FROM THE OFFICE OF PUBLIC AFFAIRS

It is a pleasure to be here today to discuss what for me, the Treasury Department, and United States government has been our top priority since September 11^th: combating global terrorism and, more specifically, terrorist financing. As we watched in utter horror the mass murder of innocent civilians at the World Trade Center and the Pentagon, we all understood that we are at war with an enemy whose sole purpose is to destroy our country and way of life, and terrorize the American people. On that fateful day, the world changed forever: our national security is threatened from a stateless enemy willing to use catastrophic means to create terror. Now, the principal goal of Government is to prevent future calamitous attacks. Thus, our strategy must be proactive in nature – prevention is now our guiding principle.

That is why immediately after September 11^th, President Bush marshaled the resources of the Government to attack the scourge of terrorism in a bold and preventative way. He ordered the military to take the fight to the heart of al Qaida in the Taliban-controlled Afghanistan. He directed the Justice Department to bring the perpetrators to justice. And he ordered the Treasury Department to identify, disrupt, and dismantle the global terrorist financial networks.

The mission of disrupting terrorist financing is proactive and preventative. We cannot afford to wait for further terrorist attacks to occur before acting. Simply stated, we are trying to save human lives. We are therefore targeting our intelligence, law enforcement, regulatory, and financial expertise and resources to ferret out those who support, facilitate, and fuel the activities of terrorist groups. In doing so, we seek to achieve three goals:

(1) We are making it more difficult for terrorist groups to transfer money that kills;

(2) We are deterring fundraisers, donors, and sympathizers from giving support and money to terrorist groups; and

(3)We are uncovering terrorist networks that will provide the footprints for sleeper cells.

I would like to read to you a portion of the al-Qaida Manual. It is instructive as to why it is important to follow and cut the flow of money to terrorist groups. The Manual was discovered during a search of an al Qaida member’s home in England and introduced into evidence during the Embassy bombings trial in New York. The Third Lesson in the Manual, entitled "Counterfeit Currency and Forged Documents," discusses "Financial Security Precautions" that al Qaida members should take to secure their operations. Al Qaida terrorists are instructed to:

Divid[e] operational funds into two parts: One part is to be invested in projects that offer financial return, and the other is to be saved and not spent except during operations.

Not plac[e] operational funds all in one place.

Not tell[] the Organization members about the location of the funds.

Hav[e] proper protection while carrying large amounts of money.

Leav[e] the money with non-members and spend[] it as needed.

As you can see, this is an enemy that understands the need to cover their financial tracks while simultaneously funneling funds to finance new acts of terror. While twisted ideology fuels their fervor, money is the lifeblood of their activities. By cutting off or freezing their funds, we are striking at the heart of their operations. Because we are facing an enemy with malignant cells planted around the world, we must employ all our assets and resources to track and disrupt al-Qaida fundraising globally.

To that end, we have followed the President’s directives and marshaled the Treasury Department’s unique financial forensic expertise in financial and electronic crimes, as well as our contacts with the financial community both here and abroad to fulfill this mission.

On September 23, 2001, the President issued Executive Order 13324 that granted the Secretary of the Treasury broad powers to freeze the assets of terrorist financiers and supporters. This authority has given Treasury the ability to attack terrorist groups – not with bombs or criminal prosecutions, but with financial actions based on the President’s constitutional authorities. We have followed the money trail and swiftly frozen the assets of 210 specially designated terrorist groups, individuals and entities who comprise the support networks for terrorism. Worldwide we have blocked over $112 million of al Qaida, Taliban, and other terrorist funds and dismantled networks for channeling funds to terrorist groups.

These blocking actions have been the most public of our activities, and we think they have proven effective. We have received the support of nearly the entire world in this effort, and 166 countries currently have blocking orders in effect. The United Nations, under Security Council Resolution 1373, has made the freezing, without delay, of terrorist-related assets mandatory on all Member States.

These actions will continue to be an essential part of our global strategy. The process of identifying and investigating targets is ongoing. We have currently identified other financial entities, businesses, groups, and persons for potential listing. Moreover, we are focusing on high-impact financial intermediaries that act as financial conduits and facilitators for terrorist groups. Our ultimate goal is to use this unique tool the President has authorized to prevent the perpetration of terrorist acts by attacking the financial substructure of terrorism.

