FROM THE OFFICE OF PUBLIC AFFAIRS March 4, 2004JS-1210 Executive Office for Terrorist Financing & Financial Crimes U.S. Department of the Treasury Before the Senate Caucus on International Narcotics Control Chairman Grassley, Co-Chairman Biden, and distinguished members of the Caucus, thank you for inviting me to testify today, and thank you for your interest in the coordination of our Government’s efforts to combat money laundering and terrorist financing. Let me begin by expressing my gratitude to the Congress for the additional resources, authorities, and support given to the Executive Branch to assist us in our efforts to attack terrorist financing networks and money launderers. Of particular importance to these efforts, the USA PATRIOT Act expands the law enforcement and intelligence community's ability to access and share critical financial information regarding terrorist investigations, and Title III enhances our joint abilities to obtain and exploit financial information collectively to attack the financing of criminal activities. We at the Treasury will continue to apply aggressively, but judiciously, the enhanced powers that you have provided us to ensure that relevant financial information is used to initiate and support actions against terrorist and criminal organizations. We will also continue to develop and strengthen the relationships we have established with our private financial sector partners in these efforts. As you will hear from this panel - and as we and the Department of Justice re-affirmed in our publication of the National Money Laundering Strategy of 2003 (2003 Strategy) last fall - the campaign against terrorist financing and money laundering forms an essential component of our national security strategy. Since September 11th, we have leveraged the relationships, resources, authorities, and expertise that we have acquired over the past several years in combating money laundering to attack terrorist financing. Our efforts in both arenas are complementary and are effecting the changes required to protect the integrity of our financial systems by identifying, disrupting and dismantling sources, flows, and uses of tainted capital within those systems. Almost one year ago, the Secretary of the Treasury established the Executive Office for Terrorist Financing and Financial Crimes (EOTF/FC). This Office is responsible for developing policies relating to the Department’s anti-money laundering, terrorist financing and financial crimes mission. It also oversees the offices and Bureaus responsible for implementing and administering these policies, i.e., the Office of Foreign Assets Control (OFAC), the Financial Crimes Enforcement Network (FinCEN), and the Treasury Executive Office for Asset Forfeiture (TEOAF). We have achieved important results, but not without the coordinated efforts of all Treasury and other agency components engaged in anti-terrorist financing, money laundering and financial crimes efforts, including the law enforcement, intelligence and military communities, foreign government counterparts, and the private sector. Together, we are effecting long-term change and strengthening domestic and international financial systems against terrorist and criminal abuse by developing and enhancing effective and comprehensive standards of financial transparency and accountability. In the shorter term, we are capitalizing on existing transparencies in financial systems and aggressively applying new authorities to identify, disrupt and dismantle terrorist and criminal organizations. II. Attacking the Financial Infrastructure of Terrorist and Criminal Organizations No matter whether the driving force is religious extremism, political power, financial greed, or any combination thereof, the infrastructure supporting crime necessarily includes a financial component. Money is required to fuel these enterprises of terror, narco-trafficking and organized crime, and as such, it represents a significant vulnerability that Treasury and its federal, state and local allies must and do exploit. Targeting money flows is among the best means of tracking, exposing and capturing terrorists and their facilitators, narco-trafficking cartels and their supporting infrastructure, and organized crime networks worldwide. Money flows leave a signature, an audit trail, and provide a road map of terrorist and other criminal activity. As we and our international partners work together to follow and stop terrorist or illicit funds, we strengthen the integrity of our financial systems and erode the infrastructure that supports terrorists and criminals. This is why we are committed to “targeting the money” from a systemic approach. We believe that resources devoted to fighting money laundering and financial crimes through a systemic approach reap benefits far beyond merely addressing the underlying financial crimes they directly target. When applied on a systemic basis, targeting the money can identify and attack all kinds of activity, including the financing of terrorism, narcotics trafficking, securities frauds, alien smuggling, organized crime, and public corruption. Financial investigations lead upstream to those who are generating the underlying financial crimes, as well as downstream to provide a roadmap to those financial professionals who facilitate the criminal activity. A. Terrorist Financing The terrorism we are fighting generally operates through complex networks. In this context, a terrorist act, no matter how basic and inexpensive, cannot be accomplished without a sophisticated financial