U.S. Department of the Treasury

(Archived Content)

Introduction:

I want to thank you for this opportunity to be here with you today. It is always a pleasure to dialogue with fellow lawyers about issues of importance confronting our nation, and I welcome the opportunity to share with you the Treasury Department’s role in combating terrorist financing. As you all know the United States is engaged in a war against terrorism. This is an unconventional war and this requires that it be fought on several unconventional fronts, including the financial front.

In the aftermath of the September 11 ^th disaster President Bush acted decisively and his command to us was clear. On September 24, 2001, he stated: We will direct every resource at our command to win the war against terrorists, every means of diplomacy, every tool of intelligence, every instrument of law enforcement, every financial influence. We will starve the terrorists of funding. The President directed Secretary O'Neill to lead the nation's war against terrorist financing and we have devoted extensive resources and applied our considerable expertise to fulfill this mandate.

The Treasury Department’s strategy is preventive, intended to disrupt the ability of terrorists to raise funds and finance future terrorist attacks. This isn’t a numbers game, focusing on how much money the USG blocked last week versus this week. Instead, by dismantling terrorist financial networks, we seek to prevent acts of terror and save human lives.

To be successful, any strategy intended to dismantle the financial infrastructure of terrorist groups like al Qaida must be international in nature. The reasons of course are obvious. First, terrorism is a global problem. Al Qaida cells are believed to be operating in as many as 60 countries worldwide. Second, money is a fluid commodity that can be wired around the world in seconds. Third, because of the strict federal bank reporting requirements and aggressive forfeiture laws, terrorist funds are not likely to be held in U.S. banks.

However, the development of an international strategy to starve terrorist of funds poses enormous challenges. Foreign governments have different legal regimes, imposing different legal standards and procedures. Some countries have not enacted either anti-terrorist financing, money laundering, or asset forfeiture legislation. Finally, sovereignty concerns may hamper information sharing and law enforcement cooperation.

Let me first begin by outlining the tools we have been utilizing to develop our comprehensive domestic and international strategy. On September 23 ^rd, pursuant to the International Emergency Economic Powers Act (IEEPA), President Bush issued Executive Order 13224 declaring a national emergency with respect to acts of terrorism and threats of terrorism committed by foreign terrorists against the United States. E.O. 13224 provides the Treasury broad, sweeping powers to block all property and interests in property of the individuals and entities named in the E.O.'s Annex or as designated by the Secretary of the Treasury or the Secretary of State under the Order. It also prohibits all financial transactions, including charitable donations, between U.S. citizens and all designees named in the E.O. Annex.

Although prior to 9/11 other executive orders and statutes were already in effect that permitted some blocking action, E.O. 13224 broadened the Treasury Department’s existing authority in two principal ways. First, it expanded the coverage of existing Executive orders from terrorism in the Middle East to global terrorism. Second, it emphasized the authority to block assets and deny access to the U.S. financial markets to persons who support, finance, or assist those who commit or pose a serious threat of committing acts of terrorism.

The new E.O. has proven an effective tool. Since September 24th the Treasury Department’s Office of Foreign Assets Control, has blocked the assets of 210 entities and individuals and $ 34 million has been frozen here in the U.S.

We are also intimately involved in the selection of the blocking targets. The Treasury Department chairs the inter-agency working group that has been targeting and listing these entities and individuals. In this inter-agency process, we have assembled experts and policymakers from the Treasury Department, including the Office of Foreign Assets Control (OFAC), the Department of Justice, the Department of State, the Federal Bureau of Investigation (FBI), the intelligence community, and the White House.

The process of identifying and investigating targets is ongoing and we are currently investigating other financial entities, businesses, groups, and persons for potential listing. We are focusing on uncovering high-impact financial intermediaries that act as financial conduits and facilitators for terrorist groups. Our ultimate goal is to use all the tools at our disposal to disrupt terrorist financing in an effort to prevent the perpetration of further terrorist attacks.