The United States government has also directed its law enforcement resources to attack terrorist financing. On October 25, 2001, we created a Treasury-led task force known as Operation Green Quest (OGQ). OGQ brings together the financial forensic expertise of the Customs Service, IRS-CI, Secret Service, the Bureau of Alcohol, Tobacco and Firearms (ATF), Financial Crimes Enforcement Network (FinCEN), the Office of Foreign Assets Control (OFAC), the FBI, Postal Service, and the Naval Criminal Investigative Service. This task force has taken a multi-jurisdictional approach to investigate and disrupt terrorist financing schemes. Whether it’s using our authorities to investigate cigarette smuggling and trade violations or exploiting our access to Bank Secrecy Act data, we are tracking money flows aggressively. Much in the same way that the Treasury was able to bring down Al Capone by use of the tax laws, we are using our financial authorities to follow the money to uncover terrorist financing networks.

At the same time, our efforts are not solely operational. We are also strengthening domestic and global financial systems to make them more transparent and thereby prevent abuse by terrorist financiers. At home, with the passage of the USA PATRIOT Act, we have engaged in an expansion and broadening of the existing anti-money laundering regulations and laws. Financial institutions, like broker/dealers, that once fell outside the anti-money laundering regulatory framework are now subject to appropriate reporting requirements. We have also targeted high-risk systems, like shell banks, by prohibiting U.S. banks from operating correspondent accounts for such institutions.

It is important to emphasize that we have made this effort global in nature. In late October, Treasury hosted a meeting of the 29-member Financial Action Task Force on Money Laundering, which has set international standards for creating anti-money laundering regimes. With our leadership, FATF redirected its attention and expertise to the issue of terrorist financing and established eight Special Recommendations for anti-terrorist financing. These Recommendations have quickly become the international standard, recognized by the international financial institutions and regional organizations, by which countries are evaluating their respective regulations and laws.

Two areas on which FATF has concentrated attention are the abuse of charities and the potential use of alternative remittance systems, like hawalas, to move money for terrorist groups. Terrorist groups can abuse charities and use them to raise, conceal, and transfer money globally. Terrorists prey on the goodwill of people throughout the world and use the images of hungry orphans and lonely widows to raise money to pay for lethal arms and weapons and fund terrorist training camps. The United States government, the FATF members, and countries around the world are reassessing how charities can be regulated to prevent the misuse of donations and the corruption of charities.

With respect to alternative remittance systems, we have recognized that unregulated, informal ways of moving money across borders, like the hawala system, pose a threat in the context of terrorism. When a terrorist cell leader in one country can quickly effect the movement of money to an operative in another country without physically transferring the funds, there is grave potential for abuse. Thus, the expansion of regulations to all money service businesses, as has been done under the U.S.A. PATRIOT Act, is an important step to ensure that such sectors are more accountable and transparent worldwide. The international community has recognized this by endorsing the FATF principles and calling for regulation of hawalas at a recent global conference in Abu Dhabi.

These efforts are critical in the war against terrorist financing. As we squeeze terrorist financiers, making it more difficult for them to transfer funds through more traditional western banking systems, they will resort to less conventional, less regulated ways of moving money. Smuggling cash or commodities are certainly ways to move money or value surreptitiously. Thus, the Customs Service, through Operation Green Quest, has engaged in increased vigilance at the borders to prevent bulk-cash smuggling. Since September 11^th, Customs inspectors have seized millions of dollars from individuals trying to smuggle money out of the country.

To ensure the success of our global strategy, we need to encourage and assist countries to improve their regulatory and financial systems and enhance their law enforcement capabilities. The United Nations, FATF, and other multilateral organizations have recognized the importance of delivering technical assistance and training to countries around the world. The United States has been providing needed assistance in the anti-terrorist financing and anti-money laundering fields, but the international community is just starting to develop efficient means to deliver needed assistance.

