(Archived Content)
FROM THE OFFICE OF PUBLIC AFFAIRS
JS-1539
Before the House Government Reform Subcommittee on Criminal Justice, Drug Policy and Human Resources
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 11 th, 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.
I. Treasury’s Role in Combating Financial Crime
Sanctions and Administrative Powers: Treasury wields a broad range of powerful economic sanctions and administrative powers to attack various forms of financial crime. We have continued to use these authorities in the campaign against terrorist financing, drug trafficking, money laundering and other criminal financial activity.
In combating terrorism financing, the U.S. government's primary and most public tool is the ability of the Departments of the Treasury and State to designate terrorist financiers and terrorists under Executive Order (E.O.) 13224, together with Treasury's ability to implement orders that freeze the assets of terrorists under E.O. 13224.
In combating drug trafficking, Treasury continues to apply its authorities under the Foreign Narcotics Kingpin Designation Act and the International Emergency Economic Powers Act (IEEPA) to administer and enforce the provisions of law relating to the identification and sanctioning of major foreign narcotics traffickers.
In combating money laundering, Treasury has applied its new authority under Section 311 of the USA PATRIOT Act (“Patriot Act”) to designate and take action against jurisdictions and financial institutions of primary money laundering concern.
Financial Regulation and Supervision: The Treasury Department – through FinCEN’s administration of the Bank Secrecy Act as amended by Title III of the Patriot Act – is responsible for establishing the U.S. AML/CFT regime by issuing the regulations intended to safeguard U.S. financial institutions from abuse by terrorists, narcotics traffickers, and other organized criminals. Treasury further maintains close contact with the federal financial supervisors – including the Treasury Department’s Office of the Comptroller of the Currency and Office of Thrift Supervision – to ensure that these regulations are being implemented throughout the financial sectors.
Private Sector Outreach: As a result of our traditional role in safeguarding the financial system, Treasury has developed a unique partnership with the private sector that provides us with the benefits of the insights and suggestions of the financial institutions that are in many ways the front-line in our war against money laundering and terrorist financing. Through such mechanisms as the Bank Secrecy Act Advisory Group, Treasury ensures that the private sector plays an appropriate role in the development of AML/CFT regulatory policy and receives appropriate feedback from the information it provides.
TFI will enhance the Treasury Department’s ability to meet our own mission and to work cooperatively with our partners in the law enforcement and intelligence communities. The Department of the Treasury is committed to complementing, but not duplicating, the important work being done by the Department of Justice and Department of Homeland Security, and by the various intelligence agencies, and will be fully integrated into already established task forces and processes.
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 fraud, alien smuggling, organized crime, and public corruption. Financial investigations lead to those who are committing the underlying financial crimes, as well as to those financial professionals who facilitate the criminal activity.
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 “downstream” to identify future perpetrators and facilitators, and “upstream” to identify funding sources and to dismantle supporting entities and individuals.
The U.S. Government 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, we have designated a total of 361 individuals and entities, as well as frozen or seized 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 U.S. and other financial systems and also provide access to further intelligence. Designations under E.O. 13224 in the past year include the following:
Ten al Qaida loyalists related to the Armed Islamic Group (GIA) on March 18
Shaykh Abd Al-Zindani (al Qaida-related) on February 24, 2004
Four branches of the Al Haramain Islamic Foundation (al Qaida-related) on January 22, 2004);
Abu Ghaith (al Qaida-related) on January 16, 2004;
Dawood Ibrahim (al Qaida-related) on October 17, 2003;
Al Akhtar Trust International (al Qaida-related) on October 14, 2003;
Abu Musa'ab Al-Zarqawi (al Qaida-related) on September 24, 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;
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;
Comité de Bienfaisance 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;
The National Council of Resistance of Iran (including its U.S. representative office and all other offices worldwide) and the People’s Mujahedin Organization of Iran (including its U.S. press office and all other offices worldwide) on August 15, 2003;
Shamil Basayev (al Qaida-related) on August 8, 2003; and
The Al-Aqsa International Foundation (Hamas-related) on May 29, 2003.
Together with the State and Justice Departments and other agencies, we are following-up on these designations by using our diplomatic resources and regional and multilateral engagements to ensure international cooperation, collaboration and capability in designating these and other terrorist-related parties through the United Nations and around the world.
Important financial networks – such as those of al Barakaat and parts of the Al Haramain Islamic Foundation – have been identified and shut down at home and abroad. The UAE and Somalia-based al Barakaat network had been used to funnel potentially millions of dollars annually to al Qaida and its affiliates.
We have worked with counterparts in important allies such as Saudi Arabia to ensure that key terrorist financiers and facilitators have had their assets frozen and/or have been arrested or otherwise addressed through the international community’s concerted law enforcement efforts. Included in this category are Saudi millionaires Yasin al-Qadi and Wa’el Hamza Julaidan, Swift Sword, and Bin Laden’s Yemeni spiritual advisor, Shaykh Abd- Al-Zindani,
The U.S. has also taken significant actions against non-al Qaida linked terrorist organizations such as HAMAS and the Basque terrorist group, ETA. On December 4, 2001, President Bush issued an order to freeze the assets of a U.S.-based foundation – The Holy Land Foundation for Relief and Development – along with two other HAMAS financiers, Beit al Mal and the Al Aqsa Islamic Bank. Six leaders of Hamas and six charities in Europe and the Middle East that support Hamas were subsequently designated in May and August 2003. In partnership with our EU allies, the U.S. designated 31 ETA operatives and one organization that supports ETA.
