FROM THE OFFICE OF PUBLIC AFFAIRS

Attached is Economic Sanctions Programs, Attached is OFAC Enforcement Cases

Chairman Campbell, Senator Dorgan, and Members of the Subcommittee, I am pleased to have the opportunity to speak to you today about the work of the Treasury Department's Office of Foreign Assets Control, or "OFAC," as we are commonly called. OFAC administers economic sanctions against foreign countries, entities and individuals to further U.S. foreign policy and national security objectives. These sanctions programs are normally imposed pursuant to a declaration of national emergency by the President under specific statutory authority, but may also be imposed directly by the Congress, as in the case of legislation pertaining to foreign terrorist organizations and narcotics kingpins.

OFAC currently administers twenty-one economic sanctions programs involving assets freezes and/or trade embargoes, including programs directed against Angola (UNITA), Burma, Cuba, Iran, Iraq, Libya, North Korea, Sierra Leone, Sudan, the Taliban in Afghanistan, foreign terrorists and foreign narcotics traffickers. (See the attached chart for a complete list of OFAC programs.) In performing its mission, OFAC relies principally on the President's broad powers under the Trading With the Enemy Act ("TWEA"), the International Emergency Economic Powers Act ("IEEPA"), and on occasion, the United Nations Participation Act ("UNPA"), to prohibit or regulate commercial or financial transactions involving specific foreign countries, entities and individuals. These powers are employed to freeze, or block, foreign assets by prohibiting transfers of those assets which are located in the United States or in the possession or control of U.S. persons, as well as to prohibit financial transactions (such as bank lending), imports, exports and related transactions. These sanctions programs may be either selective, prohibiting a specific class of economic transactions (such as transactions with the government of the target country), or comprehensive, prohibiting all unlicensed economic transactions involving the designated country or its nationals. OFAC's blocking authority has also been employed to protect classes of assets, as in the case of the 1990 freeze of Kuwaiti assets after Iraq's invasion of Kuwait, or in the case of assets pertaining to the implementation of agreements between the United States and the Russian Federation relating to the disposition of highly enriched uranium.

Organizationally, OFAC is composed of the following components:

1) Licensing Division -- Makes determinations on requests for specific licenses -- processing more than 18,000 such requests during the past twelve-month period-- and provides guidance to the public with respect to interpretive rulings and transactions authorized by general license. The influx of requests for licenses and interpretive rulings under the twenty-one separate programs OFAC administers has increased dramatically. In an effort to meet this demand and provide responsive and thorough customer service, OFAC is instituting measures to: process licenses within two weeks absent the need for interagency consultation; hire additional personnel to respond to phone inquiries; promote transparency of agency action by publishing interpretive rulings on its website; and issue implementing regulations within sixty days of the issuance of an Executive order or enactment of legislation with an opportunity for public comment.

2) Compliance Division -- Serves as the primary point of contact for the financial community, fielding more than 45,000 "hotline" calls per year to provide guidance on in-process transactions. Last year, the calls resulted in denying access to the U.S. banking system to more than 5,500 items that were contrary to U.S. sanctions and the blocking of more than 2,000 transactions. As a result of regulatory audits which it conducts, the Compliance Division opened 1,000 cases in FY 2000 and issued more than 1,000 "administrative demands for information," culminating in 205 referrals to either the Civil Penalties or Enforcement Divisions and the issuance of more than 500 Warning Letters. This OFAC Division also monitors adherence to the terms of licenses and requirements regarding blocked property; conducts public and private sector awareness programs to assure familiarity with requirements for compliance with regulations; and maintains and updates OFAC's public informational material, website, and fax-on-demand service.

3) Blocked Assets/Information Technology Division -- Maintains OFAC's aggregate database of blocked assets; coordinates multilateral sanctions implementation with foreign governments; and develops and implements information technology systems in OFAC.

4) International Programs Division -- Administers the Specially Designated National, Specially Designated Terrorist, Specially Designated Narcotics Trafficker, and Foreign Terrorist Organization programs, as well as designations under the Foreign Narcotics Kingpin Designation Act, including the preparation of two annual Presidential reports to the Congress and an annual report to the Congress on blocked terrorist assets; and coordinates certain multilateral enforcement matters with foreign governments.

5) Enforcement Division -- Coordinates overall enforcement of sanctions programs by making referrals to Customs and other law enforcement agencies for criminal investigations, opening sixty investigations during 2000; provides technical advice and assistance to Customs agents and inspectors and Assistant U.S. Attorneys concerning suspected violations, with six criminal prosecutions brought in 2000; and administratively pursues non-criminal cases for civil penalty consideration, opening 1544 new civil cases for investigation with 515 referrals for civil penalty consideration during 2000 (see attached chart).

6) Civil Penalties Division -- Administers the civil penalties program for violation of sanctions laws administered by OFAC, processing more than 2,000 cases and collecting more than $3.2 million in fines over the course of the past year (see attached chart).

