FROM THE OFFICE OF PUBLIC AFFAIRS

Mr. Chairman and distinguished members of the Subcommittee, thank you for this opportunity to describe the Department of the Treasury's strategy and procedures used to coordinate the placement of overseas personnel with the Department of State.

The Office of Enforcement along with the Office of International Affairs, at Main Treasury, and several key bureaus of the Treasury Department, have had an international presence for more than fifty years. Each office has a direct strategic, supportive or crucial enforcement role in implementing US Government policy, yet an ongoing review of positions abroad is vital for security, cost and policy reasons. Moreover, this is a timely subject given our country's ongoing efforts to combat the global scourge of terrorism, both at home and abroad. The demands on our resources abroad are expanding and the need to coordinate the Treasury Department's efforts to protect our homeland with the Department of State and other departments and agencies is essential. Our ability to share information, work directly with foreign counterparts, and the ability to react quickly to changing trends is essential not only for our battle against terrorism but for other critical missions such as controlling transnational criminal behavior, promoting U.S. interests in foreign markets, and providing essential technical assistance and training to our counterparts overseas.

Mr. Chairman, allow me then to address the issues you raised in your invitation letter. I will offer you background on Treasury's overseas presence as well as a brief description of how our efforts and strategies are coordinated with the Department of State.

In November of 1999, the Overseas Presence Advisory Panel in the 21^st Century (OPAP) was published. OPAP was established by the Secretary of State, with support from the President and Congress, following the bombings of the U.S. embassies in Nairobi and Dar Es Salaam in August of 1998. OPAP's mission was to consider the future of our nation's overseas representation (other than the military), to appraise its condition, and to develop recommendations on how best to organize and manage our overseas posts.

Few national policy issues impact on so many Americans, so significantly, and so persistently as international criminal enterprises including acts of terrorism, illicit drugs, and financial as well as cyber-crime. The costs of transnational crimes from fraud, intellectual property piracy, industrial theft, and corporate bribery total about $130 billion annually. The cost of illicit drugs supplied from abroad on this nation's social fabric is incalculable. The fear, death and destruction from acts of terrorism is chilling. The UN estimates that the total take from transnational organized crime at a staggering $1.5 trillion a year. We can trace some aspects of all of these crime threats to virtually every country.

As mentioned above, coordination of our international presence is essential to ensure that the respective missions of the various agencies and departments, including the Department of the Treasury, are fulfilled and that the U.S. government is speaking with a unified, coordinated voice abroad.

The Department of the Treasury coordinates its strategic and performance goals and objectives, as required by the Government Performance and Results Act (GPRA), with other Federal agencies including the Departments of State, Defense, Justice, Commerce, and Agriculture which have significant international responsibilities.

Treasury's goals and objectives are fully integrated into the United States Strategic Plan for International Affairs (February 1999) and involve these national and international interests:

• Expand exports and open markets;
• Maintain global growth and stability;
• Promote economic development;
• Protect American citizens abroad;
• Manage the entry of visitors and immigrants;
• Safeguard the borders of the United States;
• Combat international terrorism, crime, and narcotics trafficking;
• Support the establishment and consolidation of democracies; and
• Uphold rights.

Our efforts abroad, therefore, and our strategic placement of personnel are guided by these objectives. Though we have continued to focus on all of these missions, the critical and global nature of the terrorist threat the United States is facing and the seminal role that the Treasury Department and its Bureaus play in these efforts have required that we emphasize our Enforcement efforts abroad with respect to attacking all aspects of terrorism.

Treasury's overseas staffs contribute directly to their respective embassy annual work plans, called Mission Performance Plans (MPPs). Treasury officials here in Washington receive and review these plans and provide the State Department, other Federal agencies, and the embassies with recommendations on program performance and resource levels.

Treasury officials meet routinely with State Department program and overseas buildings operations staff to ensure that Treasury presence at posts where major construction is planned is appropriate and sized right to accomplish Treasury's missions.

The Department of the Treasury reports annually to the State Department on the number of staff positions, by Treasury component (bureau, office), by embassy/consulate, with proposed changes for the next three years.

The Department of the Treasury follows the interagency clearance process to secure the approval of the U.S. Ambassador (officially called the Chief of Mission). Treasury submits detailed justification for all proposed overseas staffing changes, additions or subtractions, to the Chief of Mission, with a copy to the Department of State. State officials also provide to the Chief of Mission and to the Department of the Treasury, its views on the necessity of overseas staffing changes proposed by Treasury.

The increasing demands on the Treasury regarding homeland security, terrorist financing, and international financial markets requires a vibrant overseas Treasury presence.