At the same time, efforts to starve terrorist of funds will not be successful unless there is continued cooperation with our international allies. Since September 11^th, foreign governments and multi-national regional groups have been engaged in a global campaign to freeze the assets of terrorist financiers. On March 11^th, for example, the United States joined with the Kingdom of Saudi Arabia to designate two branches of a Saudi-based charity as supporting terrorism. On April 19^th, the G7 jointly designated 10 targets in the first multi-lateral designation. The European Union has now published three lists of terrorist groups and members. Additionally, law enforcement agencies from Asia to Europe are moving aggressively against terrorist cells. Finally, multi-lateral and regional groups, like the G-20 and APEC, have committed to action plans to address terrorist financing. This is truly a global undertaking

The threat of terrorism requires that we devise new and creative strategies to more effectively utilize existing resources, expertise, and technology to attack this problem. This new focus demands a recalculation of how the government will devote and target its resources, but it does not mean that government has to be bigger.

Instead, this involves a reprioritization of existing expertise and resources, as well as enhanced information sharing. For example, when we embarked on the mammoth task of freezing terrorist assets, the President redirected intelligence resources to uncover these terrorist networks. At Treasury, we employed the existing talents of the Office of Foreign Assets Control to quarterback the world-wide effort to freeze assets. On the law enforcement front, we redirected the expertise of the Treasury Department’s financial investigators and the use of our financial and trade databases to focus on terrorist financing schemes.

This reprioritization also requires greater cooperation and new ways of sharing information among government agencies. Our efforts have been aided by the PATRIOT Act that has given the Departments of Treasury and Justice the authority to share financial information with the intelligence community in a way unavailable prior to September 11^th. The sharing of information and pooling of resources and expertise is critical to identifying, disrupting, and dismantling terrorist networks. This is plainly good government and represents improved efficiencies in the way we conduct our business.

Moreover, we must call upon the private sector to be vigilant. In this new type of war, our financial institutions are on the front lines and the attentiveness of their employees, much like the passengers who captured Richard Reid, is essential to our national security. From bank tellers to pawn shop owners, attentiveness to anomalies in transactions is essential to uncovering illicit financial networks. Soon after September 11^th, the Treasury’s FinCEN established a 24-hour toll-free number for banks and financial institutions to call in suspicious transactions, as opposed to waiting for the normal filing procedure. The response from the private sector has been outstanding, and several leads called into this number have proven valuable to law enforcement.

The PATRIOT Act also allows for financial institutions to share financial information with each other, and we are seeing the private sector take the onus of identifying suspicious customers upon themselves. Tracking terrorist funds is a complex undertaking and we will need to rely more on the ability of financial institutions to construct better ways of identifying suspicious activities, more efficient ways of sorting through voluminous financial records and more effective ways of sharing information.

In short, the challenge to those of us in government is to think creatively. Simply stated, the answer to every problem confronting our nation isn’t more federal funding or another government program. The hallmark of good governance in this era will be our ability to use existing resources in the public and private sector, and abroad to attack terrorism.

As I previously stated, Treasury’s principal mission is prevention -- to disrupt terrorist financial networks and to permanently shut the doors on these bankers of death and destruction. By doing so, we believe that we can prevent future terrorist attacks and save lives. Although the task at hand is not an easy one, I am pleased to report that the Administration’s strategy has realized some success. We know that Al Qaida members are having difficulty moving money globally. Potential donors are reluctant to donate money for fear of having their assets frozen and their names blacklisted by the international community. In sum, our strategy has forced al Qaida fundraisers out of their comfort zone.

Moreover, there are other encouraging signs including almost daily reports of foreign governments enacting new anti-money laundering and terrorist funding legislation, terrorist funds being blocked abroad, and al Qaida cell members being rooted out and arrested by foreign law enforcement officers.

Most importantly, the Bush Administration’s efforts have mobilized the international community against terrorism. As I have stated, prevention is the goal. This new paradigm for security requires that we use all available resources to prevent the next terrorist attack, because the consequences are too horrific to imagine. This means working smarter, cooperatively and sharing information between federal, state and local law enforcement and the intelligence communities, as well as working more effectively with members of the private sector, and our partners abroad. Only working together can we defeat the global threat of terrorism.