeiting the proceeds of corruption, human trafficking, 
counterfeiting, and terrorism. Participates in U.S. interagency 
assessments of countries' capacity to block, seize, and forfeit 
terrorist and other criminal assets. 

Bureau/division/office: Department/agency: Counter Terrorism Section; 
Description of effort: Department/agency: Provides investigative and 
prosecutorial training and technical assistance to foreign 
investigators, prosecutors, and judges in conjunction with the Office 
of Overseas Prosecutorial Development, Training, and Assistance and 
other Department of Justice components. 

Bureau/division/office: Department/agency: Drug Enforcement 
Administration; 
Description of effort: Department/agency: Provides law enforcement 
training on international asset forfeiture and anti-money laundering to 
foreign governments, in conjunction with other Department of Justice 
components and through ILEAs. 

Bureau/division/office: Department/agency: Federal Bureau of 
Investigation; 
Description of effort: Department/agency: Provides basic and advanced 
law enforcement training to foreign governments on a bilateral and 
regional basis and through ILEAs and the Federal Bureau of 
Investigation's Academy in Quantico, Virginia. Developed a two-week 
terrorist financing course that was delivered and accepted as the U.S. 
government's model. Participates in U.S. interagency assessments of 
countries' law enforcement and counter-terrorism capabilities. 

Bureau/division/office: Department/agency: International Criminal 
Investigative Training Assistance Program; 
Description of effort: Department/agency: Provides law enforcement 
training and technical assistance to foreign counterparts abroad in 
conjunction with other Department of Justice components. 

Bureau/division/office: Department/agency/State: Office of Overseas 
Prosecutorial Development, Training and Assistance; 
Description of effort: Department/agency/State: Provides legal and 
prosecutorial training and technical assistance for criminal justice 
sector counterparts abroad and through ILEAs in drafting anti-money 
laundering and counter-terrorism financing statutes. Provides Resident 
Legal Advisors to focus on developing counter-terrorism legislation 
that criminalizes terrorist financing and achieves other objectives. 
Conducts regional conferences on terrorist financing, including a focus 
on charitable organizations. Participates in U.S. interagency 
assessments to determine countries' criminal justice system 
capabilities. 

Department/agency: State; Bureau/division/office: Office of the 
Coordinator for Counterterrorism and Bureau for International Narcotics 
and Law Enforcement Affairs; 
Description of effort: Coordinate and fund U.S. training and technical 
assistance provided by other U.S. agencies to develop or enhance the 
capacity of a selected group of more than two dozen countries whose 
financial sectors have been used to finance terrorism. Also manage or 
provide funding for other anti-money laundering or counter-terrorism 
financing programs for Department of State, other U.S. agencies, IlEAs, 
international entities, and regional bodies. Leads U.S. interagency 
assessments of foreign government vulnerabilities. 

Bureau/division/office: Diplomatic Security Anti-Terrorism Assistance 
Programs; 
Description of effort: Provides law enforcement training for foreign 
counterparts and through ILEAs to develop the skills necessary to 
investigate financial crimes. 

Bureau/division/office: U.S. Agency for International Development; 
Description of effort: Provides legal technical assistance to foreign 
governments by drafting legislation that criminalizes terrorist 
financing. Provides resident advisors to provide technical assistance 
to judicial officials in their home country. 

Department/agency: Treasury; Bureau/division/office: Financial Crimes 
Enforcement Network; 
Description of effort: Provides financial intelligence training and 
technical assistance to a broad range of government officials, 
financial regulators, law enforcement officers, and others abroad with 
a focus on the creation and improvement of financial intelligence 
units. FinCEN's IT personnel provide FIU technical assistance in two 
primary areas: analysis and development of network infrastructures and 
access to a secure web network for information sharing. Conducts 
personnel exchanges and conferences. Partners with other governments 
and international entities to coordinate training. Participates in 
assessments of foreign governments' financial intelligence 
capabilities. 

Bureau/division/office: Department/agency: Internal Revenue Service 
Criminal Investigation Division; 
Description of effort: Department/agency: Provides law enforcement 
training and technical assistance to foreign governments and through 
ILEAs to develop the skills necessary to investigate financial crimes. 

Bureau/division/office: Department/agency: Office of the Comptroller of 
the Currency; 
Description of effort: Department/agency: Provides financial regulatory 
training in Washington, D.C., and abroad for foreign banking 
supervisors. 

Bureau/division/office: Department/agency: Office of Technical 
Assistance; 
Description of effort: Department/agency: Provides a range of training 
and technical assistance including intermittent and long- term resident 
advisors to senior-level representatives in various ministries and 
central banks on a range of areas including financial reforms related 
to money laundering and terrorist financing. Conducts and participates 
in assessments of foreign government anti-money laundering regimes for 
the purpose of developing technical assistance plans. 

Bureau/division/office: Department/agency/Bureau/division/office: 
Office of Terrorist Financing and Financial Crime; 
Description of effort: Department/agency;
Description of effort: Participates in U.S. interagency assessments of 
countries' counter-terrorism financing and anti-money laundering 
capabilities. Provides technical advice and practical guidance on how 
the international anti-money laundering and counter-terrorist financing 
standards should be adopted and implemented. 

Source: GAO, using information from State, Treasury, Homeland Security, 
and Justice, and the federal financial regulators. 

[End of table] 

[End of section] 

Appendix V: Comments from the Department of Justice: 

U.S. Department of Justice: 
Criminal Division: 

September 29, 2005: 

Christine Broderick: 
Assistant Director, International Affairs and Trade: 
U.S. Government Accountability Office: 
441 G Street, NW: 
Washington, DC 20548: 

Dear Ms. Broderick, 

On August 26, 2005, the Government Accountability Office (GAO) provided 
the Department of Justice (DOJ) an electronic copy of its draft report 
entitled, "Terrorist Financing: Greater Strategic Planning and 
Coordination Needed to Improve U.S. Government Efforts to Combat 
Terrorist Financing Abroad." [Note 1] Several Department components 
reviewed the draft report. The Criminal Division and FBI forwarded 
minor comments and technical corrections to your staff electronically 
and appreciate that these will be incorporated as appropriate. We 
nevertheless have several larger substantive concerns with the report 
as drafted. 

Our foremost concern is that the report fails to recognize the 
significant role that DOJ plays in providing international technical 
assistance and training in the money laundering and terrorist financing 
areas. Beyond that, we are dismayed that the draft report's focus on 
the interaction of the Department of State (State) and the Department 
of Treasury (Treasury) has obscured the enormous contributions of the 
Terrorist Financing Working Group. The TFWG, in existence for almost 
four years, has succeeded in assessing and identifying terrorist 
financing deficiencies in priority countries, has avoided duplication 
of USG agencies' efforts in providing assistance to remedy these 
deficiencies, and has achieved considerable progress in even some of 
the most intransigent states. We solicit your attention to these 
important concerns. 

DOD's role in providing international assistance to combat terrorism 
and terrorist financing is well-recognized. Indeed, a high level inter- 
departmental decision has assigned Justice primacy within the USG 
interagency community in drafting foreign criminal laws (including 
money laundering and terrorist financing), reviewing the legal 
sufficiency of such laws, and providing prosecutorial training and 
development for the TFWG countries. This, of course is logical because 
as the Department with lead responsibility for the prosecution and 
investigation of terrorism and terrorist financing offenses, see 18 
U.S.C. § 2332b(f), DOJ is in the best position. to know what assistance 
we require from our international counterparts and what capacities it 
is critical that they possess to assist in the global tear on 
terrorism_ The foreign recipients of technical assistance as well as 
U.S. interests are best served when the agency with the particular 
competence for the training and technical assistance is the one to 
deliver (or to oversee the delivery of) the particular technical. 
assistance. 

As a result of its recognized prominence and expertise, DOJ has 
received a significant portion of the total funding managed by the TFWG 
and has completed the greatest number of programs. Unfortunately, DOD's 
substantial - and acknowledged-role in providing assistance to combat 
terrorism and terrorist financing is missed in the report's 
recommendation that "the Secretary of State and the Secretary of the 
Treasury, in consultation with the National Security Council and 
relevant government agencies, develop and implement an integrated 
strategic plan for the delivery of training and technical assistance." 
Failing to recognize DOJ's key role and participation. (through the 
Criminal Division, Asset Forfeiture Money Laundering and 
Counterterrorism Sections, and the Office of Overseas Prosecutorial 
Development, Assistance and Training, as well as through the FBI and 
DEA) in the development of any such strategy is a critical omission. By 
focusing on the disagreement over leadership and procedures and the 
roles of the Departments of State and Treasury essentially to the 
exclusion of the rest of the interagency community, GAO's report fails 
to meet its own objectives of examining USG efforts as a whole to 
coordinate anti-terrorism financing assistance. 