and operational infrastructure. Terrorist organizations such as al Qaida and Hamas require a financial and operational infrastructure. They must pay for the security of “safe havens,” financial support for the families of “martyrs,” recruitment, indoctrination, logistical support, and personnel training. This doesn’t even get into the costs of ostensibly humanitarian efforts - charitable organizations, medical clinics and schools - that are either created as fronts for terrorism or to win support and recruits. Finally, there is the cost of weapons. In short, the horrific results of terrorism require the raising, movement and use of considerable funds. The terrorist leaves identifiable and traceable footprints in the global financial systems, and these footprints must be pursued forward to identify future perpetrators and facilitators, and backwards to identify funding sources and to dismantle supporting entities and individuals. The President has made it clear that we must use every available tool in waging a comprehensive campaign against terrorism, and we at Treasury are working with other relevant USG agencies in taking meaningful and effective action on a variety of fronts. We are developing effective international standards of financial transparency and accountability; sanctioning non-compliant behavior by non-cooperative states; coordinating effective technical assistance to weak but willing states; freezing terrorist-related and other criminal assets; investigating and prosecuting crimes; directing intelligence operations either at a financier, a financial node, or a facilitator; and using diplomatic suasion to convince other governments to take significant steps. Depriving the terrorists of funding remains both an ongoing priority and an effective tool in the war on terrorism. Ever since the President took initial action in freezing terrorist finances through the issuance of Executive Order 13224, the U.S. Government (USG) has led an international coalition to disrupt, dismantle, and destroy the sources and pipelines from and through which terrorists receive money. · Under Executive Order 13224, the USG has designated a total of 351 individuals and entities, resulting in the freezing or seizure of approximately $200 million of terrorist-related funds worldwide. The impact of these actions goes beyond the amount of money frozen. Public designation and asset blocking choke off terrorist cash flows by cutting off access to the § The Al-Aqsa § Shamil Basayev (al-Qaida-related) on § The National Council of Resistance of Iran (including its § Commite de Beianfaisance et de Secours aux Palestiniens (France), Association de Secours Palestinien (Switzerland), Interpal (UK), Palestinian Association in Austria, and the Sanibil Association for Relief and Development (Lebanon) (all Hamas-related charities) on August 22, 2003
§ Sheik Ahmed Yassin (Gaza), Imad Khalil Al-Alami (Syria), Usama Hamdan (Lebanon), Khalid Mishaal (Syria), Musa Abu Marzouk (Syna), and Abdel Aziz Rantisi (Gaza) (Hamas political leaders) on August 22, 2003
§ Yassin Sywal, Mukhlis Yunos, Imam Samudra, Huda bin Abdul Haq, Parlindungan Siregar, Julkipli Salamuddin, Aris Munandar, Fathur Rohman A1-Ghozi, Agus Dwikarna, and Abdul Hakim Murad (members of Jemaah Islamiyah) on September 5, 2003
§ Abu Musa'ab Al-Zarqawi (al-Qaida-related) on § Al Akhtar Trust § Dawood Ibrahim (al-Qaida-related) on § Abu Ghaith (al-Qaida-related) on
§ Four branches of the Al Haramain Islamic Foundation (al-Qaida-related) on § Shaykh Abd Al-Zindani (al-Qaida-related) on · We have made it harder for al Qaida to raise and move money around the world by cutting off channels of funding and freezing assets. In the last year, over fifty individuals and entities were designated by the USG pursuant to the obligations of UN-member states to freeze the assets of individuals and entities related to Usama bin Laden, al-Qaida, and/or the Taliban. · Important financial networks - such as those of al Barakaat and parts of the Al Haramain Islamic Foundation - have been identified and shut down. The UAE and Somalia-based al Barakaat network was once used to funnel potentially millions of dollars annually to al Qaida and its affiliates. · Key terrorist financiers and facilitators, such as Saudi-millionaires Yasin al-Qadi and Wa’el Hamza Julaidan, Swift Sword, and Bin Laden’s Yemeni spiritual advisor, Shaykh Abd- Al-Zindani, have had their assets frozen and/or have been arrested or otherwise addressed through the international community’s concerted law enforcement efforts. · The · Six leaders of Hamas and six charities in · Working together with the international community, we have taken steps to ensure global compliance with international standards against terrorist financing and money laundering. Treasury and other elements of the USG have launched a three-prong strategy that includes: (i) objectively assessing countries against international standards; (ii) providing capacity-building assistance for key countries in need, and (iii) isolating and punishing those countries and institutions that facilitate terrorist financing. · The USG has identified 26 countries as priorities for receiving counter-terrorist financing technical assistance and training, and we are working bilaterally to deliver such assistance to these priority countries. The USG is also working together with its allies in the Counter-Terrorism Action Group (CTAG) and the Financial Action Task Force (FATF) to coordinate bilateral and international technical assistance efforts to additional priority