It is important to note that this total includes Americans posted abroad, local hires, foreign national and personal contractors. The breakdown of Treasury personnel abroad as reported to OMB is as follows:

• Departmental Offices, including technical assistance, personnel total 112 persons;
• The Customs Service accounts for a total of 369 persons abroad;
• The U.S. Secret Service has a total of 93 persons abroad;
• The Bureaus of Alcohol, Tobacco, and Firearms accounts for 5 persons abroad
• The Internal Revenue Service, both civil and criminal divisions, has 58 persons abroad; and
• The Office of Comptroller of Currency (OCC) has 4 bank examiners stationed in London.

After the horrific attacks of September 11, 2001, the nation focused its attention on the global terrorist threat presented by al-Qaida and other related groups. For the Treasury Department this meant increasing security at the borders and in cyberspace, devising aggressive efforts to better screen outbound and inbound passengers and cargo, and attacking terrorist financing at the operational and systemic level.

As you are aware, Mr. Chairman, on September 24, 2001, President Bush stated, "We will direct every resource at our command to win the war against terrorists, every means of diplomacy, every tool of intelligence, every instrument of law enforcement, every financial influence. We will starve the terrorists of funding." The President directed the Department of the Treasury to lead the nation's war against terrorist financing -- to identify, disrupt, and dismantle global terrorist financing networks.

Treasury, in close partnership with the State Department, the Defense Department, the Department of Justice, the Federal Bureau of Investigation, the intelligence community, and many other parts of the federal government, has been dealing with terrorist financing on multiple levels since September 11th. We have concentrated much of our efforts and resources on identifying, tracing, and blocking terrorist-related assets. In this endeavor, we have collected the financial expertise, information, and authorities that are unique to the Treasury Department to attack terrorist financing on all fronts. We have also engaged the world, in bilateral and multilateral fora, to ensure international cooperation in our anti-terrorist campaign. All of these efforts have required continued international cooperation and coordination at the operational, financial, and structural levels. Allow me to highlight briefly the efforts the Treasury Department has taken to date to tackle the global problem of terrorist financing.

In furtherance of this mandate, the President issued Executive Order (E.O.) 13224 on September 24, 2001, which grants the Secretary of the Treasury, in consultation with the Attorney General and the Secretary of State, the authority to block the assets of individuals who support or finance terrorist groups. To date, the United States has designated 202 entities and individuals as terrorists or terrorist supporters under this Executive Order and frozen approximately $34 million in assets. Internationally, 161 countries/jurisdictions have blocking orders in force and over $70 million in terrorist assets have been blocked internationally. A portion of the amount linked to the Taliban has recently been unblocked for use by the new Afghan Interim Authority.

The international scope of this effort is exemplified best in two recent designations. On April 19, 2002, the G-7 Finance Ministers jointly designated 9 individuals and 1 entity as terrorists or supporters related to al-Qaida. This was the first joint list created and affected multilaterally. Prior to that designation, the United States and the Kingdom of Saudi Arabia took a historic step on March 11, 2002, by jointly designating the Bosnian and Somali branches of the Saudi-based charity, al Haramain.

These blocking actions internationally are complemented by our work to ensure that the international financial system is not corrupted by those who would use funds to support terrorist groups. We have worked closely with the U.N. Counter-terrorism Committee, the G-7, G-8, G-20, regional groups like the European Union, the Asia Pacific Economic Community (APEC), and the Association of Southeast Asian Nations (ASEAN) (as well as the international financial institutions and regional banks) to confront the systemic and regulatory issues to secure the international financial system and to promote changes in nation's laws to facilitate the battle against terrorist financing.

The prime example of this work comes from our leadership in the Financial Action Task Force (FATF) on Money Laundering, which is now committed to the fight against terrorist financing. At the October 2001 Special Plenary in Washington, D.C., FATF issued 8 Special Recommendations regarding terrorist financing that are quickly becoming the international standard by which countries should address terrorist financing. In addition, the leadership of the Financial Crimes Enforcement Network (FinCEN) in the Egmont Group of Financial Intelligence Units (FIUs) to create expedited ways of sharing information has important in following the money trail.

The work on these fronts is complemented by the Treasury's commitment to provide training and technical assistance to our counterparts abroad in law enforcement and finance ministries and central banks to ensure that they have the means to attack terrorist financing. This is an important component of our long-term strategy since we must help countries meet the demands of the international community and give them the tools to combat terrorist financing in a way that will benefit the entire global community.