7) Policy Planning and Program Management Division -- Performs policy analysis; coordinates interoffice and interagency program implementation and regulatory issues; and currently prepares thirty-five statutorily required Presidential reports and fourteen Notices of Continuation of emergency authorities per year to the Congress.

Other components of OFAC include the Miami Office, which coordinates certain Cuba licensing, compliance and enforcement matters, and the Bogota Office, which coordinates the Colombian narcotics traffickers program and conducts research on specially designated narcotics traffickers. Offices are also being established in Mexico City and Bangkok in support of OFAC's implementation of the Foreign Narcotics Kingpin Designation Act. A ninth division within OFAC is also being organized to establish the Foreign Terrorist Assets Tracking Center. In addition, while not organizationally part of OFAC, Treasury's Office of the General Counsel devotes a complement of attorneys to providing OFAC legal support in the administration of its programs.

I would like to focus the remainder of my remarks today on OFAC's increasing responsibilities to administer economic sanctions with respect to foreign terrorists, particularly with regard to the establishment of the Foreign Terrorist Asset Tracking Center, as well as economic sanctions programs targeting foreign narcotics traffickers.

OFAC's International Programs Division has historically been responsible for compiling available evidence establishing that certain foreign entities or individuals are owned or controlled by or acting for or on behalf of a foreign government subject to an economic sanctions program. These entities and individuals then become "specially designated nationals," and are subject to the same sanctions as the foreign government to which they are related. In 1995, the President used his authority under IEEPA to declare national emergencies with respect both to terrorists who threaten to disrupt the Middle East Peace Process and significant narcotics traffickers centered in Colombia. These declarations of national emergency marked the first occasion that this statutory authority had been invoked to directly target organizations and individuals, rather than hostile foreign regimes.

Since the inception of the Colombia program in 1995, OFAC has identified 578 businesses and individuals as specially designated narcotics traffickers ("SDNTs"), consisting of ten cartel leaders of the Cali, North Valle, and North Coast drug cartels, 231 of their businesses and 337 other individuals. Four of the most notorious Colombian drug kingpins were identified in the Executive order itself. OFAC has added six more Colombian drug cartel leaders since 1998, including four leaders of Colombia's powerful North Valle drug cartel named in 2000 and 2001. United States persons are prohibited from engaging in financial or business dealings with the ten drug kingpins and the 568 other SDNTs.

As a result of the SDNT program against Colombian drug cartels, traffickers' companies have been forced out of business, are suffering financially, and have been isolated both financially and commercially. By May 2001, more than sixty SDNT companies, with an estimated annual aggregate income of more than U.S. $230 million, have been liquidated or are in the process of liquidation. SDNTs are denied access to banking services in the United States and Colombia and have been denied access to the benefits of trade and transactions involving U.S. businesses. SDNT individuals have been denied U.S. visas or had their visas revoked. OFAC will continue to identify businesses of the Colombian drug cartels and to expand the SDNT list to include additional drug traffickers and their organizations.

Economic sanctions were imposed by the President pursuant to IEEPA in 1995 against terrorists who threaten to disrupt the Middle East Peace Process. This action was taken to combat fundraising in the United States on behalf of foreign terrorist organizations identified in an annex to the implementing Executive order. In August 1998, a second Executive order was issued expanding the list of foreign terrorists to include Usama bin Ladin, his organization (Al-Qaeda), and two other individuals. In addition to the thirteen terrorists and terrorist entities identified by Executive order, OFAC has authority to designate organizations or individuals, known as "specially designated terrorists" or "SDTs," that are owned or controlled by, act for or on behalf of, or that provide material or financial support to these terrorists. As a result of these sanctions, a number of individuals acting on behalf of the Middle East terrorists have been subjected to sanctions, and financial assets of some of these groups have been blocked.

We believe that the sanctions have had a deterrent effect on fundraising in the United States and have impeded terrorists' use of the U.S. financial system. OFAC continues to work closely with Justice, State, the FBI, and other Federal agencies in implementing the two Middle East terrorist Executive orders against identified or potential SDTs.

In April 1996, Congress passed the Antiterrorism and Effective Death Penalty Act ("Antiterrorism Act"), in part to prevent U.S persons from providing material support or resources to Foreign Terrorist Organizations ("FTOs") throughout the world. Currently, twenty-nine FTOs are subject to OFAC-administered sanctions, having been designated by the Secretary of State in consultation with the Secretary of the Treasury and the Attorney General. Under the Antiterrorism Act and OFAC's implementing regulations, U.S. financial institutions must maintain control over all funds in which an FTO has an interest, block financial transactions involving FTO assets, and report those actions to OFAC. OFAC is the coordination point with State and Justice on FTO designations and also has responsibility for coordinating with the financial community, the FBI, State, and other Federal agencies in implementing the prohibitions of the Antiterrorism Act.