countries in the campaign against terrorist financing. · We have forged an international coalition against terrorist financing, gaining the support and action of countries around the world to search for and interdict terrorist funds. Most terrorist-related assets are located outside the jurisdictional reach of the · Through FinCEN, we have directed the attention of the Egmont Group towards terrorist financing and expanded its global reach. The Egmont Group is now comprised of 84 Financial Intelligence Units (FIUs) from various countries around the world, which are responsible for receiving, analyzing and disseminating financial information reported pursuant to their respective anti-money laundering and anti-terrorist financing regimes. FinCEN is the FIU for the · We have enlisted the active support of international bodies, such as the G-7, G-10, G-20, APEC, and others - to make efforts against terrorist financing a priority for their members. The G7, G20, Asia-Pacific Economic Cooperation Forum (APEC), Western Hemisphere Finance Ministers (WHFM), ASEAN Regional Forum (ARF), and OSCE have all issued action plans calling on their members to take a series of concrete measures to enhance the effectiveness of their counter-terrorist financing regimes. · Our systemic efforts and targeted designations, together with USG law enforcement, diplomatic, intelligence and military actions, have deterred potential terrorist supporters and sympathizers by increasing the cost and the risk of doing business with terrorists. · Several countries, including members of the Gulf Cooperative Council, have taken steps to begin regulation and oversight of charities and donations abroad. Islamic States have also moved forward on regulating and harmonizing accounting, transparency, and oversight principles for Islamic banking. In addition, several countries, such as the B. Drug Trafficking Our focus and commitment to targeting the financing of illicit activities includes an aggressive use of authorities against narcotics traffickers. A particularly potent financial weapon in our war against drug money laundering systems is that wielded by Treasury’s ability to apply and enforce narcotics trafficking sanctions. Treasury, in conjunction with the Departments of Justice, State and Homeland Security, enforces the IEEPA narcotics sanctions against Colombian drug cartels under Executive Order 12978. The objectives of the Specially Designated Narcotics Traffickers (SDNT) program are to identify, expose, isolate and incapacitate the businesses and agents of the Colombian drug cartels and to deny them access to the Recent designations under E.O. 12978 include: · A financial network of 134 front companies and individuals in Colombia, Costa Rica, Ecuador, Panama, Peru, Spain, Venezuela, the Bahamas, the British Virgin Islands, and the United States that were acting on behalf of the Cali cartel leaders, Gilberto and Miguel Rodriguez Orejuela, on October 17, 2003. Treasury also implements the President’s sanctions under the Foreign Narcotics Kingpin Designation Act (“Kingpin Act”). The Kingpin Act, enacted in December 1999, operates on a global scale and authorizes the President to deny significant foreign narcotics traffickers, and their related businesses and operatives, access to the Since the inception of the Kingpin Act and after multi-agency consultations, Treasury has named 14 foreign businesses and 37 foreign individuals in Another weapon that the USG uses aggressively against narco-traffickers and money launderers is that of seizure and confiscation. In fiscal year 2003, Treasury’s Executive Office for Asset Forfeiture (TEOAF) received over 234 million dollars in annual forfeiture revenue from the combined efforts of the former Bureau of Alcohol, Tobacco Firearms and Explosives, the U.S. Secret Service (USSS), the Internal Revenue Service (IRS), and the former U.S. Customs Service (USCS). This represents a significant increase over fiscal year 2002, in which TEOAF received over $152 million dollars of forfeiture revenue. Such an improvement is particularly impressive when considering the transition undertaken by three of these law enforcement bureaus in the government reorganization last year. C. Terrorist Financing and Drug Trafficking Although terrorist financing and drug money laundering differ in some respects, they utilize many of the same financial systems and methods. To that end, we seek solutions and tools that provide us the greatest systemic change and flexibility. As part of our long term strategy, we have focused our efforts on enhancing the transparency and accountability of formal and informal financial systems, particularly those that have been abused by terrorist and criminal organizations. In the shorter term, we are exploiting existing transparencies and developing a variety of weapons to identify, disrupt and dismantle these organizations. Enhancing the Transparency and Accountability of Financial Systems Attacking the financial infrastructure of terrorist and other criminal activity requires transparent and accountable financial systems that allow us to identify and take effective action against sources, movement and use of terrorist funds and criminal proceeds moving through such systems. As part of our long-term strategy, therefore, we have focused on developing or enhancing the transparency and accountability of financial systems, particularly those that have been abused by terrorists and money launderers in the past. We have achieved considerable success thus far, both internationally and