The report's critical flaw in omitting DOJ is repeated in its 
recommendation that "the Secretaries of State and Treasury enter into a 
Memorandum of Agreement . In providing counter-terrorism financing 
training and technical assistance programs to vulnerable countries." 
Although congressional appropriations flow in the first instance to 
State and Treasury, DOJ has been and is likely to continue to be the 
primary supplier of expertise and technical assistance in the areas, 
among others, of legislative drafting, law enforcement investigative 
assistance, and development of prosecutors and the judiciary in the 
terrorist financing. DOJ is a key player and therefore should be 
involved in all interagency deliberations and decisions, particularly 
those to develop strategies and set priorities for technical 
assistance. 

The TFWG has provided a workable interagency framework for developing 
and coordinating technical assistance. In DOJ's view, effective 
interagency coordination must respect, reflect, and implement each 
participating agency's specific spills and expertise. At the core what 
is needed is an overall coordinator whose authority is recognized and 
respected by all component participants. Contrary to the impression 
conveyed in the draft report, DOJ fully respects the honest broker role 
that State plays as the TFWG Coordinator. 

We do agree that the three departments - State, Justice; and Treasury - 
must work together to bring all efforts in this arena under the TFWG 
decision-.making process. In the: 

TFWG forum, each agency's areas of expertise are recognized. By working 
within that coordination structure, the United States can ensure the 
delivery of the best available training and technical assistance to the 
most vulnerable countries of the world. 

We appreciate this opportunity to offer what we believe are 
constructive and necessary comments to the draft report. 

Signed by:

Mary Lee Warren: 
Deputy Assistant Attorney General: 

[1]We note that the report specifically addresses the planning and 
coordination of USG international assistance efforts; which is a 
narrower issue than the .report's title implies. DOJ recommends that 
both the title and the introductory pages of the report be modified to 
accurately reflect the more limited scope of the study.

The following are GAO's comments on the Department of Justice's letter 
dated September 29, 2005. 

GAO Comments: 

1. Justice expressed concern that the draft report does not recognize 
the significant role it plays in providing international training and 
technical assistance in the money laundering and terrorist financing 
areas. The report acknowledges the roles of multiple agencies, 
including Justice, in delivering training and technical assistance to 
vulnerable countries. Under the first objective we broadly describe the 
U.S. efforts to provide training and technical assistance to vulnerable 
countries and note that U.S. offices and bureaus, primarily within the 
departments of the Treasury, Justice, Homeland Security, and State, and 
the federal financial regulators, provide training and technical 
assistance to countries requesting assistance through various programs 
using a variety of methods funded primarily by the State and Treasury. 
Moreover, appendix IV includes Table 2, which summarizes key U.S. 
counter-terrorism financing and anti-money laundering training and 
technical assistance programs for vulnerable countries and lists 
contributions provided by Justice, as well as other relevant agencies. 

2. Justice expressed dismay that the report focuses on the interaction 
of State and Treasury rather than the accomplishments of the TFWG. 
While a number of comments suggested including information indicative 
of the successes of agency efforts to address terrorist financing 
abroad, much of this information is outside of the scope of this 
report. However, we have made a number of changes in response to these 
comments. First, we have added information on the accomplishments of 
U.S. agencies to the report. Second, we have adjusted our first 
objective to clarify that we are providing an overview of U.S. 
agencies' efforts to address terrorist financing abroad. Third, as we 
note in other comments, we have adjusted the title of the report to 
better reflect the focus of our work. 

3. Justice notes that the report addresses a narrower issue than the 
title implies. We agree. We have revised the title of the report to 
focus on our key recommendation. 

4. According to Justice, our report contains a critical flaw because it 
does not recognize Justice as a key player nor does it place Justice on 
equal standing with State and Treasury in the report's recommendation 
and Memorandum of Agreement concerning training and technical 
assistance. Justice noted that it should be involved in all interagency 
deliberations and decisions. The report acknowledges the roles of 
multiple important agencies, including Justice, in delivering training 
and technical assistance to vulnerable countries. The report recommends 
that the Secretaries of State and the Treasury, develop and implement 
an integrated strategic plan in consultation with the NSC and relevant 
government agencies, of which Justice is one (see comment 1). We 
continue to believe that the Memorandum of Agreement should be limited 
to the Secretaries of State and Treasury. State and Treasury both 
primarily fund and support U.S. government anti-money laundering and 
counter-terrorist financing training and technical assistance programs, 
and in Treasury's case also provides considerable training and 
technical assistance abroad through current U.S. government employees 
and contractors. It is important that their programs and funding be 
integrated to optimize results. Other agencies are important 
stakeholders, as they are recipients of this funding and support and 
should benefit from improved coordination between these two agencies. 
Justice primarily receives funding from State and, according to 
Justice, State has been supportive of Justice's training and technical 
assistance efforts. 

5. Justice states that contrary to the impression conveyed in the 
draft, it fully respects the "honest broker role" that State plays as 
the TFWG coordinator. We have added information from Justice to more 
accurately portray Justice's support of State as TFWG coordinator in 
the Highlights page, Results in Brief, and body of the report. 

Additional Comments from the Department of Justice: 

Justice provided information in its technical comments that we believe 
are important to the key findings and recommendations in this report. 
While we have addressed Justice's technical comments as appropriate, we 
have reprinted and addressed specific technical comments below. 

1. Justice technical comment (on our Highlights page): 

"The draft Report reflects that "Justice officials confirmed that roles 
and procedures [of the TFWG] were a matter of dispute." The context 
suggests that DOJ [Department of Justice] does not accept the 
leadership of the State Department. That is not an accurate statement. 
DOJ strongly agrees that there needs to be a designated coordinator in 
this TFWG process and supports that role being given to the State 
Department, which has been an honest broker in the process and DOJ has 
abided by its procedures. DOJ agrees with the observation that the 
Treasury Department does not accept the State Department's leadership 
or the procedures. . . ." 

"Justice officials confirmed that roles and procedures were a matter of 
dispute." It would be more accurate to replace dispute with 
disagreement." 

GAO response: Justice made these two comments concerning the statement 
in the draft report that "Justice officials confirmed that roles and 
procedures were a matter of dispute." We added language to show that 
Justice is supportive of State's role as coordinator of TFWG efforts 
and substituted the word "disagreement" for "dispute" when stating that 
"Justice officials confirmed that roles and procedures were a matter of 
disagreement." 

2. Justice technical comment (on our second objective): 

"The draft report references that AFMLS [Asset Forfeiture and Money 
Laundering Section] stated that "the Department of State's leadership 
role is limited to its chairmanship of TFWG…" To be clear, this 
statement was not made to suggest that the TFWG be limited to priority 
countries, but rather that differing standards on procedures 
(particularly with DOJ leadership role in legislative drafting) for 
priority countries and vulnerable countries creates problems." 

GAO response: In response to this point, we removed the report's 
reference to AFMLS and noted that Justice officials told us that having 
procedures and practices for TFWG priority countries that differ from 
those for other vulnerable countries creates problems. 

[End of section] 

Appendix VI: Comments from the Department of State: 

Department of State: 
Ms. Jacquelyn Williams-Bridgers: 
Managing Director: 
International Affairs and Trade: 
Government Accountability Office: 
441 G Street, N.W. 
Washington, D.C. 20548-0001: 

Dear Ms. Williams-Bridgers: 

We appreciate the opportunity to review your draft report, TERRORIST 
FINANCING Greater Strategic Planning and Coordination Needed to Improve 
U.S. Government Efforts to Combat Terrorist Financing Abroad," GAO Job 
Code 320249. 

The enclosed Department of State comments are provided for 
incorporation with this letter as an appendix to the final report. 

If you have any questions concerning this response, please contact 
Robert Stapleton, Policy Advisor, Office of the Coordinator of Counter- 
Terrorism, at (202) 647-6487. 

