February 11, 2007
HP-257

Prepared Remarks of Deputy Secretary
Robert M. Kimmitt
International Terrorism and Asymmetric
Warfare
Munich Security Conference

Munich, GERMANY – Excellencies, ladies and gentlemen, as the last speaker in the conference, I know I will be graded as much on brevity as on substance. So, I plan to stay well within the green of the Teltschik traffic light.

Thank you, Horst Teltschik, for inviting a representative of a Finance Ministry to this security conference.

This invitation is indicative of the evolution of this conference, and even the concept of "security policy", from when I first attended Wehrkunde in 1982. It also reflects the evolution of the U.S. Treasury Department and Finance Ministries worldwide, in an era where terrorism has become a strategic threat to our individual and mutual interests.

British Chancellor Gordon Brown gave a landmark speech one year ago this week, in which he said that Finance Ministries are now important security ministries, and no responsibility is more important than our common efforts to stop the flow of illicit finance to terrorists and proliferators. I was thus very pleased that our colleague from India put such emphasis on terrorist financing.

Before turning to that specific point, let me also note that, with the exception of the United States Treasury, all major Finance Ministries are also budget directors. So, Horst, given the frequent references during the conference to the need to devote increased resources to difficult common tasks such as Afghanistan, it might be good next year to invite selected Finance Ministers, along with their Foreign and Defense Ministry colleagues, to hear directly the multilateral context in which defense and development budget decisions need to be made.

Returning to the subject of terrorist financing, let me again reference Chancellor Gordon Brown's speech in which he said, and I quote: "There is a paradox about globalization: the very opportunities it offers – the free movement of money, people, goods, and information – creates a global threat for which there is no real precedent."

And no group is more adept at exploiting these opportunities for dangerous purposes than international terrorists. While individual terrorist acts are relatively inexpensive and can be executed on a cash basis using informal networks such as hawalas in the Middle East, running terrorist networks and planning major terrorist operations requires access to the world's financial system to move significant funds across borders. And it is when terrorists and their supporters come into the global financial system that we have the best chance to detect, disrupt, and dismantle their dangerous activities and networks.

There is much that countries can do within their own borders to disrupt terrorist financing. In the United States, with strong bipartisan support from the congressional leaders here today, we have established an extensive legal and regulatory regime that empowers the Treasury to keep our banking system not only safe and sound but also secure from abuse by terrorists and their financial supporters. We have similar strong authorities to act against proliferators, narcotics traffickers, and organized criminal networks. These authorities bridge the divide between diplomacy and the use of force by giving us a concrete way to target illicit actors and strike at the financial heart of their operations.

A recent example is the decision we took to ensure that the Iranian state-owned Bank Saderat could not access the U.S. banking system because of its central role in the financing of terrorist activities of Hamas and Hezbollah, including via Saderat's branch in London.

Mentioning London makes clear that we are all part of a global banking system, and, as our colleague from India made clear, effective action against terrorist financing requires coordinated multilateral efforts. The terrorists and their financial supporters are smart, sophisticated abusers of the world's financial system, and they concentrate their efforts on the softest spots they can find in the system. We have, for example, seen recently growing use by terrorist financiers of charities, insurance transactions, and money service businesses.

The issue of countering terrorist financing is now on the agenda of every major international organization, including the United Nations, NATO, and the European Union, and every major international financial and economic forum, including the G-8, APEC, and the G-20, a new and increasingly influential financial group that includes, in addition to the G-8, important countries like China, India, Australia, Brazil, Turkey, Saudi Arabia, South Africa, and Mexico.

In addition, an organization that is becoming increasingly active is the Financial Action Task Force, where finance ministries, central banks, and regulators meet regularly, including in regional forums, to share information and best practices.

As an example of the new attention to this important challenge, just yesterday, in its communiqué after meeting in Essen, the G-7 Finance Ministers and Central Bank Governors said "We are committed to fight money laundering, terrorist financing, and other illicit financing involving similar risks to the stability and integrity of financial markets." It was not too many years ago this issue would not even have been on the agenda of the G-7.

Perhaps the most important recent development in the fight against terrorist financing is the impressive degree to which the private sector has taken action to protect their business activities from abuse by terrorists. Of course, part of this response is based on their need to comply with U.S. and other laws. But, increasingly, banking leaders understand that avoiding any possible contact with terrorist financing activities is an integral part of their normal risk-reward business analysis, leading many major banks to eliminate or reduce significantly their activities in countries like Iran, Syria and other state sponsors of terror.

Let me end my remarks with two points: first, a slight but related diversion; and second, a link to previous speakers' comments on Afghanistan.

First, although this panel focuses on terrorism, the fight against terrorist financing is closely linked to the fight against proliferation financing. Again using domestic authorities, the United States Government has taken action against Banco Delta Asia in Macau based on its engagement in illicit finance for North Korea and against Iranian state-owned Bank Sepah because of its role in financing Iranian proliferation activities, including through its branch in Rome. We have now been joined in this effort by the world community, which in UN Security Council Resolutions 1695 and 1718 on North Korea and 1737 on Iran has made clear that all UN member states must ensure their banks do not support the nuclear ambitions of these two countries. The European Union, under the German Presidency, has been particularly strong in this support of effective implementation – including establishing a firm basis for legal action by member states against illicit financing.

My second closing point regards Afghanistan, a subject frequently mentioned in earlier panels. At the suggestion of American Ambassador to NATO Nuland and at the invitation of Secretary General de Hoop Scheffer, I spoke in November to NATO's Permanent Representatives to discuss the connection between the international terrorist financing network and the increase in the frequency and scope of Taliban activities in Afghanistan, especially in the southern part of the country. The amounts of illicit financing flowing to the Taliban gives them the ability to attack NATO forces in asymmetric ways, with car bombs and other terrorist methods mentioned yesterday by Senator McCain. But the financing has also made possible more symmetric, larger combat unit attacks against NATO forces.

While many countries are contributing forces to counter the increasing activity of the Taliban and other insurgency elements in Afghanistan, countries should also enhance their intelligence and military capabilities to specifically target Taliban financial support networks. In fact, NATO leadership has acknowledged the importance of targeting terrorist financing in Afghanistan as a means of weakening the overall capabilities of the Taliban.

To meet this goal, finance ministries can and should play a key role in using their authorities against Taliban support nodes and associated financial flows. By proactively identifying Taliban support networks and designating them under UN Security Council Resolution 1267, we can collectively weaken the Taliban by disrupting its financial infrastructure.

In sum, the fight against terrorist financing has moved directly to the core of our common security policy. Each of our countries, and each of our private sector banks, must be part of securing our financial systems. I appreciate the opportunity to make this point on behalf of finance ministries worldwide before this important security policy conference and audience.