03 October 2001
Text: Treasury Official on Dismantling Terrorist Financial Networks
(Hopes Congress will pass legislation to facilitate agency's work)
(3700)
The United States "is committed to dismantling terrorist fund-raising
mechanisms with every tool we have at our disposal," says Jimmy
Gurule, under secretary for law enforcement at the Department of the
Treasury.
Testifying before Congress on October 3, Gurule outlined the steps
taken thus far to track down -- and eliminate -- the financial
lifeblood of terrorist organizations such as Al-Qaida. U.S. officials
have linked Al-Qaida to suspected terrorist Osama bin Laden and to the
September 11 attacks on New York City and Washington.
The Treasury Department is working closely with finance ministers from
other Group of Seven (G-7) industrialized countries to stop the
financing of terrorism, Gurule said. Senior Treasury officials have
also contacted finance officials in Chile, Russia, India, Saudi
Arabia, Pakistan, Indonesia, Egypt, the Netherlands, the Philippines,
Spain, Argentina, Brazil, Bahrain and Kuwait.
Treasury Secretary Paul O'Neill will meet with his G-7 colleagues in
Washington on October 6 to address "the important subjects of
information-sharing arrangements amongst financial crimes experts, and
the possible establishment of terrorist asset-tracking centers in the
other G-7 countries similar to the one created by the United States
after the September 11 attacks," Gurule said.
But the Treasury needs additional instruments to carry out its mission
in the fight against terrorism, Gurule argued, and he conveyed
O'Neill's hope that legislators would ease existing restrictions on
the department. "I am here today to reiterate the Secretary's request
that we remove the handcuffs that are hindering law enforcement and
intelligence agencies from doing their job," he said.
Gurule said officials "are currently evaluating proposals that would
equip Treasury law enforcement components with the necessary tools for
the task at hand," and are debating such questions as "whether the
Customs Service would benefit from enhanced jurisdictions and powers."
Bush Administration officials plan to draft legislation to address
those concerns and "look forward to working with Congress on this
matter in the near future," he said.
Following is the text of Gurule's testimony, as prepared for delivery:
(begin text)
FROM THE OFFICE OF PUBLIC AFFAIRS
FOR IMMEDIATE RELEASE
October 3, 2001
TESTIMONY OF UNDER SECRETARY JIMMY GURULE
UNDER SECRETARY (ENFORCEMENT)
HOUSE COMMITTEE ON FIANCIAL SERVICES
Chairman Oxley; distinguished members of the House Committee on
Financial Services:
Permit me to begin by thanking you for inviting me to testify before
the Committee on the Administration's policies and proposals for
dealing with the threats posed to the U.S. and global financial
systems by international terrorists and terrorist groups. It is an
honor to meet with you this morning as we assess the Treasury
Department's strategy to cut off the financial lifeblood of the
individuals and organizations responsible for the September 11
attacks.
In so far as possible, my testimony is structured along the lines
requested by Chairman Oxley in his September 27, 2001, letter to
Secretary O'Neill. Let me begin with an overview of what the Treasury
Department hopes to accomplish.
First, the Treasury Department is committed to bringing the
perpetrators of the cowardly acts of September 11th to justice.
Second, we are taking steps to identify the financial infrastructure
of these terrorist organizations so that we are able to disrupt and
dismantle their fund-raising abilities and ensure that they do not
have access to the international banking system.
To attain these goals, we must improve coordination and information
sharing among our own government agencies and deepen and broaden the
already strong cooperation of friendly governments throughout the
world. As the President has so decisively stated, in the war against
terrorism there is no middle ground: ultimately, you either stand with
us -- or against us.
The Financial Networks and Operations of Terrorist Groups
To cut the lifeblood of Osama bin Ladin and his terrorist group
Al-Qaida, we must identify and take action against individuals and
Islamic charitable organizations who contribute money to this
organization. We will also target businesses, front companies, banks
and underground money transfer systems that participate in the
financial schemes of the terrorists. There can be no doubt that the
dismantling of bin Laden's financial network is one of the most
critical elements of our policy to deter and prevent future terrorist
attacks.
Unfortunately, available information indicates that some Islamic
charitable organizations have been penetrated, exploited and are now
controlled by terrorists involved with Al-Qaida. Islamic charitable
organizations which have elements associated with Al-Qaida include
multinational Gulf-based organizations operating worldwide with
multi-million-dollar budgets at one end of the spectrum and small,
tightly organized front cells at the other. Islamic charitable
organizations serving as cover for terrorist groups adopt innocuous
names and co-opt legitimate causes. Often, well-intentioned
individuals seeking to make contributions to provide relief for
refugees from disaster are defrauded -- and their funds end up
diverted to finance terrorism. Shutting down or re-configuring these
corrupt charities is a critical component of the war against bin
Ladin's financial empire -- and one which will require intense
international coordination and cooperation.
In addition to fund-raising, Al-Qaida uses banks, legal businesses,
front companies and underground financial systems to finance its
activities. Some Al-Qaida operatives engage in petty theft to support
their cells. Other Al-Qaida elements profit from the drug trade. For
instance, Taliban-controlled Afghanistan produces at least
three-quarters of the poppy in the world.