Sincerely, 

Sid Kaplan (Acting): 

cc: GAO - Kathleen Monahan S/CT - John Dinger State/OIG - Mark Duda: 

Department Of State Comments On GAO Draft Report TERRORIST FINANCING - 
Greater Strategic Planning And Coordination Needed To Improve U.S. 
Efforts To Combat Terrorist Financing Abroad (GAO-06-19, GAO Code 
320249): 

Thank you for the opportunity to respond to the draft report Greater 
Strategic Planning and Coordination Needed to Improve U.S. Government 
Efforts to Combat Terrorist Financing Abroad. We appreciate that the 
report acknowledges the many initiatives the Executive Branch has taken 
to combat terrorist financing, and the success of these initiatives. We 
note, however, that there other initiatives whose details are 
classified that the GAO does not include in this report. 

While we understand the nature of the report is to recommend 
improvements to the interagency process, we are nonetheless 
disappointed at the lack of examples of the the Administration's 
success combating terrorism financing. We believe that readers will 
find more useful a balanced report that not only mentions the areas 
that GAO believes need improvement, but also better captures numerous 
successes of which we are quite proud, especially those of the 
Terrorist Finance Working Group (TFWG). 

Without mentioning accomplishments, we don't believe the report 
accurately portrays to its readers the overall effectiveness and 
success of the Administration's CT finance programs. The TFWG targets 
its training and technical assistance in the five areas that comprise 
an effective anti-money laundering/counterterrorist finance (AML/CTF) 
regime that meets international standards: legal framework, financial 
regulation, financial intelligence unit, financial investigations, and 
judges and prosecutors. There are currently 26 countries on the 
priority list to receive training and technical assistance. Of those 26 
countries, we are pleased that we have conducted 19 needs assessment 
missions and provided training and technical assistance in at least one 
area of an AML/CTF regime to over 20 countries. We have provided 
technical assistance and training in at least 4 of the 5 areas that 
comprise an effective AML/CTF regime to nine countries. We think it is 
useful for readers to understand that due in part to technical 
assistance training the TFWG provided, the Financial Action Task Force 
(FATF) removed two countries from its Non-Cooperative Countries and 
Territories List. All of these successes have prompted requests for 
training and technical assistance from not only priority and frontline 
countries, but also countries that are not on those lists. We believe 
the draft report could much more accurately portray the strength of our 
strategy to combat terrorism finance and all that we have done to 
implement it. 

The U.S. Government developed a number of aggressive policy initiatives 
and actions in order to curb terrorist financing following the 
terrorist attacks against the United States on September 11, 2001. It 
was a focal point of our effort to prevent future terrorist attacks at 
home and abroad. Our actions include blocking the property (including 
assets) of terrorists and their supporters and providing training and 
technical assistance to countries most vulnerable to terrorist 
financing in an effort to "extend our borders." Central to these plans 
is international cooperation and the State Department's leadership in 
this arena. 

We are proud of our coordinated effort to combat terrorist financing 
and gratified that the GAO draft report recognizes our success in 
several key areas. However, we are disappointed that the title, 
conclusions and recommendations of the report regarding the delivery of 
technical assistance do not accurately capture or portray all we have 
achieved. We offer comments below keyed to the report's recommendations 
and later general and technical comments which we believe provide 
useful clarification and context. 

Recommendation 1: The Secret of State and the Secretary of the 
Treasury, in consultation with the National Security Council and 
relevant government agencies, develop and implement an integrated 
strategic plan. 

We do not concur. Such a strategic plan already exists. In September 
2002, the National Security Council Deputies' Committee adopted an 
integrated strategy to coordinate the delivery of technical assistance 
to combat terrorist financing abroad and designated the State 
Department as the lead coordinator. This decision reaffirmed a December 
2001 Deputies Committee decision that the State Department's Office of 
the Coordinator for Counterterrorism (S/CT) should lead the effort to 
prioritize and coordinate the USG's counterterrorism training and 
assistance programs, including those pertaining to terrorist financing. 
The Counterterrorism Security Group (CSG) reaffirmed this decision in 
June 2002, as did the Treasury-chaired Terrorist Financing Policy 
Coordination Committee in July 2002, and an ad-hoc senior working group 
in August 2002. The strategy that emerged from this series of high- 
level meetings and their conclusions directly supports the "enabling 
weak states" objective of the National Strategy for: 

Combating Terrorism. It is reflected in the S/CT's Bureau Performance 
Plan, which also includes objectives and performance measures for 
counterterrorist financing programs. 

The integrated counterterrorism (CT) finance strategy tasks State with 
leading the coordination of delivery of all capacity building programs 
in the area of terrorism financing. In addition, it puts rightful and 
special emphasis on targeting priority and frontline states vulnerable 
to terrorist financing. It also provides guidance on implementation, 
and establishes TFWG chaired by the Department of State's Office of the 
Coordinator for Counterterrorism (S/CT} and Bureau of International 
Narcotics and Law Enforcement Affairs (INL). The TFWG includes 
representatives of all key stakeholders from the Departments of 
Homeland Security, Justice, and Treasury, as well as financial 
regulatory agencies, and the intelligence and law enforcement 
communities. 

In order to operationalize the strategy, State led the development in 
the TFWG of a process to identify priority countries for assistance, 
based on consideration of intelligence community analysis of the 
vulnerabilities, importance to U.S. security, and capacity to absorb 
U.S. assistance in key states of anti-money laundering/terrorist 
financing concern. The TFWG process ensures that its actions are 
coordinated with broader U.S. counterterrorism efforts in terms of 
priorities and the most effective use of human and financial resources. 
We believe that State has provided strong and necessary leadership to 
implement the strategy. However, we emphasize that the process has been 
inclusive, and all key agencies helped to develop and agreed to abide 
by the integrated strategy. Key stakeholders also actively participate 
in implementing the strategy, any disagreements that arise are resolved 
and we expect the TFWG to continue and enhance its record of success 
following this GAO report. 

In addition to determining U.S. priorities under the strategy, the TFWG 
carefully plans, discusses and coordinates important decisions related 
to scheduling and implementing all counterterrorism finance foreign 
assistance programs brought to it. If the country team, interagency and 
host government agree on the implementation plan, the TFWG determines 
the necessary funding for State to obligate to the agencies with the 
appropriate counterterrorism finance and anti-money laundering 
expertise. State carefully monitors and can account for all of the 
funding Congress has appropriated for training programs coordinated 
through the TFWG. State provided an accounting for such obligations and 
expenditures to the Congress in a classified report in May 2004. 

The TFWG has been very diligent in developing methods to measure its 
success, and continues to discuss better methods and ways to measure 
its progress. As an important part of that process, TFWG members 
discuss issues regarding strategies developed for certain countries and 
revise them according to reporting from posts and experts who have 
conducted recent onsite missions. 

Recommendation 2: The Secretaries of State and the Treasury enter into 
a Memorandum of Agreement concerning counterterrorism financing and 
anti-money laundering training and technical assistance. 

We do not concur. There already is an interagency agreement on these 
issues. Under the procedures approved by the Deputies Committee and 
other guidance developed under the NSC, the interagency developed, 
agreed to, and is implementing a strategy for leading and coordinating 
the provision of training and technical assistance to combat terrorist 
financing. The strategy outlines the roles of the agencies that 
participate in the TFWG, and each participant recognizes these roles. 
Experts from the various agencies comprise the assessment missions led 
by the State Department, and each representative has the lead in 
drafting the appropriate section as it relates to his/her area of 
technical expertise. 

There are established methods to resolve disputes that may arise during 
the interagency process. The co-chairs, of the TFWG, or any of its 
members, may raise an issue during a meeting. If the interested parties 
cannot reach a consensus through the TFWG process, the parties can 
raise the issue at the Training and Assistance Subgroup (TASG) of the 
Counterterrorism Security Group (CSG) or their representatives can 
discuss them at a CSG meeting. However, it is rare that the TFWG 
process cannot resolve issues. 

The primary responsibility of the TFWG is to coordinate all training 
and technical assistance to ensure that the United States Government 
effectively harnesses all its resources and capabilities and that the 
money the Congress allocates for CTF training and technical assistance 
is spent efficiently and effectively. A series of high-level groups and 
a series of detailed documents thoroughly memorializes these issues. 
Unfortunately many are not referenced or described in the report. 

We do not believe any additional formal documents are necessary. If 
there were to be such a document, we believe it should include all 
agencies engaged in providing training and technical assistance, not 
just State and Treasury. 

Recommendation 3: The Secret of the Treasury provide in its annual 
Terrorist Assets Report to Congress more complete information on the 
nature and extent of asset blocking in the United States. 