domestically, and in both formal and informal financial systems. For example: · · In the larger context of the need for a strong anti-money laundering regime as a necessity for combating terrorist financing, we have seen many countries take important steps to improve their legal regimes and strengthen the oversight of their financial sectors. Countries like · We have engaged the IMF and World Bank to gain their recognition of the FATF 40 Recommendations as one of the 12 Key · We have capitalized on the FATF’s expertise on money laundering to attack terrorist financing, largely through the Eight Special Recommendations on Terrorist Financing developed and adopted by the FATF in October 2001. Since that time, we have worked within the FATF’s Working Group on Terrorist Financing, which Treasury co-chairs, to issue interpretive guidance on the Eight Special Recommendations, particularly with respect to: freezing terrorist-related assets; regulating and monitoring alternative remittance systems such as hawala; ensuring accurate and meaningful originator information on cross-border wire transfers, and protecting non-profit organizations from terrorist abuse. · To facilitate the global development and implementation of effective counter-terrorist financing regimes, the USG is driving a coordinated and comprehensive process to deliver technical assistance to combat terrorist financing around the world. In coordination with our international allies in the CTAG, the international community has identified nine priority countries to receive immediate assistance. The FATF’s Working Group on Terrorist Financing is completing terrorist financing needs assessments in these priority countries and will forward these assessments to the CTAG for coordinated assistance by donor states. · We have built relationships with the private sector to enlist their support as the gatekeepers to the financial system. We have broadened and deepened the regulatory structure and reporting requirements in the domestic financial system. We have created a level-playing field and attacked money laundering and terrorist financing through non-banking financial systems under the USA PATRIOT Act, subjecting new sectors of the economy (such as money service businesses and broker-dealers) to anti-money laundering controls like record-keeping and reporting requirements previously imposed on banks alone. Identifying, Disrupting and Dismantling Terrorist and Criminal Organizations We are capitalizing on our long-term efforts to improve the transparency and accountability of formal and informal financial systems by developing and applying various weapons to identify, disrupt and dismantle terrorist and criminal organizations that operate within these systems. Our efforts to date have produced considerable results: · We are aggressively using the force of Section 311 of the PATRIOT Act to address primary money laundering concerns on a jurisdictional and institutional basis. Working in cooperation with the law enforcement and intelligence communities, we have designated three foreign jurisdictions and two financial institutions under Section 311. In addition to designating the jurisdiction of · We have enhanced law enforcement efforts that attack those who support terrorism through other means of organized crime: · On · On · Most recently, on · We have used Section 314(a) of the PATRIOT Act to enable law enforcement, through FinCEN “Blastfaxes” to more than 30,000 financial institutions, to locate quickly the accounts and transactions of those suspected of money laundering or the financing of terrorism. Since Section 314a’s creation, the system has been used to send the names of 1,547 persons suspected of terrorism financing or money laundering to financial institutions. This has resulted in 10,560 matches that were passed on to law enforcement. · Since September 11th, FinCEN has supported 3,248 terrorism investigations and has made 342 proactive case referrals to law enforcement potentially involving terrorism based upon an analysis of information in the Bank Secrecy Act database. The Terror Hotline established by FinCEN has resulted in 833 tips passed on to law enforcement. FinCEN also is implementing an Electronic Reports program that will be able to issue these reports in an electronic format, thus enhancing law enforcement’s ability to utilize the information. · With the expansion of the Suspicious Activity Report (SAR) regime since September 11th, financial institutions nationwide have filed 2,818 SARs reporting possible terrorist financing, including 607 SARs in which terrorist financing represented a primary suspicion. · We have developed the use of technology to identify possible sources of terrorist financing, particularly through the pilot counterterrorism project undertaken by IRS-CI in Garden City, III. Enhancing Interagency Coordination What these actions show is the strength of Treasury’s resources and expertise and the value and critical need of interagency cooperation in order to tighten the trap around terrorist financiers, drug traffickers and other criminal enterprises. A core principle of the 2003 Strategy is enhancing our ongoing efforts to combat money laundering by ensuring that law enforcement agencies and task forces, including the High Intensity Financial Crime Area (HIFCA) Task Forces, Organized Crime and Drug Enforcement Task Forces (OCDETF), the Suspicious Activity Report (SAR) Review Teams, and the High Intensity Drug Trafficking Area (HIDTA) Task Forces use and share all available financial databases and analytical