In December 1999, the Congress also passed the Foreign Narcotics Kingpin Designation Act (the "Kingpin Act"), which is modeled after OFAC's Colombia narcotics traffickers program. The Kingpin Act provides a statutory framework for the President to impose sanctions against foreign drug kingpins and their organizations on a worldwide scale. Like the Colombia program, the Kingpin Act is designed to deny these significant foreign narcotics traffickers and their organizations, including their related businesses and operatives, access to the U.S. financial system and to all trade and transactions involving U.S. companies and individuals. The President named the first twelve kingpins ("tier one designations") on June 1, 2000. The President plans to make the next list of kingpins public by June 1, 2001. OFAC also has authority under the Kingpin Act to make derivative ("tier two") designations of the kingpins' businesses and agents. These tier two designations are very important to the long-term practical impact and effectiveness of the Kingpin Act, since they target entities through which the kingpins penetrate legitimate commerce.

OFAC's sanctions programs against foreign narcotics traffickers and foreign terrorists expose and impede money laundering activities, terrorist fundraising and financial flows. While these activities continue to be coordinated with traditional law enforcement agencies, we believe that counter-terrorism activities against foreign terrorists will be greatly enhanced by the establishment of the Foreign Terrorist Asset Tracking Center (the "Center"). Last year, the Report from the National Commission on Terrorism (the "Bremer Report") recognized the potential for more effectively employing the broad sanctions authorities delegated to OFAC and recommended the development of a joint task force of relevant U.S. government agencies to develop strategies to counter terrorist fundraising. The Bremer Report also recommended that the Secretary of the Treasury create a unit within OFAC, dedicated to the issue of terrorist fundraising. The Congress subsequently provided funding to Treasury for FY 2001 to develop the Center, in coordination with the relevant USG agencies.

The Center's mission is to gather information from all sources relating to terrorist groups' sources and methods of fundraising and funds movement. The Center will use this information to conceptualize, coordinate, and implement strategies within the US government that could ultimately lead to denying these target groups access to the international financial system; impair their fund-raising abilities; expose, isolate, and, where appropriate, block their financial transactions; and work with other friendly governments to take similar measures. The Center will accomplish this mission by:

1) gathering information from all sources relating to terrorist groups' sources and methods of fundraising and funds movement;

2) reviewing data regarding the fundraising activities and funds of terrorist groups that threaten the US national security;

3) assessing the sources and methods of fundraising and funds movement of each targeted foreign terrorist group, and of their operatives and terrorist-owned entities;

4) tracking all information about the nature, operations, goals, and methods of each terrorist group, related especially to the movement and placement of their assets;

5) sharing all relevant information and analysis, as appropriate, with US regulatory, diplomatic, defense, intelligence and enforcement communities;

6) conceptualizing and developing implementation strategies to deny targeted terrorist groups access to the international financial system, and whenever possible, to expose, isolate and incapacitate their financial holdings within the United States and in other countries;

7) developing strategies to deny these targets the ability to conduct financial transactions with US entities and individuals and impair their fundraising abilities; and

8) persuading foreign governments to take similar measures.

Such strategies would bring to bear the full weight and influence of the Federal government relating to financial matters -- regulatory, diplomatic, defense, intelligence and enforcement communities -- and involve foreign and domestic actions.

OFAC is currently in the process of establishing the Center and USG agencies with counter-terrorism responsibilities have committed to participate in the Center by: 1) providing the Center with all relevant information; 2) detailing specialists to analyze the data; and 3) appointing special liaisons to cement the constant interaction of the member organizations. It is anticipated that the departments and agencies that will participate in or work with the Center are: 1) the Department of Treasury -- OFAC, Customs, IRS, USSS, ATF, and FinCEN; 2) the Department of Justice, FBI, INS; 3) the CIA -- Office of Transnational Issues and the DCI's Counter-Terrorism Center; 4) the National Security Agency; 5) the Department of State -- Office of the Counter-terrorism Coordinator (S/CT); and 6) the Department of Defense.

The role of each agency would depend upon the target, and the circumstances of each target's fundraising, money movements, and placements modus operandi. Some terrorist groups are involved in multiple activities to produce income. These activities would also be covered under the Center's mission.

OFAC is currently hiring staff to implement the Kingpin Act, establish the Foreign Terrorist Assets Tracking Center and make the other improvements I've discussed. We currently have seventy-seven staff members on board, twenty-one position offers outstanding, and expect to hire an additional thirty-six positions -- eight of which involve reimbursable agreements with other agencies -- by the end of FY 2001. Crucial to the successful administration of these priorities is enhanced customer service, particularly with regard to the pending implementation of the Trade Reform and Export Enhancement Act of 2000. Your continuing support of our mission is critical.

Thank you very much for the opportunity to discuss these matters of grave concern to the Congress as well as the Executive Branch. I look forward to keeping you posted of our progress.