This recommendation is incomplete in that it makes no mention of the 
State Department's important role in blocking assets and promoting 
international cooperation to achieve it. In particular, we are 
disappointed that the GAO report omits the State Department's role in 
designations to combat terrorist financing. The Secretary of State 
energetically exercises her designation authorities under the 
Antiterrorism and Effective Death Penalty Act of 1996, Section 411 of 
the USA PATRIOT ACT of 2001 (8 U.S.C. § 1182), Executive Order 12947, 
and Executive Order 13224. The report makes no mention of those 
important tools against terrorist financing. 

State also plays an active role in building international support for 
measures to combat terrorist financing including designations 
promulgated by the Secretary of Treasury and Secretary of State. The 
State Department's Economic Bureau (EB), coordinates policy 
implementation at the working level, largely through the network of 
Terrorism Finance Coordinating Officers (TFCOs) located at every 
embassy worldwide. The Bureau of International Organization Affairs 
(10) ensures designations related to al-Qaida, the Taliban, or Usama 
bin Laden are made worldwide obligations through the UN 1267 Committee. 

The Administration believes that it is crucial that the United States 
wage a strong, effective and coordinated fight against terrorist 
financing. That effort must and is bringing to bear the capabilities 
and resources of all relevant agencies. We're proud of our success in 
this key area. We hope these comments add useful information, context 
and clarity to the GAO report. 

General Comments: 

In addition to our concerns with the recommendations we note above, 
State is concerned with a number of issues within the report's 
narrative. For example, we believe that a different title would more 
accurately capture the report's research and findings. We believe that 
the report's narrative acknowledges that many, in fact most, of the 
USG's efforts to combat terrorist financing abroad are extremely 
effective. Therefore, State suggests that the GAO create a new title 
that better and positively describes the broad U.S. efforts to combat 
terrorism overseas, or alternatively, that makes clear that any 
critical comments are limited to the' provision of training and 
technical assistance to combat terrorist financing abroad. 

No interagency process is without flaws, but we believe there is much 
evidence that the TFWG is one of the most successful examples of 
interagency cooperation. Disagreements between members are usually 
resolved amicably through the procedures established in the Deputies 
Committee's Summary of Conclusions. We believe there is strong buy-in 
to the strategy, grounded on all agencies' dedication to complete the 
mission, ensure the success of our training and technical assistance, 
and achieve our nation's goals. There are outside forces that can 
interfere with the delivery of training and technical assistance and 
prevent certain projects from occurring, such as a lack of political 
will by the recipient nation or unexpected occurrences that would 
endanger the safety of the participants of the mission. The TFWG 
members address these issues during biweekly meetings to plan 
accordingly and pool their resources to overcome whatever issues may 
arise. 

We understand the GAO's need for unclassified documentation to provide 
the basis for the statements made by interagency participants and have 
provided as much unclassified information as possible. We believe that 
some gaps in the report are due to the inability of the interagency to 
document the full scope of TFWG's success with unclassified material. 
We regret if conclusions based on unclassified documents only do not 
accurately portray the interagency process and leave room for incorrect 
inferences by the consumers of this product. We hope that this 
information provides a more positive and accurate portrait of the TFWG. 

Finally, State would like to underscore again that we are perplexed by 
the draft report's conclusion that the Administration lacks an 
integrated strategy to combat terrorism financing. The NSC Deputies, in 
a Summary of Conclusions that built on a series of high-level 
interagency meetings and resulting documents, provides clear guidance 
on how the USG should provide technical assistance and training to 
combat terrorist financing. The members of TFWG have cooperatively 
operationalized the Deputies' guidance. And, S/CT's Bureau Performance 
plan further documents that strategy. 

The following are GAO's comments on the Department of State's letter 
dated October 3, 2005. 

GAO Comments: 

1. State noted in its comments that it does not believe the report 
accurately portrays the overall effectiveness and success of the 
Administration's counter-terrorism finance programs. While a number of 
comments suggested including information indicative of the successes of 
agency efforts to address terrorist financing abroad, much of this 
information is outside of the scope of this report. However, we have 
made a number of changes in response to these comments. First, we have 
added information on the accomplishments of U.S. agencies to the 
report. For example, we added information on the number of needs 
assessment missions conducted and the number of countries receiving 
training and technical assistance. Second, we have adjusted our first 
objective to clarify that we are providing an overview of U.S. 
agencies' efforts to address terrorist financing abroad. Third, as we 
note in other comments, we have adjusted the title of the report to 
better reflect the focus of our work. 

2. State commented that it has an integrated strategic plan which is 
evidenced through classified NSC Deputies Committee documentation and 
the Department of States' Office of the Coordinator for 
Counterterrorism's Bureau Performance Plan. We reviewed the NSC 
Deputies Committee documentation, which includes minutes, an agreement, 
and conclusions--all of which serve as the NSC guidance for the TFWG. 
We also reviewed the performance plan, which includes the Office of the 
Coordinator for Counterterrorism's objectives and performance measures 
for counter-terrorist financing programs and provides some performance 
indicators, such as the number of assessments and training plans 
completed. Although some aspects of a strategic plan for delivering 
training and technical assistance are included in these documents, we 
do not agree that this guidance and performance plan includes the 
elements necessary to constitute an integrated strategy for the 
coordination of the delivery of training and technical assistance 
abroad. In addition to not having a fully integrated strategy on paper, 
the NSC guidance lacks clarity, particularly regarding coverage of non- 
priority countries. The guidance also lacks familiarity and clear buy- 
in among the pertinent levels of agencies. As a result, the documents 
did not guide the actions of the agencies in actual practice. 

3. State commented that "if the country team, interagency and host 
government agree on an implementation plan, TFWG determines the 
necessary funding for State to obligate to each agency with the 
appropriate expertise." State added that it carefully monitors and can 
account for all of the funding Congress has appropriated for training 
programs coordinated through the TFWG, as provided in a classified 
report. Our report did not specifically address TFWG-reported 
obligations and expenditures, as this information focusing on priority 
countries was classified. Our report focused on the lack of 
transparency in the overall amount of funds available for all counter- 
terrorism training and technical assistance programs within State and 
the Treasury. Because funding is embedded with anti-money laundering 
and other programs, the U.S. government does not have a clear 
presentation of the budget resources that State and Treasury allocate 
for training and technical assistance to counter-terrorist financing as 
differentiated from other programs. Although various officials told us 
that funding for counter-terrorism financing training and technical 
assistance is insufficient, the lack of a clear presentation of 
available budget resources makes it difficult for decision-makers to 
determine the actual amount that may be allocated to these efforts. 

4. We do not agree with State's comment that TFWG has been very 
diligent in developing methods to measure its success. As of July 2005, 
the U.S. government, including TFWG, did not have a system in place to 
measure the results of its efforts to deliver training and technical 
assistance and to incorporate this information into integrated planning 
efforts. Our report acknowledges that an interagency committee was set 
up to develop a system to measure results and other efforts were 
undertaken to track training and technical assistance; however, 
according to agency officials, these efforts have not yet resulted in 
performance measures. 

5. Based on our review of NSC and other documents provided by State, 
the U.S. government lacks an integrated strategy to coordinate the 
delivery of training and technical assistance. The classified document 
serving as an interagency agreement lacks clarity as well as 
familiarity and buy-in from all agencies and levels of leadership 
within TFWG, particularly Treasury. The NSC guidance was agreed to at 
the deputy level, and we found that many of the working level staff 
were not familiar with the guidance or the interpretation of the 
guidance and Treasury staff clearly did not have the same 
interpretation as State staff. 

6. State noted that there are established methods to resolve disputes 
that arise through the interagency process and it is rare that the TFWG 
process cannot resolve issues. While there are guidelines for resolving 
disputes, in practice there are long-standing disagreements that have 
not been resolved. Based on discussions with agency officials and 
review of documentation, our report provides examples of long-standing 
disagreements that have not been resolved such as the use of 
contractors and procedures for conducting assessments of country's 
needs for training and technical assistance. 