FinCEN has made 342 proactive case referrals to law enforcement potentially involving terrorism based upon analysis of information in the Bank Secrecy Act database. The Terror Hotline established by FinCEN has resulted in 853 tips passed on to law enforcement since 9/11. FinCEN is also implementing an Electronic Reports program that will further enhance law enforcement’s ability to utilize this information. Additionally, with the expansion of the Suspicious Activity Report (SAR) regime, as of April 28, 2004, financial institutions nationwide have filed 4,294 SARs reporting possible terrorist financing directly to FinCEN, including1,866 SARS in which terrorist financing represented a primary suspicion. This has further enhanced our efforts to identify and vigorously investigate terrorist financing webs and dismantle them.
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, New York. The Garden City Counterterrorism Lead Development Center is dedicated to providing research and nationwide project support to IRS-CI and the Joint Terrorism Task Force (JTTF) counterterrorism financing investigations. Relying on modern technology, the Center is comprised of a staff of IRS Special Agents, Intelligence Analysts, and civil components from the Service’s Tax Exempt/Government Entities Operating Division, who will research leads and field office inquiries concerning terrorism investigations. Center personnel specializing in terrorism issues will develop case knowledge, identify trends, and provide comprehensive data reports to IRS field agents assigned to JTTFs or to those conducting CI counterterrorism financing investigations. The Center may also serve to de-conflict related investigations among multiple field offices, and will have distinctive analytical capabilities to include link analysis, data matching, and pro-active data modeling. Using data from tax-exempt organizations and other tax-related information that is protected by strict disclosure laws, the Center will analyze information not available to or captured by other law enforcement agencies. Thus, a complete analysis of all financial data will be performed by the Center and disseminated for further investigation. This research, technology, and intuitive modeling, coupled with CI’s financial expertise, are maximizing IRS-CI’s impact against sophisticated terrorist organizations.
The U.S. has identified 24 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 U.S. 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.
The U.S. has enlisted the active support of international bodies, such as the G-7, G-10, G-20, the Asia-Pacific Economic Cooperation Forum (APEC), and others — to make efforts against terrorist financing a priority for their members. The G7, G20, 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.
B. Drug Trafficking
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 certain specified Colombian drug cartels and to deny them access to the U.S. financial system and to the benefits of trade and transactions involving U.S. businesses and individuals. Targets are identified in consultation with the Drug Enforcement Administration and the Narcotics and Dangerous Drug Section of the Department of Justice. Since the inception of the SDNT program in October 1995, 956 parties have been identified as SDNTs, consisting of 14 Colombian drug cartel leaders, 381 businesses and 561 other individuals.
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 U.S. financial system and all trade and transactions involving U.S. companies and individuals. During 2003, the President named seven new kingpins, including two designated foreign terrorist organizations -- Revolutionary Armed Forces of Colombia and United Self-Defense Forces of Colombia -- and a Burmese narco-trafficking ethnic guerilla army, bringing the total number designated to 38.
Another weapon that the U.S. uses against narco-traffickers and money launderers is seizure and confiscation. In fiscal year 2003, Treasury’s Executive Office for Asset Forfeiture (TEOAF) received over $ 234 million in 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 of forfeiture revenue. This improvement is particularly impressive when considering the transition undertaken by three of these law enforcement bureaus in the government reorganization last year.
III. Enhancing Interagency Coordination
Despite considerable progress achieved, several 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.
In addition to setting standards, we are facilitating compliance with existing international standards through terrorist financing technical assistance to priority countries, both bilaterally and through a coordinated international effort. Internationally, we anticipate completing technical needs assessments of priority countries through the FATF within the next few months. Thereafter, we will work with the State Department in coordinating the delivery of appropriate assistance to these countries through the CTAG. Bilaterally, we will continue to work with the State Department and the interagency community to ensure that those countries targeted for bilateral assistance receive it as planned.
Another priority is engaging the Middle East as a priority in promoting greater transparency and understanding of regional financial systems and regional money laundering and terrorist financing threats. We are working with the World Bank, other organizations and states, and the countries in the region to facilitate development of a FATF-style regional body for the Middle East and North Africa, and anticipate the launch of this organization by the end of 2004. In addition, we are participating in a number of ongoing training and outreach seminars with government officials in the region on anti-money laundering and counter-terrorist financing issues, including in the United Arab Emirates and Lebanon, and are exploring the continued study of terrorist financing and drug trafficking connections with countries in that region.
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, both domestically and internationally, to advance this goal.
Internationally, we are focusing our efforts on achieving greater European cooperation and support for our terrorist financing designations. We are capitalizing on our progress in improving and clarifying international standards for freezing terrorist-related assets under FATF Special Recommendation III by: (i) pursuing bilateral and multilateral efforts to reform the EU Clearinghouse process, and (ii) encouraging national implementation of UN member state obligations under United Nations’ Security Council Resolution 1373.
I will be happy to answer any questions you may have.
-30-