As noted, our fight against terrorist financing is a global effort. As a result, we have engaged in increased activities abroad that are critical to our mission.
Operation Green Quest

October 25, 2001, Treasury created Operation Green Quest ("Green Quest"), a new multi-agency financial enforcement initiative intended "to augment existing counter-terrorist efforts by bringing the full scope of the government's financial expertise to bear against systems, individuals, and organizations that serve as sources of terrorist funding."  In conjunction with OFAC, Green Quest is aimed at identifying, freezing and seizing the accounts and assets of terrorist organizations that pose a threat to the United States and to all nations of the world.  This task force is led by the Customs Service, and includes the Internal Revenue Service, the Secret Service, the Bureau of Alcohol Tobacco and Firearms (ATF), Treasury's Office of Foreign Asset Control (OFAC), Financial Crimes Enforcement Network (FinCEN), the Postal Inspection Service, the Federal Bureau of Investigation (FBI), the Department of Justice, and the Naval Criminal Investigative Service (NCIS).  Green Quest brings together the extensive financial expertise of the Treasury Bureaus along with the exceptional experience of our partner agencies and departments to focus on terrorist financing.

Green Quest has complemented the work of OFAC in identifying terrorist networks at home and abroad, and it has served as an investigative arm in aid of blocking actions. Green Quest's work has led to 12 arrests, 6 indictments, the seizure of nearly $4.4 million, and bulk cash seizures-cash smuggling-of over $12.5 million.

Much of the work being conducted by Green Quest, along with the FBI and other government agencies, has concentrated on international collaboration. Green Quest agents have traveled abroad to follow leads, exploit documents recovered, and provide assistance to foreign governments.  In this effort, Green Quest has made full use of overseas Customs Attachés and other international assets to investigate suspect networks and to gather information for its own use and the use of OFAC. Green Quest's work, in combination with the work of OFAC, serves as a seminal part of our international enforcement efforts.

The President's September 23^rd Executive Order greatly expanded the ability of OFAC to block the assets of all property and interests in property, in the United States or within the possession or control of a U.S. person, of foreign individuals and entities determined by the President to have engaged in, threatened or supported grave acts of terrorism against the United States or U.S. nationals. The powers derived from this Executive Order have formed the heart of the U.S. efforts to block terrorist-related assets domestically and internationally. As a result of the need to effect blocking efforts internationally, OFAC has engaged in numerous overseas missions to discuss relevant compliance issues with allies abroad. For example, OFAC currently has an analyst serving in Riyadh to help with the ongoing cooperation on the financial front with the Kingdom of Saudi Arabia.

After September 11^th, the Treasury established a task force to work with countries and monitor their efforts to track and block terrorists' financial assets. This task force is composed of international economists and financial analysts from International Affairs and Enforcement's Office of Foreign Asset Control. Treasury enlisted support from ministries of finance and central banks around the world to assist efforts to immobilize and/or confiscate the financial assets of terrorist organizations and deny such organizations use of the international banking system.

Certain countries crucial to this effort have expressed the desire to cooperate more fully with the United States, but they do not possess the investigative apparatus to identify financial assets belonging to terrorist organizations, nor do they have the legal framework necessary to freeze the bank accounts of these organizations. As a result, $3 million in Emergency Response Funds were made available to Treasury's Office of International Affairs to assist foreign governments, primarily their finance ministries and central banks, in combating terrorist financing. Most of the current funding is being used to train staff of foreign governments (anti-terrorism, financial investigations, money laundering) in country, using short -term advisors. Treasury has already placed a resident advisor in Kabul, Afghanistan to monitor aid donations and expenditures by the Afghan Finance Ministry.

Treasury financial attaches play a critical role in the development of US international economic policy by deepening our understanding of macroeconomic and financial market developments and policies and their potential implications for U.S. national interests. Financial attaches develop extensive contacts with finance ministries, foreign regulatory authorities, central banks, and financial market participants that offer a unique view of market developments in their respective countries. This unique perspective lends itself to a more thorough understanding of potential policy implications and a more rapid translation of new U.S. policy on the ground, a critical capability given today's rapidly changing market conditions.

The Treasury is using its assets abroad to deal not only with terrorist financing and terrorism generally but also to deal with transnational crime, which often forms a nexus with terrorist groups. The following is a synopsis of the work being done abroad and the overarching strategies of the Treasury Bureaus charged with protecting the U.S. financial system and trade.

As you know, Mr. Chairman, the Secret Service's investigative roots began with its creation in 1865 to suppress counterfeiting. In addition to the demands of the Secret Service's protective mission, the Secret Service continues to provide the nation with a very productive and efficient investigative program. The thrust of the Secret Service's investigative efforts and authority is to protect our currency and financial and banking systems from criminal acts or from attacks used as tools component of our homeland security. The financial infrastructure and confidence in that infrastructure is critical. Furthermore, as the association between terrorist activities/funding and transnational identity fraud, financial institution fraud and counterfeiting becomes more apparent, the role of the Secret Service's investigative resources and expertise will have long reaching benefits that will directly impact homeland security on all fronts.