7. State commented that it is the primary responsibility of the TFWG to 
coordinate all training and technical assistance and notes the 
existence of formal supporting documents. State commented that while it 
does not believe additional formal documents are necessary, if a 
Memorandum of Agreement concerning counter-terrorism financing and anti-
money laundering training and technical assistance were to be 
developed, State commented that it should include all agencies involved 
in providing training and technical assistance. Our review as well as 
Treasury's technical comments clearly shows that Treasury does not 
accept State's position that TFWG's primary responsibility is to 
coordinate all counter-terrorist financing training and technical 
assistance abroad. Treasury limits this role to priority countries. 
Based on our review of NSC and other documents provided by State, the 
U.S. government lacks an integrated strategy to coordinate the delivery 
of training and technical assistance. The classified document, which 
according to State serves as an interagency agreement, lacks clarity, 
familiarity, and buy-in from all levels of leadership within TFWG, 
particularly Treasury. State and Treasury both fund and support U.S. 
government anti-money laundering and counter-terrorist financing 
training and technical assistance programs, and Treasury also provides 
considerable training and technical assistance abroad through 
contractors and U.S. government employees. It is important that their 
programs and funding are integrated to optimize results. Other agencies 
are important stakeholders as they are recipients of this funding and 
support and would benefit from improved coordination between these two 
agencies. 

8. State comments that our recommendation to the Secretary of the 
Treasury regarding Treasury's annual Terrorist Assets Report to 
Congress was incomplete because it makes no mention of State's role in 
blocking assets. Specifically we recommend that Treasury provide more 
complete information on the nature and extent of asset blocking in the 
United States in its annual Terrorist Assets Report to Congress. We did 
not incorporate the Secretary of State into this recommendation because 
the scope of our request for our third objective focused solely on the 
accountability issues Treasury faces in its efforts to block 
terrorists' assets. State also expressed disappointment that our report 
did not include details on State's role in terrorist designations. 
While our report provides an overview of how U.S. government agencies 
use designations to disrupt terrorist networks, we recognize that State 
has an important role and added language to provide more detail on 
State's role in targeting individuals, groups, or other entities 
suspected of terrorism or terrorist financing. 

9. In response to agency comments, we have revised the title of the 
report to focus on our key recommendation. 

10. The scope of our second objective was to examine U.S. efforts to 
coordinate the delivery of training and technical assistance to 
vulnerable countries. The effort does not have key stakeholder buy-in 
on roles and practices, a strategic alignment of resources with needs, 
or a system to measure performance and incorporate this information 
into its planning efforts. According to agency officials, the lack of 
effective leadership leads to less than optimal delivery of training 
and technical assistance to vulnerable countries. Without a system to 
measure performance, the U.S. government and TFWG cannot ensure that 
its efforts are on track. 

11. Although this report is based on unclassified information, GAO 
reviewed all unclassified and classified information provided by State 
in support of TFWG efforts. We believe that findings, conclusions, and 
recommendations accurately portray the interagency process. Moreover, 
we reviewed and incorporated additional information provided by State 
subsequent to issuing our draft to the agencies for comment to ensure 
that all available information was assessed. 

[End of section] 

Appendix VII: Comments from the Department of the Treasury: 

Department of the Treasury:
Washington, D.C.

October 5, 2005:

Mr. Loren Yager:
Director:
International Affairs and Trade: Government Accountability Office: 441 
G Street. N.W.
Washington, D.C. 20548-0001:

RE: Request for Comments on the draft GAO Report on Terrorist 
Financing: Greater Strategic Planning and Coordination Needed to 
Improve U.S. Government Efforts to Combat Terrorist Financing Abroad 
(GAO-06-19):

Dear Mr. Yager:

Thank you for the invitation to respond to your office's draft report 
entitled "Terrorist Financing: Greater Strategic Planning and 
Coordination needed to Improve US. Government Efforts to Combat 
Terrorist Financing abroad (GAO-06-19)." On behalf of the Treasury 
Department, we would like to provide these general comments, and 
transmit in the enclosed Annex more detailed commentary and information 
related to your draft report.

The draft report's focus on the U.S. Government's (USG) coordination of 
certain technical assistance and training to combat the financing of 
terrorism (CFT) is of great interest to Treasury because of the close 
relationship of such assistance and training with two core aspects of 
Treasury's mission: (i) safeguarding the international financial system 
from terrorist abuse, and (ii) providing comprehensive technical 
assistance and training to facilitate the growth and development of 
healthy financial systems abroad. The relationship between certain CFT 
technical assistance and training coordination and these core aspects 
of Treasury's mission is discussed in greater detail below. Treasury 
also shares a common goal with the GAO in wishing to improve the 
effectiveness of U.S. technical assistance to combat terrorist 
financing, particularly with respect to certain priority countries. We 
welcome suggestions as to how Treasury, together with other relevant 
USG agencies, can better achieve that goal.

With this in mind, our first comment on your draft report concerns its 
scope. The draft report establishes its goal as: (i) describing the 
entire scope of USG efforts to combat terrorist `financing abroad; (ii) 
examining in greater detail USG efforts to coordinate the delivery of 
technical assistance and training to designated "priority" and certain 
"vulnerable" countries; and (iii) examining the usefulness of the 
annual report on terrorist assets (referred to as the "Terrorist Assets 
Report " or "TAR") and performance measures to assess OFAC's terrorist 
financing designation efforts. This is an extraordinarily broad range 
of issues for the GAO to address in a single draft report.

With respect to the first objective, the draft report necessarily falls 
considerably short in attempting to describe, in less than five pages, 
the comprehensive efforts of the USG to combat terrorist financing 
abroad. On a related but more fundamental level, the draft report fails 
to place its second objective of examining aspects of certain technical 
assistance and training provided to certain priority and vulnerable 
countries against the larger backdrop of: (i) U.S. efforts to combat 
terrorist financing abroad, and (ii) Treasury's broader technical 
assistance mission in such priority and vulnerable countries. By 
failing to establish this contest, the draft report implies that "U.S. 
Government efforts to combat terrorist financing abroad" (the phrase 
used in the title of the draft report) can be assessed by examining 
U.S. coordination of CFT technical assistance and training in certain 
priority and vulnerable countries (the actual focus of the draft 
report).

Consistent with the primary focus of the draft report, Treasury 
suggests modifying the title of the draft report along the lines of the 
following: "Integrated U.S. Strategic Plan Needed to Improve the 
Coordination of Counterterrorism Finance Training and Technical 
Assistance to Certain Priority Countries." As such, the first section 
of the draft report, with appropriate modifications, rather than 
attempting to address the full range of distinct CFT initiatives, could 
provide a useful introduction of the initiatives most relevant to the 
particular technical assistance and training efforts that represent the 
overwhelming focus of the draft report.

To help put this suggestion in perspective, consider how the 
coordination of technical assistance to select priority countries fits 
within the much broader strategy of Treasury and the USG to combat 
terrorist financing abroad. This strategy, described initially as the 
first of three fundamental goals in the 2003 National Money Laundering 
Strategy (2003 NSMLS), includes the following core aims:

* Applying targeted financial sanctions against individuals and 
entities comprising terrorist organizations and their support networks;

* Establishing international standards to combat terrorist financing; 

* Ensuring global compliance with these international standards; 

* Addressing terrorist financing mechanisms of particular concern; 

* Facilitating international information sharing; and,

* Facilitating outreach and cooperation with the private sector and the 
international financial community:

These strategic aims implicate Treasury's fundamental responsibilities. 
As you are aware, the Congress and the Administration established last 
year the Office of Terrorism and Financial Intelligence (TFI) as a 
central pillar within Treasury to formulate and coordinate the 
Department's CFT and anti-money laundering (AML) efforts, which include 
working with the interagency community to advance each of the strategic 
aims identified above.

The draft report focuses on only a small part of the efforts to combat 
terrorist financing abroad. As explained in the 2003 NMLS, the 
strategic aim delineated in the third bullet point above --ensuring 
global compliance with international standards - has as one of its 
three components providing capacity-building to key countries. It is 
this component that is implicated (in part) by the technical assistance 
and training to select priority and vulnerable countries that are the 
focus of the draft, report. As such, the draft report focuses on one 
aspect of a singular component of one of seven core strategic aims that 
the USG has identified and is pursuing to combat terrorist financing 
abroad. While the draft report describes some of these strategic aims 
in briefly discussing U.S. efforts to combat terrorist financing 
abroad, this discussion is incomplete and fails to puce the 
coordination of CFT technical assistance to certain priority and 
vulnerable countries in the context of the overall U.S. CFT strategy.

Moreover, the draft report's discussion of this issue mischaracterizes 
the USG's relationship with international financial institutions--
namely, the International Monetary Fund and the World Bank. Treasury 
bears a fundamental responsibility in managing this relationship which 
is crucial towards advancing global compliance with international CFT 
standards. These and other inaccuracies are more exhaustively covered 
in the attached Annex.