tools and focus their personnel and other resources on high-impact targets and financial systems. To help achieve this goal and in accordance with the 2003 Strategy, the interagency law enforcement community is taking aggressive steps to develop an interagency anti-drug-money laundering financial intelligence center, to serve as a drug-money laundering intelligence and operations center. As stated in the just-released 2004 National Drug Control Strategy, some $6.3 million has been approved to support and expand the OCDETF Drug Fusion Center. We at Treasury are working with the Departments of Justice and Homeland Security to ensure that there is a robust financial component at the OCDETF Drug Fusion Center to develop the highest value financial targets, identify and disseminate information about developing trends and patterns, and help coordinate financial attacks on the systems, geographic locations, and individuals by and through which drug proceeds are moved and laundered. HIFCAs have been created specifically to identify and address money laundering in designated geographical areas (currently in New York/New Jersey; IV. Next Steps Despite the considerable progress that we have achieved, largely through enhanced inter-agency and international communication, cooperation and collaboration, several ongoing and important challenges remain in the campaign against terrorist financing and money laundering. We have identified a number of priorities to advance our long-term and short-term goals as described above and in the 2003 Strategy. We are continuing to develop international standards where necessary to advance our long term strategy of enhancing the transparency and accountability of financial systems and mechanisms prone to terrorist and criminal abuse. We are currently engaging the FATF and the Asia Pacific Group (APG), a FATF-style regional body, to complete a study of mandatory, cross-border, cash reporting requirements as an effective tool in identifying and interdicting cash couriers carrying illicit funds. We anticipate that the results of this study will facilitate countries’ adoption of reporting requirements and the sharing of information obtained through such reports. In addition to these standard-setting priorities, we are facilitating compliance with existing international standards through terrorist financing technical assistance to priority countries, both bilaterally and through a coordinated international effort. We are also launching a number of initiatives to reduce the threat of terrorist financing through non-profit organizations (NPOs). For example, the Treasury Department is planning an initial outreach event with the NPO sector to discuss issues raised by Treasury’s Anti-Terrorist Financing Guidelines for charities. Through the FATF Terrorist Financing Working Group, we are encouraging jurisdictions to review the adequacy of existing authorities and oversight mechanisms in protecting the NPO sector from terrorist abuse. We have formed a Treasury Working Group on Charities and Terrorist Financing to ensure effective communication, cooperation and collaboration among Treasury’s various components assisting in this effort. We are presently engaging the inter-agency community to enlist the support of other agencies where necessary and to provide support where appropriate to attack and reduce the threat of terrorist financing through charities operating in the We are also engaging the Finally, we are enhancing the transparency of financial systems by working directly with the private sector whenever possible. In addition to our direct engagement with the charities sector as described above, we are working with the international banking sector to facilitate bank-to-bank training and assistance in understanding and complying with enhanced anti-money laundering and counter-terrorist financing obligations. To exploit these existing and developing transparencies, we must also advance our short-term strategy by enhancing our ability to identify, disrupt and dismantle terrorist and criminal organizations. We are pursuing a number of priorities to advance these interests, domestically and internationally. In addition to supporting the targeting strategies against narco-traffickers through the We are particularly focused on identifying opportunities to apply Section 311 against those foreign banks that either facilitate money laundering or ignore their responsibilities as gatekeepers to the international financial system. Such banks will learn to comply with international standards or they will be cut off from the These long-term and short-term initiatives are complementary and address the priority challenges that we face in the campaign against terrorist financing and money laundering. Moreover, these initiatives capitalize on the progress we have achieved to date, and on the relationships that we have forged in the inter-agency and international communities, as well as in the private sector, over the course of our sustained campaign. The 2003 Strategy, published last fall, provides a framework for the USG’s ongoing commitment to attack money laundering and terrorist financing on all fronts. As this Caucus is aware, the 2003 Strategy was the last of the five Congressionally-mandated strategies. We have and will continue our efforts with this Caucus and the Congress to evaluate the need for future Congressionally-mandated strategies and the contours of such a mandate. I will be happy to answer any questions you may have.
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