The Secret Service is extremely active in cooperative investigations with foreign law enforcement authorities regarding the counterfeiting of U.S. currency, and has extraterritorial jurisdiction to prosecute foreign counterfeiters in the United States under Title 18 USC 470. The Service is the sole U.S. law enforcement agency responsible for protecting our nation's currency. There is no concurrent or overlapping jurisdiction regarding U.S. currency in this area. Our 18 current Foreign Post of Duty with 46 authorized agents and 93 total authorized positions, and our presence at INTERPOL, have established liaison and enhanced coordination of investigative efforts with foreign law enforcement, and as a result the Secret Service has been increasingly successful in suppressing the counterfeiting of U.S. currency overseas and protecting our nation's financial systems.

Where permanent assignments are not available, the Secret Service relies on temporary overseas assignments to satisfy the requests for participation in overseas financial crimes and counterfeit task forces. Within the last two years alone, our work through temporary assignments in Lagos, Bucharest and Frankfurt has resulted in the opening of permanent offices. The temporary duty concept allows us to conduct a survey in a specific area to determine if the cost of opening a field office in that country is warranted.

A Recurring Temporary Assignment (RTA) allows for the establishment of relationships within the law enforcement and embassy communities. This is especially important if the Service realizes a need to commit assets on a long-term basis (2+ years), be it by long-term RTA or establishment of a permanent Foreign Post of Duty (FPD). The relationships that were established during the cooperative period serve to forge the framework for embassy and host governmental approval for the formal establishment of an office.

The continued "dollarization" of foreign economies has resulted in an increase in the number of countries that utilize the U.S. dollar as the base of their financial operating system. The darker side of the "dollarization" process has already been observed in the countries that are contiguous with Colombia, as the counterfeiters have spread across the borders and into those nations.

The Secret Service's presence in that area of the world has primarily been one confined to providing anti-counterfeiting training and staffing RTA (e.g., Bogotá). We believe that this effort has been successful in maintaining a controlling hand over rising levels of problems to date, but that a greater effort will be required in the near future as other nations "dollarize". In addition to the regional expansion of counterfeit-related activities, there are international counterfeiting concerns affiliated with "dollarization," as can be seen in Spain with a rise in the importation of counterfeit U.S. currency from South America.

It must be stated that the new Foreign Post of Duty would bring to bear Secret Service assets to contend with other core USSS investigative responsibilities. Today, electronic payment systems are the new lifeblood of international business, and they too are subject to compromise and counterfeiting, more frequently through the use of computers and computer technology. The Secret Service anticipates additional investigative and enforcement responsibilities in the area of alternative money or electronic cash, also referred to as e-cash. The Financial Crimes Division attempts to forecast vulnerabilities in these emerging payment systems that will be exploited by criminal elements, such as al Qaida, on a global scale. The Service, through its current complement of Foreign Posts of Duty, continues to interface with financial industries and law enforcement, domestically and abroad, in pursuit of our criminal enforcement responsibilities and our proactive risk analysis based programs.

These financial crimes can range in complexity and severity from a fraudulent credit card transaction at a retail store located anywhere in the world, to a bank fraud scheme spanning three continents, to an intrusion into a computer system perpetrated by a suspect thousands of miles away, to an intricate system of terrorists laundering fraudulently obtained assets that will be utilized to fund terrorist attacks globally. Secret Service

personnel assigned overseas continue to work with foreign law enforcement to develop strategies to combat the attacks against their financial institutions.

It must be stated that as the global economy continues to expand, so must this agency's approach and global presence. Based upon these facts, the Secret Service is proposing to increase our current complement of 18 Foreign Posts of Duty. Due to the nature of the process by which Foreign Posts of Duty are formally approved and established, it is difficult to firmly present the names of the specific locales at which the Secret Service wishes to open new offices within this document relative to international anti-counterfeiting efforts.

The Secret Service seeks to continue its strategic global expansion toward the goals of extending its core investigative reach and presenting bilaterally coordinated timely responses in the arena of transnational crime, with a primary focus on international counterfeiting. An adjunct goal that is realized from this expansion abroad is better fulfillment of the agency's protective responsibilities.

This expansion effort follows a time-tested approach that the Secret Service has sought to adhere to when addressing global criminal concerns by expanding its overseas presence, as is outlined in the President's 1998 International Crime Control Strategy. The combination of an infusion of investigative training to regional law enforcement populations and strategic placement of Recurring Temporary investigative Assignments is a fiscally responsible manner by which to assess whether regionally specific concerns will require a short or long-term (2+ years) control commitment. The insertion of International Investigative Seminars training and the strategic placement of Recurring Temporary Assignments Task Forces afford the Secret Service a period of time during which to observe regional situations on several fronts, to include local law enforcement capabilities and existing levels of criminal activities. The level of host country assistance provided directly impacts the success rates of Recurring Temporary Assignments. In the field of international counterfeiting, the Secret Service would seek to work hand-in-hand with its host country vetted International Anti-Counterfeiting Forces (IACF)

The Secret Service's Office of Investigations believes that this three-tiered approach to combating crimes against the United States' financial system is a fiscally responsible approach, and the Department of Treasury's Office of Enforcement has viewed it favorably. There are significant benefits to be derived from the realization of the three-tiered approach. For example, the expansion of our International Investigative Seminars will facilitate the Service's educational and training campaign amongst foreign law enforcement authorities, which allows for a realistic assessment of criminal trends and resource allocation needs.