The draft report's focus on coordinating CFT technical assistance and 
training to certain priorities and vulnerable countries also fails to 
place these efforts in the context of Treasury's broader technical 
assistance and training mission in many of these countries, Treasury's 
Office of International Affairs comprehensively manages this mission 
through the Office of Technical Assistance (OTA) - to advance core 
competency in the following strategic financial areas:

* Tax policy and administration;

* Government debt issuance and management;

* Financial institutions policy and regulation;

* Budget policy and management; and:

* Financial crime and enforcement.

OTA pursues these strategic aims through a multi-disciplined, macro- 
economic approach to foreign technical assistance, typically advanced 
by tong-term Treasury resident advisors to counterpart finance 
ministries or central banks. These resident advisors are supplemented 
by short-term experts and technicians to comprise specific teams 
designed to promote the five core interests identified above.

OTA has dedicated specific resources since 1997 in its Financial 
Enforcement Program (FEP) to providing technical assistance to combat 
financial crimes, of which the CFT component has become more prominent 
in recent years. OTA is unique in that all of its five technical 
assistance teams, including FEP, work synergistically to ensure that 
the economic reforms promoted by the USG are approached in a holistic, 
comprehensive manner. Each team supports the work of the others so that 
financial systems are comprehensively strengthened and protected.

Treasury's broad CFT and technical assistance interests, briefly 
summarized above, drive the Department's participation in the State 
Departments coordination of interagency and international CFT technical 
assistance and training to certain priority countries. Treasury 
believes that such efforts have been often successful. In contrast, the 
draft report, while focusing on the difficulties of. and the inevitable 
differences in viewpoints arising from, the interagency process, fails 
to give due credit to the relevant Departments, and the USG as a whole, 
for the successes that have been achieved through unprecedented 
interagency coordination.

The enclosure provides some detailed responses to the text of the draft 
report, as well as additional information which we think might help to 
provide a more balanced understanding of the issues that are the focus 
of the report. As a final comment with respect to the overall scope of 
the draft. report, we noted earlier the report's third objective of 
examining, on pages 18-20, the usefulness of Treasury's Annual Assets 
Report. This section on accountability issues related to OFAC terrorist 
blocking efforts appears somewhat incongruous in a report dedicated to 
CFT technical assistance in training.

While you might wish to consider whether this forms an appropriate part 
of the report, we have taken the liberty to suggest a revised text that 
more accurately reflects Treasury's understanding of the nature of this 
annual report; the challenges Treasury faces in assessing the impact of 
economic sanctions on the Global War on Terrorism; and the status of 
performance measures for OFAC. We recognize that OFAC's performance 
measures, which relate to OFAC's internal administrative effectiveness 
in implementing its terrorist sanctions programs, require adjusting. 
OFAC is in the process of revising its performance indicators and has 
established milestones for completing this process. If the section is 
retained, we recommend that the revised text suggested in the attached 
Annex be substituted for pages 18-20 of the draft report and that the 
recommendations section of the report (pages 5 and 7) be modified 
accordingly.

Treasury agrees that the GAO has raised a number of important questions 
with respect to the coordination of CFT technical assistance and 
training in priority countries. Although the USG devotes significant 
resources to CFT assistance and training, competing demands upon scarce 
CFT expertise do frame Treasury's view on issues such as its preference 
for the use of contractors in certain situations. Treasury supports the 
GAO's call for tracking USG CFT technical assistance and training 
efforts to priority countries and developing performance measures to 
assess and improve the effectiveness of these efforts. But expectations 
must be tempered by a realistic understanding of the challenges in 
working with foreign countries to develop and implement effective CFT 
regimes.

Sincerely,

Signed by:
Stuart A. Levey:
Under Secretary:
Office of Terrorism and Financial Intelligence:
Department of the Treasury

Signed by:
Timothy D. Adams:
Under Secretary:
Office of International Affairs:
Department of the Treasury:

The following are GAO's comments on the Department of Treasury's letter 
dated October 5, 2005. 

GAO Comments: 

1. Treasury notes in its comments that the report falls short in 
describing the comprehensive efforts of the U.S. government efforts to 
combat terrorist financing abroad. While a number of comments suggested 
including information indicative of the successes of agency efforts to 
address terrorist financing abroad, much of this information is outside 
of the scope of this report. However, we have made a number of changes 
in response to these comments. First, we have added information on the 
accomplishments of U.S. agencies to the report. For example, we added 
that Treasury has coordinated bilateral and international technical 
assistance with the FATF and the international financial institutions, 
such as the World Bank and International Monetary Fund, to draft legal 
frameworks, build necessary regulatory and institutional systems, and 
develop human expertise. Second, we have adjusted our first objective 
to clarify that we are providing an overview of U.S. agencies' efforts 
to address terrorist financing abroad. Third, as we note in other 
comments, we have adjusted the title of the report to better reflect 
the focus of our work. 

2. Treasury suggests that the title of the draft report be modified to 
be consistent with the primary focus of the report. We agree and have 
revised the title of the report to focus on the key recommendations. 

3. Treasury states that the report does not accurately characterize 
Treasury's role in managing the U.S. government's relationship with 
international financial institutions. We recognize that Treasury plays 
an important role and added more examples of Treasury's relationship 
with international financial institutions as provided in Treasury's 
technical comments. For example, we added Treasury's relationship with 
an intergovernmental body --the Financial Action Task Force--in setting 
international standards for anti-money laundering and counter- 
terrorism financing regimes. In addition, we added mentions of 
Treasury's relationship with the Asian Development Bank, IMF and the 
World Bank. 

4. Treasury comments that the report focuses on the difficulties and 
differences arising from the interagency process to coordinate training 
and technical assistance to combat terrorist financing abroad and fails 
to give due credit for the successes that have been achieved through 
unprecedented interagency coordination. Our report concludes that the 
U.S. government lacks an integrated strategy to coordinate the delivery 
of training and technical assistance because key stakeholders do not 
agree on roles and practices, there is not a clear presentation of what 
funding is available for counter-terrorism financing training and 
technical assistance, and a system has not been established to measure 
performance and incorporate this information into its planning efforts. 
Our report notes that, according to agency officials, the lack of 
effective leadership leads to less than optimal delivery of training 
and technical assistance to vulnerable countries. However, we have 
included some interagency accomplishments such as numbers of 
assessments in our description of training and technical assistance 
efforts under objective 1. To best provide evidence of the 
effectiveness of the U.S. government efforts, the U.S. government 
should continue to develop a system to measure performance and 
incorporate this information into its planning efforts. 

5. In its comments, Treasury states that the report's third objective 
on accountability issues appears somewhat incongruous in a report 
dedicated to U.S. counter-terrorism training and technical assistance. 
Our requesters asked us to address specific issues related to U.S. 
efforts to combat terrorist financing abroad, including accountability 
issues Treasury faces in its efforts to block terrorists' assets held 
under U.S. jurisdiction, particularly with regard to the Treasury's 
annual Terrorist Assets Reports. 

6. We reviewed the revised text provided by Treasury for our report's 
third objective on accountability issues the Department faces in its 
efforts to block terrorists' assets held under U.S. jurisdiction. We 
noted that we already cover many of Treasury's points in our report. 
However, in some cases we incorporated technical information to help 
clarify the challenges the department faces in assessing the impact of 
terrorist designation activities. In addition, we updated the report to 
reflect the most current status of Treasury's efforts to establish 
performance measures for OFAC. Additionally, we acknowledge that the 
language in the mandate for the Terrorist Assets Reports did not 
explicitly design the reports as an accountability measure of the 
Office of Foreign Assets Control's effectiveness in identifying and 
blocking terrorist assets; however, nothing in the statutory language 
or in the congressional intent underlying the mandate precludes 
Treasury from compiling and reporting information in the manner in 
which we have suggested in this report. Furthermore, we believe that 
inclusion of comparative information and additional explanation 
regarding significant shifts between years will enhance program 
reporting and congressional oversight. 

Additional Comments from the Department of the Treasury: 

In addition, Treasury provided information in its technical comments 
that we believe are important to the key findings and recommendations 
in this report. While we have addressed Treasury's technical comments 
as appropriate, we have reprinted and addressed specific technical 
comments below. 

1. Treasury technical comment (on our Results in Brief): 

"The second paragraph of this section states, "First, although the 
Department of State asserts that it leads the overall effort to deliver 
training and technical assistance to all vulnerable countries, the 
Department of Treasury does not accept State in this role." This 
statement should be clarified to reflect that while Treasury does 
acknowledge State's role, it believes that State's function is 
necessarily one of coordination. State's role in this process is not to 
actually "deliver" assistance. Rather, Treasury believes that State's 
role is coordinating each USG agency's personnel and expertise to allow 
them to deliver the needed training in commonly agreed upon priority 
countries. Treasury also acknowledges that the draft report is helpful 
in pointing out that this coordination can and should be improved to 
facilitate more effective delivery of assistance in priority 
countries." 