I am pleased to report that we have seen unprecedented cooperation from our friends and allies on the financial front. To date, all but a handful of countries have expressed their support for the war on terrorist financing and 166 countries and jurisdictions around the world have taken blocking action against individuals and entities with suspected terrorist links resulting in blocked assets abroad of $ 82 million.

Despite our successes there have been some unique challenges that have required flexibility and creativity as we crafted together an international coalition one country at a time. For instance, many countries, despite the good intentions of the government, do not have the domestic laws necessary to allow the government to take blocking action legally. In some of these cases legal authority was obtained via UN Security Council Resolutions 1267, 1337 and 1390. Let me take a moment to explain how this works. UNSCR s 1267 and 1333 are now combined in UNSCR 1390. UNSCR 1390 was adopted January 16, 2002, and requires all UN member States to block the assets of the Taliban, Usama bin Ladin, the al-Qaida organization and those linked to them. Thus, when the U.S. designates persons or entities under E.O. 13224, those names are forwarded to the U.N. Sanctions Committee. The members of the U.N. Committee have 48 hours to object or the names are placed on the U.N. Security Council list. The UN’s so-called 1267 Committee maintains a list of blocked individuals and entities. All states are required to freeze their assets and prevent assets from being made available to them.

In addition, UNSCR 1373, adopted on September 28th, 2001, mandates that all States prevent and suppress the financing of terrorist acts. To be more specific, it requires them to criminalize providing or collecting funds for terrorist use. It also requires them to block without delay funds and other assets of terrorists and their supporters, and prohibits making assets available to terrorists and supporters. UNSCR 1373 also mandates that States prosecute terrorists and provide mutual assistance in criminal investigations and proceedings for terrorist financing, including obtaining needed evidence. It further bars States from giving terrorists a safe haven. The resolution also mandates the establishment of the Counter-Terrorism Committee to monitor implementation of UNSCR 1373.

In addition, the Treasury Department has also worked bilaterally with many of these countries to provide them with the technical assistance necessary to enact and enforce domestic laws in their home countries that would give them the legal authority to block assets. Over the past eight months forty-three countries have requested technical assistance from the United States. The Treasury Department has been sending out teams of lawyers, accountants, and other specialists to aid many of these countries in drafting new laws that would enable them to take action unilaterally without relying on the UN process. Our technical assistance efforts are an ongoing priority of the Department and we are encouraged by the progress we have seen thus far on this front.

Another prong of our international strategy involves the Financial Action Task Force. FATF, a twenty-nine member organization, was originally created for the purpose of combating money laundering on an international, multilateral level. Treasury, State and Justice each contribute to the U.S. position on policy matters that implicate FATF.

The decision was made post September 11 ^th to also utilize FATF to address terrorist financing issues. The United States hosted an Extraordinary FATF Plenary session in October of 2001, at which FATF members established 8 Special Recommendations on Terrorist Financing that have quickly become the international standard on how countries can ensure that their financial regimes are not being perverted by terrorist financiers. The U.S. delegation also attended a FATF Plenary Session in Hong Kong earlier this year in which FATF required that all countries, including non-members, participate in a self-assessment process to identify loopholes in their financial systems that could be exploited by terrorist financiers. This FATF effort, along with our ongoing bilateral and multilateral negotiations, will ensure that we are crippling terrorist financiers by securing the global financial system.

Treasury officials have also engaged internationally with key countries via three multi-lateral bodies: the G-7, the G-8, and the G-20. In particular, the G-7 agreed to develop a mechanism to jointly identify terrorists whose assets are subject to freezing. This has resulted in even closer cooperation and commitment from our allies. We are also working toward developing criteria regarding information-sharing protocols that would address such issues as the procedures for sharing information and the protection of sensitive materials.