The use of Recurring Temporary Assignments has been very successful in the arena of financial crimes (e.g. the City of London Initiative and the Lagos, Nigeria Task Force) and counterfeiting (Bogotá, Colombia and Sofia, Bulgaria). RTA led to the decisions to enhance the agent pool at the London Resident Office by one (1) additional agent, formally establish the Lagos Resident Office, enhance the agent pool at the Bogotá Resident Office by one (1) additional agent and pursue the formal establishment of the Bucharest, Romania Resident Office. The Service is able to remain fiscally non-committal while addressing global criminal concerns. In addition, the domestic investigative mission reaps the benefits of increased investigative intelligence collection. The Foreign Posts of Duty have a chance to evaluate potential candidates for future service at their posts. The agency benefits from these relationships not only during the performance of its investigative mission but also during the performance of its protective mission abroad.

The Secret Service's permanent presence in key posts abroad allow for improved coordination in the area of counterfeiting, fraud, security and intelligence as well as the ability of the U.S. government to assist our foreign counterparts in building their own legal and enforcement mechanisms to confront these issues themselves. As the nature of crime, including terrorism and terrorist financing, becomes more international in nature, it will be essential for the Secret Service to work closely with key counterparts abroad to achieve its mission. Whether it is the threat of counterfeiting related to "dollarization" or the threat of cyber attacks on our financial system, the Secret Service's strategic presence abroad is essential. This need for an expanded global presence will be coordinated closely with the State Department to ensure that the Secret Service's mission can be completed.

The role of the U.S. Customs Service in protecting our homeland has become more acute since September 11^th. As a result, Customs is seeking to increase its international presence in a targeted way in order to support its key enforcement missions, such as investigating terrorist financing and preventing the illegal export of weapons of mass destruction (WMD).

The Customs Service is seeking to establish or enhance its presence in key financial and shipping centers around the world.  The strategic aims of this increased international presence would be to deny and disrupt financial support for terrorist organizations and to identify and intercept terrorist materials moving within the international cargo stream. An enhanced overseas presence would directly support Operation Green Quest and Operation Shield America, which is the innovative program established by Customs to track and prevent the shipment of the implements of weapons of mass destruction (MDWs).  Moreover, an enhanced presence in Mexico and Canada would support Customs' border security initiatives with each country, which is critical for establishing smart border security and homeland defense.

Furthermore, the Customs Service has been tasked and funded by Congress to increase its efforts overseas to support initiatives in Forced Child Labor, Intellectual Property Rights, and the Northern Border.  

As part of Customs' strategic plan, the additional investigators and analysts overseas would be primarily investigating financial matters that relate to Customs violations and matters linked to terrorist activities or organizations.  Such violations would include money laundering, export violations (including munitions list items, WMD, and their delivery systems and dual-use technology), commercial fraud, smuggling, and any other illegal activity within the import/export arena that is utilized in support of international terrorism.

Additional investigators, inspectors and analysts would also support Customs' foreign efforts to identify and interdict the materials that terrorist organizations and rogue states require to accomplish their aims.  With the assistance of our foreign counterparts, overseas personnel would evaluate cargo traffic, analyze cargo manifests, review export documentation, monitor transshipped items, and assist in prescreening cargo/containers.

Customs' overseas presence is essential to its mission on all fronts to protect the United States, especially with respect to terrorism-related matters.

Customs' Overseas Expansion Priorities

Customs is actively seeking to establish or enhance its presence in key international financial centers in addition to those overseas ports that are responsible for the majority of container cargo that enters the commerce of the United States and to fulfill the congressionally-mandated responsibilities in FCL, IPR, and Northern Border Initiative.

The Bureau of Alcohol, Tobacco, and Firearms (ATF) plays an important role in the regulation of firearms and explosives as well as tobacco and alcohol. Though its overseas presence is not significant in numbers, the ATF's mission and presence bears mentioning because of its fundamental importance to overall U.S. security.

The ATF is the premier agency in the United States entrusted with enforcing federal firearm and explosive laws. In this capacity, ATF has developed a high level of practical and technical expertise in crime gun tracing and analysis, ballistics identification, and post-blast investigations. The U.S. Department of State has thus recognized and utilized ATF expertise abroad on numerous occasions.