GAO response: As Treasury states above, they believe that State's role 
is limited to coordination for priority countries and does not accept 
State's position that it leads all U.S. training and technical 
assistance efforts to vulnerable countries, not just priority 
countries. We have adjusted the language in our report and it now 
reads, "First, Treasury, a key stakeholder, does not accept State's 
position, based on statements in NSC guidance, that it leads all U.S. 
counter-terrorism financing training and technical assistance efforts 
to vulnerable countries." 

2. Treasury technical comment (on our first objective): 

"The first paragraph contains the following statement "According to the 
Department of State, its Office of the Coordinator for Counterterrorism 
is charged with directing, managing, and coordinating all U.S. 
government agencies' efforts to develop and provide counter-terrorism 
financing programs." This statement is inaccurately overbroad, as 
Treasury (and likely other government agencies) has developed numerous 
counterterrorist financing programs to advance the core strategic aims 
identified in the 2003 NMLS [National Money Laundering Strategy]. It is 
more accurate to say that the department of State coordinates the USG 
provision of CFT [combat the financing of terrorism] technical 
assistance and training to priority countries." 

GAO response: GAO's draft statement was attributed to State and was 
supported by State, so we did not change it in the report. Rather we 
added the information provided by Treasury to the section on "U.S. 
Effort Lacks Buy-in from Key Stakeholder on Roles and Procedures" 
noting that Treasury asserts that State overstates its role and that 
the role is limited to coordinating other U.S. agency's provision of 
counter-terrorist financing training and technical assistance in 
commonly agreed upon TFWG priority countries and notes that there are 
numerous other efforts outside of States' purview. 

3. Treasury technical comment (on our third objective): 

"Substitute [text] with the following language: 'However, the TAR 
[Terrorist Asset Report] was not mandated or designed as an 
accountability measure for OFAC's effectiveness in assisting U.S. 
persons in identifying and blocking assets of persons designated under 
relevant Executive orders relating to terrorism. The report, as 
mandated, was intended to provide only a snapshot view in time of 
terrorist assets held in the United States by terrorist countries and 
organizations.'" 

GAO response: We acknowledge that the language in the mandate for the 
Terrorist Assets Reports did not explicitly design the reports as an 
accountability measure of the Office of Foreign Assets Control's 
effectiveness in identifying and blocking terrorist assets; however, 
nothing in the statutory language or in the congressional intent 
underlying the mandate precludes Treasury from compiling and reporting 
information in the manner in which we have suggested in this report. 
Furthermore, we believe that inclusion of comparative information and 
additional explanation regarding significant shifts between years will 
enhance program reporting and congressional oversight. 

4. Treasury technical comment: 

"Substitute [text] with the following language: 'OFAC officials have 
advised that OFAC's new performance measures are expected to be 
completed by December 1, 2005, and its new strategic plan is expected 
to be completed by January 1, 2006.'" 

GAO response: We updated the report to reflect the most current status 
of Treasury's efforts to establish performance measures for OFAC. 

5. Treasury technical comment (on our third objective): 

"In the second paragraph, the following language: "We also recommend 
that the Secretary of Treasury provide more complete information on the 
nature and extent of asset blocking in the United States in its 
Terrorist Assets Report to Congress and establish milestones for 
developing meaningful performance measures on terrorist designations 
and asset blocking activities…." Should be replaced with the following 
language: 

. . . ."We also recommend Congress consider discontinuing the 
requirement that Treasury produce the annual Terrorist Assets Report to 
Congress. The report, based upon the input of numerous government 
agencies, provides a snapshot of the known assets held in the United 
States by terrorist-supporting countries and terrorist groups at a 
given point in time. These numbers may fluctuate during each year and 
between years for a number of policy-permissible reasons. The amount of 
assets blocked under a terrorism sanctions program is not a primary 
measure of a terrorism sanctions program's effectiveness, and countries 
that have been declared terrorist supporting, and whose assets are not 
blocked by a sanctions program, are already wary of holding assets in 
the United States.'" 

GAO response: We noted Treasury's position on this recommendation in 
our report. However, we continue to believe that the annual Terrorist 
Assets Report, with the incorporated changes, would be useful to 
policymakers and program managers in examining their overall 
achievements of the U.S. efforts to block terrorists' assets. 

[End of section] 

Appendix VIII: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Loren Yager, (202) 512-4347: 

Acknowledgments: 

In addition to the contact named above, Christine Broderick, Assistant 
Director; Tracy Guerrero; Elizabeth Guran; Janet Lewis; and Kathleen 
Monahan made key contributions to this report. Martin de Alteriis, Mark 
Dowling, Jamie McDonald, and Michael Rohrback provided technical 
assistance. 

(320249): 

FOOTNOTES 

[1] A More Secured World: Our Shared Responsibility, United Nations, 
December 2004. 

[2] See GAO, Terrorist Financing: U.S. Agencies Should Systematically 
Assess Terrorists' Use of Alternative Financing Mechanisms, GAO-04-163 
(Washington, D.C.: Nov. 14, 2003). 

[3] Alternative financing mechanisms are outside the mainstream 
financial system and include the use of commodities (cigarettes, 
counterfeit goods, illicit drugs, etc.), bulk cash, charities, and 
informal banking systems. 

[4] State identified these countries as major money laundering 
countries among the 55 jurisdictions of primary concern in its March 
2005 International Narcotics Control Strategy Report. 

[5] World Bank and International Monetary Fund, Reference Guide to Anti-
Money Laundering and Combating the Financing of Terrorism, (2003). As 
noted in the Guide, the formal definition of terrorist financing is 
provided in the United Nations International Convention for the 
Suppression for the Financing of Terrorism (1999). The difficult issue 
is that a universally accepted definition for "terrorism" has not been 
established due to significant political and national implications that 
differ from country to country. The United Nations continues to work to 
gain worldwide consensus on the definition of terrorism. 

[6] OFAC's mandate is to require all U.S. persons, including financial 
institutions, to block targeted assets located in the United States or 
under the control of a U.S. person outside of the United States. 

[7] A Financial Intelligence Unit is a central, national agency 
responsible for receiving, analyzing, and disseminating financial 
information concerning suspected proceeds of crime or required by 
national regulation in order to counter money laundering. 

[8] International standards are represented by the United Nations 
International Convention for the Suppression of the Financing of 
Terrorism and by the FATF's forty recommendations on money laundering 
and nine special recommendations on terrorist financing. 

[9] State and Treasury designations authorities are set forth in the 
Antiterrorism and Effective Death Penalty Act of 1996, Section 411 of 
the USA PATRIOT ACT of 2001, and relevant Executive orders [Executive 
Order (E.O.) 13224, as amended by E.O. 13268, Blocking Property and 
Prohibiting Transactions with Persons Who Commit, Threaten to Commit, 
or Support Terrorism, and E.O. 12947, Prohibiting Transactions with 
Terrorists Who Threaten to Disrupt the Middle East Peace Process.] U.S. 
persons are prohibited from having dealings and must block the assets 
within U.S. jurisdiction of terrorists and terrorist groups that are 
designated by the departments of State and the Treasury, and those who 
are owned or controlled by, acting for or on behalf of, or materially, 
financially, or technologically assisting designated terrorists, 
terrorist groups, or their supporters. 

[10] According to a State official, designation and asset blocking do 
not come at the expense of taking appropriate law enforcement action 
but frequently complement each other. There are cases where in which 
operational law enforcement action can be initiated quickly to track, 
prosecute, and shut down terrorists. In other cases, for instance when 
long-term investigations are under way, the better option may be to 
designate for asset blocking until law enforcement actions can be 
undertaken. 

[11] According to Justice, asset forfeiture remains the most powerful 
tool for disrupting and dismantling criminal enterprises of any nature, 
including terrorist financing. 

[12] Agencies include relevant bureaus, divisions, and offices of the 
Departments of Defense, Homeland Security, Justice, State, and 
Treasury, and the intelligence community. 

[13] FATF mutual evaluations are conducted using a detailed methodology 
to assess compliance with the FATF recommendations on money laundering 
and terrorist financing. This methodology has been endorsed by the IMF, 
World Bank, and other FATF-style regional bodies. Ultimately, if a 
member country does not take steps to achieve compliance, membership in 
the organization can be suspended. 