Another example of the progress that has been made on the multi-lateral front is the November 17th decision by the G-20 finance ministers and Central Bank governors in Ottawa, Canada. They agreed that they would block terrorist assets in their respective countries and report publicly which terrorist groups each country has blocked and the amount of actual monies blocked. Such coordination has been extremely helpful in improving communication and information sharing.

There has also been steady progress on the joint designation front. I am referring to situations where the United States and one, or more, other countries coordinate to identify, target and block the assets of terrorist related individuals and entities. Such action takes extensive coordination and close cooperation. The first joint designation took place on March 11 ^th of this year with our ally Saudi Arabia. The U.S. and Saudi Arabia together took action to designate and block the assets of two branch offices of the Saudi Arabia based charity the Al-Haramain Islamic Foundation.

On May 3rd we also participated in a joint designation with the European Union countries. The list of designees, which consisted of 18 groups and individuals, was a product of different countries contributing information and possible blocking targets to the larger group. It is this type of international synergy that we strive toward in our terrorist financing strategy. I am very optimistic that joint designations will become a routine component of terrorist related blocking actions by the U.S. government.

Treasury also supports FinCEN's active involvement in the growing network of financial intelligence units or FIUs. These specialized agencies were created by governments around the world to fight money laundering. They first met in 1995 at the Egmont-Arenberg Palace in Belgium to compare money laundering trends and law enforcement tips. Now known as the Egmont Group, these FIUs meet annually to find ways to cooperate on money laundering issues, especially in the areas of information exchange, training, and the sharing of expertise.

This global network of information exchange and cooperation has proved to be a valuable tool on the terrorist financing front. FinCEN hosted a special meeting of the Egmont Group in October 2001 to support the unprecedented law enforcement investigation in the wake of the events of September 11th. During the special meeting, the Egmont Group agreed to: (1) Review existing national legislation to identify and eliminate existing impediments to exchanging information between FIUs, especially when such information concerns terrorist activity; (2) Encourage national governments to make terrorist financing a predicate offense to money laundering and to consider terrorist financing one form of suspicious activity for which financial institutions should be on the look out; (3) Pass requests for information involving FIUs exclusively between FIUs rather than other government agencies; (4) Have FIUs play a greater role screening requests for information; and (5) To pool Egmont Group resources, where appropriate, to conduct joint strategic studies of money laundering vulnerabilities, including Hawala.

In addition, Egmont officials have also met with representatives of international financial institutions in order to solicit the support of private industry in its efforts to combat terrorist financing in a global, systematic way.

The fight against terrorist financing is a complex problem that will involve years of careful diplomacy and innovative thinking. One critical component of the strategy as we look toward the future is the development of personal relationships with our counterparts abroad. Treasury Secretary O’Neill has personally traveled to Europe, Asia and the Middle East in an effort to enlist the cooperation of our global counterparts. I have also visited Europe to engage with our colleagues there on this issue and will be traveling to Belgium, Luxembourg, Switzerland and Italy next week to engage in additional discussions with our global partners and personally underscore the importance of the financial war on terrorism to the U.S. government.

Close relations and regular communication with our global partners is critical to our success in combating terrorism now and in the future.

In conclusion, I want to talk a bit about why we are doing all of this. Our strategy, both domestically and internationally, is designed to be a preventative approach to the crisis facing our country today. Our view is that money that makes it into the hands of the terrorists is money that kills. If we can make it difficult for the terrorists to move money around the world and, even more importantly, make it difficult for them to raise money, we believe we can save lives. Terrorism threatens to harm not only our great country but freedom-loving countries around the globe. Our challenge is to harness the international interest in the terrorist financing issue into worldwide action. We believe that we have made some important steps in the right direction but I want to point out that this fight will be a marathon and not a sprint. We are just beginning. And I leave you with my personal assurance that we will not stop until every last dollar is rendered useless to those who seek to destroy us and our friends and allies abroad.

Thank you. I will be happy to take a few questions at this time.