Through its regulatory and enforcement authorities derived from the Gun Control Act of 1968, the National Firearms Act, the Arms Export Control Act, and the Explosives Control Act, ATF seeks to neutralize the illicit movement of firearms, explosives, and ammunition, and to deny their access to international narcotics dealers, terrorists, and other violent criminals. ATF's International Traffic in Arms (ITAR) initiative was formalized as a Bureau-wide program in 1974 and is an aggressive enforcement effort designed to combat the illegal movement of U.S.-sourced firearms, explosives, and ammunition in international traffic. Through enforcement and compliance of the statutes mandated by law, ATF seeks to neutralize the trafficking of these commodities from the United States, which are used throughout the world to commit acts of terrorism and political violence, to subvert restrictions imposed by other nations on their residents, and to further narcotics-related activities and violent crime.

The success of the ITAR program depends heavily on ATF's ability to post personnel in overseas assignments. Working alongside the host government, ATF personnel assist in the identification of recovered crime guns that have a nexus to the U.S. and then trace these weapons in order to identify the organizations responsible for the illicit trafficking of arms. Joint investigations further assist in the sharing of intelligence between agencies and the development of leads, both in foreign and domestic cases. The ability to be located in foreign posts to coordinate efforts that affect this progress ultimately leads to stemming the flow of firearms in international traffic.

ATF initially established country offices in Colombia, Mexico, and Canada because these countries were identified as having been severely impacted by the illegal trafficking of U.S.-sourced firearms. On site, the agents are able to provide investigative and technical assistance with regards to this problem, however, they also regularly deliver training to the host government in firearms identification, tracing procedures, trafficking investigation techniques, and other related topics.

As a result of civil unrest and insurgent activity, both Colombia and Mexico have experienced a significant increase in explosives incidents in the past year. The ATF agents posted in these countries have been frequently used to provide technical assistance to the Embassy, and especially the host government, in explosives identification and in post-blast investigative procedures.

Additionally, the ATF personnel in the Canada Country Office have concentrated much of their efforts assisting the Canadian Government in combating the diversion or smuggling of U.S.-produced alcohol and cigarettes into Canada. The taxes on alcohol and cigarettes are generally considerably higher in Canada than in the United States. Consequently, during the 1990s, the Canadian Government lost billions of dollars in tax revenues, much of which was earmarked to finance the Canadian National Health system. Moreover, alcohol and tobacco smuggling and the organized criminal groups associated with this activity became a major Canadian criminal concern.

Recently, ATF enforcement efforts have helped control this problem.

In 1990, ATF established its first overseas post at the U.S. Embassy in Bogotá, Colombia. The Colombia Country Office (CCO) is currently staffed by a Country Attaché (CA) and an Assistant Country Attaché (ACA). There is also one Foreign Service National (FSN) and a shared Administrative Assistant (contract employee who also works for Customs.)

In 1992, our Mexico Country Office (MCO) was established at the U.S. Embassy in Mexico City, Mexico. The MCO is currently staffed by one CA, one ACA, and two FSNs. In 1997, ATF established a permanent office at the U.S. Embassy in Ottawa, Canada. Current staffing consists of a CA and Administrative Assistant (contract through State) in Ottawa, and an ACA at the Consulate in Vancouver. There is also one vacancy for a contracted Administrative Assistant in Vancouver. An NSDD-38 request has been forwarded to State at the request of the Royal Canadian Mounted Police (RCMP) and with the support of the U.S. Ambassador for an additional FTE (Inspector) to be located at RCMP Headquarters.

ATF receives weekly activity reports and extensive annual reports from each of the country offices. These reports detail the mission, efforts, accomplishments, and planned action by each Country Office and are reviewed by the highest level of ATF management. In addition to this internal oversight, there is regular communication between the Deputy Chiefs of Mission and ATF personnel regarding the continued productivity of the liaison mission.

ATF has a minimal staff abroad, and current manpower and other resource considerations only allow for overseas assignments by ATF in countries capable of supporting full-time positions.

The Internal Revenue Service- Criminal Investigation Division (IRS-CI) is charged with enforcing the nation's tax laws and has been playing a critical role in Operation Green Quest as it lends its expertise in the tax arena, especially with respect to charities, to the counter-terrorist financing fight. Based upon an assessment conducted in 2001 of its workload overseas, IRS-CI is considering two changes in the number and placement of its agents assigned overseas.

The assessment in 2001 determined that the workload in the Europe/Africa Region, which includes the Middle East and the former Soviet Union Bloc countries, was too substantial for one CI Attaché to handle. 