[14] The TFWG is co-chaired by State's Office of the Coordinator for 
Counterterrorism and the Bureau for International Narcotics and Law 
Enforcement Affairs. 

[15] The number of priority countries recently expanded from 19. 
According to State, TFWG conducts a process to identify priority 
countries for assistance based on consideration of intelligence 
community analysis of the vulnerabilities, importance to U.S. security, 
and capacity to absorb U.S. assistance in key states of anti-money 
laundering/terrorist financing concern. According to NSC guidance, all 
work in frontline countries is also to be coordinated within TFWG. 

[16] See GAO, Electronic Government: Potential Exists for Enhancing 
Collaboration on Four Initiatives, GAO-04-6, pages 17-21 (Washington, 
D.C.: Oct. 10, 2003) for a discussion of key practices for interagency 
collaboration. 

[17] According to Treasury, Treasury has developed numerous counter- 
terrorist financing programs to advance the core strategic aims 
identified in the 2003 National Money Laundering Strategy. 

[18] According to Justice, a high level inter-departmental decision has 
assigned Justice the lead among the inter-agency community in drafting 
foreign criminal laws, reviewing the legal sufficiency of such laws, 
and providing prosecutorial training and development for the TFWG 
countries. 

[19] Pub. L. 99-83. Sec. 502, codified at 22 USC 2349aa-7. See also 
Section 1(e) of the State Department Basic Authorities Act, as amended, 
codified at 22 U.S.C. 2651a(e). 

[20] Pub. L. 105-277 (Div. A, Title II, sec. 589). This provision has 
been codified at 22 U.S.C. 2151aa. 

[21] According to State officials, the number of TFWG priority 
countries has grown and may change again in the future. During the 
course of our review the number of priority countries increased from 19 
to about two dozen. According to Treasury, U.S. agencies were providing 
assistance under one set of procedures before these countries became 
TFWG priority countries and were subject to TFWG procedures. 

[22] According to Treasury officials, OTA funds other Treasury offices 
conducting assessments or delivering training, such as TFFC and FinCEN 
in conjunction with its programs. Also according to Treasury, OTA has 
funded the expenses of other agencies to deliver technical assistance 
when it was in support of an existing work plan and to meet performance 
objectives. 

[23] According to OTA officials, Justice and other U.S. agencies do not 
always have the time and resources to comment on draft laws. Justice 
officials agree, but maintained that this problem will only be resolved 
when other agencies acknowledge Justice's jurisdiction and expertise. 
According to Treasury, in many cases, countries pass laws that don't 
meet international standards, even after having received substantial 
commentary from the U.S. government. 

[24] When signing a contract for placement of a resident advisor, OTA 
also signs an agreement with foreign officials that it advises to not 
share sensitive information with third parties. 

[25] A TFWG assessment conducted by a Financial Systems Assessment Team 
includes meetings with host government financial regulatory agencies, 
the judiciary, law enforcement agencies, the private financial services 
sector, and non-government organizations. 

[26] According to State TFWG officials, per NSC guidance, all work in 
frontline countries is to be coordinated within TFWG and some frontline 
countries are also priority countries. However, frontline countries are 
not subject to the same procedures as priority countries which are the 
main focus of TFWG, according to Department of State and Department of 
the Treasury officials. According to State TFWG officials, frontline 
countries contain terrorist cells. 

[27] See GAO, Executive Guide: Effectively Implementing the Government 
Performance and Results Act, GAO/GGD-96-118 (Washington, D.C.: June 
1996). 

[28] OTA also funds the travel of all Treasury participants in the 
assessment process and has funded other U.S. government employees in 
support of an existing work plan and to meet performance objectives. 

[29] TFWG expenditures are classified. 

[30] An official from State's Bureau of International Narcotics and Law 
Enforcement Affairs Office told us that according to Office of the 
Counterterrorism Coordinator officials, the fiscal year 2005 budget was 
reduced by $300,000 giving a total of $17.2 for fiscal years 2002-2005. 

[31] An official from State's Bureau of International Narcotics and Law 
Enforcement Affairs Office told us that in fiscal year 2004 about $2.3 
million, which had been carried forward from prior years, was 
transferred to a development program, reducing the total to $7 million. 

[32] State's Bureau of International Narcotics and Law Enforcement 
Affairs Office provided a document showing about $4.1 million in 
Support for European Democracy funds obligated for anti money 
laundering training between Fiscal Years 2002-2004. 

[33] Department of State expenditures for priority countries are 
classified. 

[34] According to OTA officials, their contractors must have relevant 
and recent active anti-money laundering experience, speak a foreign 
language, and have overseas experience. Senior Department of the 
Treasury officials support this claim and according to the NSC 
guidance, contractor personnel are to be used to supplement U.S. 
resources, with some caveats including that deference be given to those 
U.S. government institutions with substantive equities in the outcome 
of the missions. 

[35] State generally funds other, non-State agencies - including OTA -
-to provide training to foreign governments, whereas OTA generally 
funds contractors, the majority of whom are former U.S. government 
employees, to do so. 

[36] This analysis pertains to the nineteen countries originally 
prioritized by the Terrorist Financing Working Group-it does not 
include the seven additional countries added in March 2005. 

[37] It became unclear at our meeting with OPDAT and State as to 
whether the database should be classified. Justice had not classified 
the database, because officials were under the impression that it was 
only the ranking of priority countries that was classified, while State 
maintained that it was the listing of priority countries that was 
classified. 

[38] Section 304 of Public Law 102-138 as amended by Public Law 103-236 
(22 U.S.C. § 2656g) requires Treasury to submit the Terrorist Assets 
Reports to the Committee on Foreign Relations and the Committee on 
Finance of the Senate and to the Committee on International Relations 
and the Committee on Ways and Means of the House. 

[39] The 2004 Terrorist Assets Report listed the international 
terrorist organizations as al Qaeda, HAMAS, Mujahedin-E Khalq 
Organization, New People's Army, Palestinian Islamic Jihad, Kahane 
Chai, and the Taliban. This figure does not include amounts under 
review or investigation. 

[40] The 2004 Terrorist Assets Report listed the state sponsors of 
terrorism as Cuba, Iran, Libya, North Korea, Sudan, and Syria. Of the 
$1.6 billion, $1.5 billion in assets are blocked because of economic 
sanctions imposed by the United States. 

[41] The Terrorist Assets Reports include information on "assets in the 
United States," which include blocked assets held in the United States 
and in U.S. jurisdiction and nonblocked assets of terrorist countries 
and international terrorist designees. Nonblocked assets include those 
assets belonging to entities under sanctions programs that do not 
contain blocking provisions (Iran and Syria are the only two such 
entities identified in the 2004 report). 

[42] According to OFAC, amounts blocked for terrorist entities may 
shift year to year for policy-acceptable purposes. For example, funds 
may be unblocked when the U.S. government terminates a sanctions 
program or when OFAC issues exceptions to sanctions programs in 
accordance with applicable law. 

[43] Treasury's 2004 Annual Performance and Accountability Report 
states that Treasury proposes to discontinue the use of this indicator 
in 2005. 

[44] Sanctioned entities include hostile foreign governments, corrupt 
regimes, foreign drug cartels, and other sanctioned targets determined 
by the President, the Secretary of State, or the Congress. 

[45] Pub.L. No. 103-62 (August 3, 1993). According to GPRA, the agency 
shall consult with the Director of the Office of Management and Budget 
to determine that it is not feasible to express the performance goal in 
a measurable form. 

[46] Currently, OFAC's efforts are guided by Treasury's overall 
strategic plan. 

[47] See GAO, Executive Guide: Effectively Implementing the Government 
Performance and Results Act, GAO/GGD-96-118 (Washington, D.C.: June 
1996); and GAO, Electronic Government: Potential Exists for Enhancing 
Collaboration on Four Initiatives, GAO-04-6, p. 21 (Washington, D.C.: 
Oct. 10, 2003) for a discussion of key practices for interagency 
collaboration. 

[48] The GAO reports we reviewed include: GAO, Results-Oriented 
Government: GPRA Has Established a Solid Foundation for Achieving 
Greater Results, GAO-04-38 (Washington, D.C.: March 10, 2004) and GAO, 
Agency Performance Plans: Examples of Practices That Can Improve 
Usefulness to Decision makers, GAO/GGD/AIMD-99-69 (Washington, D.C.: 
February 26, 1999). 

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