In the 5 years since the initial placement of a CI Attaché in Frankfurt, Germany, the number of requests for assistance involving countries located in this region had increased approximately 400%.  In addition, the Attaché has been spending substantial more time assisting in training initiatives being conducted in this region, including the ILEA in Hungary and Botswana. Since the completion of the assessment, IRS-CI resources needed in this area have further increased significantly as a result of CI's focus on terrorist financing.  Using the criteria recommended by the "Rightsizing" Working Group, it was determined that the best location to add a second Attaché to be responsible for the Europe/Africa Region is London, England.  The factors that weighed in this decision are as follows:

• Requests for Assistance by CI special agents to the United Kingdom in 2001 are approximately 40 percent for the region.
• Requests for Assistance by CI special agents to the United Kingdom in 2001 are approximately three times higher than any other country in the region.
• These statistics are primary the result of London's being the financial capital of Europe.
• Contacts with representatives of the United Kingdom's Law Enforcement Agencies determined that there was a very strong desire to work with IRS-CI on joint initiatives.
• Contacts with US Law Enforcement personnel assigned to the London Embassy determined that placement of an IRS-CI Attaché at that embassy would not result in an overlapping of missions, and endorsed our presence at the embassy.
• London provides excellent transportation links with both the other countries in the region and the US.

The second change the 2001 Worldwide Assessment recommended was moving the CI Attaché that is responsible for the Caribbean Basin Region from the US Embassy in Mexico City to an Embassy in the Caribbean.  In March 2000, CI placed a second Attaché in Mexico City.  This placement of the second Attaché afforded the opportunity for one Attaché to be primarily responsible for the countries located in the Caribbean basin.  This dedication of resources to the Caribbean has resulted in a tremendous growth in the workload as new and better relationships have been developed with the law enforcement agencies of the 22 countries located in the area.  Specifically, the number of requests for assistance involving countries in this region has increased by over 400 percent during the period 2000 to 2002. We expect that the workload will continue to increase as additional Tax Exchange Agreements are signed and go into effect over the next two years and as countries in the region continue to strengthen the anti-money laundering regimes.

However, the past two years have demonstrated that to have the CI Attaché operate from Mexico City to handle the Caribbean is not cost-effective and wastes a significant amount of time in traveling back and forth to the region (all travel must be made through Miami from Mexico City to go to the region). 

As a result of this recommendation, CI has just initiated a follow-up assessment to determine the best site in the Caribbean Basin to relocate the Attaché.  Results of this assessment should be available by the end of FY 2002.

IRS-CI, like the other Treasury Bureaus, has reassessed trends related to its jurisdictional responsibilities and demands abroad and is adapting its overseas requirements accordingly. This flexible approach allows Treasury and the State Department to work closely to ensure that the Bureaus' missions are fulfilled.

The Internal Revenue Service (IRS) works closely with its foreign counterparts on tax treaties and other tax-related matters. The IRS currently has 46 positions in 7 regional offices overseas, including Berlin, London, Mexico City, Paris, Rome, Singapore, and Tokyo. IRS has reduced its overseas presence significantly from 1985 when it had 83 positions in 15 regional offices overseas. IRS tax attaches and staff interact with foreign governments on tax treaty and other tax issues and with business and tax practitioner communities. Under bilateral tax treaties, tax attaches are delegated signature authority for certain tax treaty exchange of information programs between governments. These overseas tax offices also identify emerging tax and tax compliance issues. Moreover, these offices also provide customer service to U.S. citizens residing abroad and to foreign individuals who have a tax liability to the US. In addition, IRS provides direct assistance to selected foreign governments to help improve their own tax administration. This past year, IRS had 4 personal services contractor (PSC) staff in Trinidad and Tobago and in Tanzania providing technical assistance.

Because of its important role in bank regulation, the Office of the Comptroller of the Currency (OCC) has 4 bank examiners assigned to the U.S. Embassy in London. This is a critical presence because London is a major banking and commercial center.

The Office of International Affairs currently is responsible for 10 positions at regional development banks as follows: 2 positions at the European Bank for Reconstruction and Development in London, 3 positions at the African Development Bank in Abidjan, and 5 positions at the Asian Development Bank in Manila. The Secretary of the Treasury is the U.S. Governor on the Board of Governors at these three regional development banks.

Day-to-day policy, fiduciary and administrative oversight is delegated to the banks' Board of Directors. As a member of the Board of Directors, the U.S. Executive Director (a Presidential appointee with Senate confirmation) represents the U.S. Government.

The Asian Development Bank and European Bank for Reconstruction and Development and the US Executive Director position are currently vacant and an alternate is currently representing the United States. Treasury professional staffs are assigned to the U.S. Executive Director offices as advisors and assistants. Costs of the U.S. Executive Director, Alternate Executive Director (Asian Development Bank) and technical advisors/assistants are paid either directly or reimbursed by the regional development banks. Treasury also reimburses the State Department for two support staff at the US Embassy, Manila.

Treasury financial attaches play a critical role in the development of US international economic policy. Financial attaches develop extensive contacts with finance ministries, foreign regulatory authorities, central banks, and financial market participants that offer a unique view of market developments. This unique perspective lends itself to a more thorough understanding of potential policy implications and a more rapid translation of new U.S. policy on the ground, a critical capability given today's rapidly changing market conditions.

The Office of International Affairs currently has 6 financial attaches and 13 analytical/ support staff, including foreign nationals, at U.S. embassies in Tokyo, Moscow, Mexico City, and Rome (Southeast Europe region), at the U.S. Mission to the Organization for Economic Cooperation and Development (OECD) in Paris, and at the U.S. Consulate General, Frankfurt (European Union region). The U.S. Ambassador and the State Department have approved Treasury opening a financial attaché office in Beijing, China. Opening this new post is subject to resource allocation. International Affairs has recently proposed to close its financial attaché office in Mexico City and open an office in Buenos Aires.

Over the past decade, International Affairs has scaled back its overseas presence. In 1990, International Affairs had 12 financial attaches and 25 analytical/support staff at 12 U.S. embassies/missions overseas. Treasury financial attaches collect, report, interpret and forecast macroeconomic and financial developments and policies on assigned foreign countries. Department of Treasury personnel assigned abroad report on foreign economic, financial and monetary matters, to help keep U.S. government decision-makers fully informed on such matters. In addition, International Affairs is a user of economic and financial information supplied by all U.S. embassies and consulates.

The Office of International Affairs provides technical assistance to foreign countries in five core areas: budget policy and management; financial institutions policy and regulation; government debt issuance and management; enforcement policy and administration; and tax policy and administration.

The placement of Treasury advisors is closely coordinated through several offices and bureaus at the State Department, including the Regional Coordinator for Assistance to Countries of the former Soviet Union, Eastern and Central Europe, the Bureau of International Narcotics and Law, the newly created Counter Terrorism Office and the relevant regional bureaus. Treasury's Office of Technical Assistance also coordinates work and assignments with Treasury's Office of Enforcement.

Treasury currently has 45 long term or resident advisors, primarily personal services contractors, and 35 support staff in 22 countries. In addition, short term, or intermittent, advisors are provided to foreign countries on temporary duty assignments, for highly specialized assistance. The level and scope of all assistance efforts are negotiated with host countries and advisors work at host government, primarily finance ministry, facilities and thus do not require Embassy office space.

Funding for technical assistance comes primarily from the Freedom Support and Support for Eastern European Democracy (SEED) Acts, augmented by additional AID program funds and a direct Congressional appropriation to Treasury, knowns as the Treasury International Affairs Technical Assistance (TIATA) program. Treasury has closed assistance efforts as foreign countries have instituted structural and economic reform. For example, Treasury has completed assistance efforts in the Czech Republic, Slovakia, Poland, Latvia, and Lithuania and no longer has advisors stationed in these countries. In addition, projects under the US-Saudi Arabia Joint Economic Commission, that was fully financed by Saudi Arabia, were closed in 2000, after 25 years of successful assistance efforts in Saudi Arabia, eliminating the need to station over 40 U.S. employees in Riyadh and Jeddah.

The Treasury Department has been flexible in its allocation of resources abroad. Where needs no longer exist, for either enforcement or non-enforcement personnel, the Treasury has been willing to reallocate those resources to areas where such personnel are needed. This will continue to be the way the Treasury operates since we are dedicated to the efficient use of resources abroad. We look forward to continued cooperation with the State Department on this front.

The Department of the Treasury's law enforcement bureaus, as well as the non-enforcement offices, have traditionally practiced the concept of regionalization in varying degrees - the practice by which a region is covered by personnel stationed in one overseas post. The concept has proved beneficial in certain locations or regions of the world given the assessed needs and trends related to our overseas.

As noted above, Mr. Chairman, Treasury and its law enforcement bureaus have on occasion closed a foreign office and moved to other countries when they felt the opportunity to do so would produce a more effective and efficient work product. We are committed to this approach by assessing the needs abroad.

In the post September 11^th world, we are required to reassess our needs - to deal most specifically with the terrorist threat on several levels as well as to confront the increasing threat of transnational criminal behavior. We will continue to work closely with the State Department, as well as our other sister agencies and departments, to ensure that the U.S. government's resources are used effectively and efficiently abroad.

Mr. Chairman, this concludes my formal testimony. I would be pleased to answer any questions that you, or members of the Committee, may have regarding Treasury's procedures, goals and mission abroad.