Al-Qaida operatives use checks, credit cards, ATM cards, and
wire-transfer systems and brokerage accounts throughout the world,
including the U.S. Often, accounts are maintained in names unknown to
us.
One underground system of moving funds is called "Hawala" which
operates outside traditional regulation with virtually no paper trail,
relying on trust and guaranteed anonymity. Operators engaged in this
system deliver money across borders without physically moving it --
assured the account will be settled by money or material goods
returned in a future reverse transaction. Used widely in the Middle
East and South Asia for centuries, all indications are that the system
is exploited by Al-Qaida and other terrorist organizations. FinCEN and
other Treasury law enforcement components are currently making efforts
to determine if non-traditional money remittance systems, such as
Hawala, are being used within the U.S. in furtherance of terrorist
activity. Additionally, FinCEN has begun analyzing law enforcement
case information and other data to build a strategic profile of
methodologies used to collect, move and disburse funds that could
support terrorist activities in the U.S.
Tools for Stopping Terrorist Financing
Detecting and disrupting the financing of terrorist groups is a
complex process involving many steps and the input of many dedicated
analysts and law enforcement personnel. At its core, the process
involves six primary steps. First, the investigation and
identification of targets. Second, identification of assets for
potential blocking or seizure.
Third, identification of methodologies used to move the funds for
operational support. Fourth, identification of gaps in law enforcement
and regulatory processes that make the movement of terrorist funds
possible. Fifth, the sharing of information with appropriate law
enforcement personnel and other appropriate organizations around the
world. And sixth, application of an array of authorities, regulatory
tools and law enforcement initiatives to deprive terrorists of access
to their funds within the U.S. The Department of Treasury is currently
utilizing the following tools in the fight against the funding of
terrorism.
IEEPA
Central to this process is the ability to obtain information and make
effective use of it. The International Emergency Economic Powers Act
("IEEPA") is the principal tool used to stop terrorism financing. It
provides broad authority to impose comprehensive trade and financial
sanctions against foreign terrorists. Essentially, IEEPA authorizes
the President to act against foreign threats to the national security,
foreign policy, or economy of the United States by declaring a
national emergency with respect to an identified threat. The President
is thus empowered to impose trade and financial sanctions to deal with
that threat. The Office of Foreign Assets Control of the U.S. Treasury
Department ("OFAC") administers the economic sanctions programs
against the specific countries, groups or individuals posing that
threat.
IEEPA provides the President and his designees with the authority to
seek information regarding transactions subject to Presidential
Executive Orders. OFAC may require U.S. persons to provide information
regarding transactions that involve or are reasonably believed to
involve blocked property. The Secretary of the Treasury or the
Secretary of State, depending on the circumstances, may identify
additional individuals or entities targeted by the Executive Order.
IEEPA also provides broad authority to block the property of foreign
terrorists and their agents and to prevent U.S. persons from engaging
in any type of financial transaction with targeted terrorists.
By way of background, on January 23, 1995, President Clinton signed
Executive Order ("E.O.") 12947, which declared a national emergency
with respect to acts of violence by foreign terrorists that threaten
to disrupt the Middle East peace process. E.O. 12947 blocks all
property and property interests that are in the United States or in
the possession or control of a U.S. person belonging to entities named
in the Annex to the order. The blocking provisions also apply to
certain foreign persons designated by the Secretary of State and
persons designated by the Secretary of the Treasury.
Executive Order 12947 also prohibits U.S. persons from engaging in
transactions with or making charitable donations to any entity named
in the Annex or designated under the Order. On August 20, 1998,
President Clinton signed E.O. 13099, which added Osama bin Ladin,
several of his close advisers, and Al-Qaida (also known as the Islamic
Army) to the Annex of E.O. 12947. This subjects the assets of these
individuals and groups to blocking and prohibits transactions with
them by U.S. persons.
Executive Order 13129, issued on July 4, 1999, deals expressly with
the threat posed by the actions and policies of the Taliban in
Afghanistan, including the Taliban's policy of allowing territory
under its control in Afghanistan to be used as a safe haven for Osama
bin Ladin and Al-Qaida. The E.O. blocks all property and interests in
property of the Taliban that are in the United States or in the
control of U.S. persons, as well as interests in property of persons
designated by the Secretary of the Treasury.
In response to the events of September 11, 2001, President Bush issued
E.O. 13224 on September 23, 2001, 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 blocks 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
transactions, including charitable donations, by U.S. persons with any
individual or entity named in the Annex to E.O. 13224 or designated
pursuant to that E.O. The Annex to Executive Order 13224 named 27
entities and individuals associated with Osama bin Laden and
additional entities and individuals will be added in the days and
months to come.
The Antiterrorism Act
The Antiterrorism Act provides authority for two additional sanctions
programs targeting terrorism. First, prohibiting material support,
such as funds, false identifications and safe houses, to designated
foreign terrorist organizations. Second prohibiting financial
transactions with state sponsors of terrorism.
First, Section 302 of the Act authorizes the Secretary of State, in
consultation with the Secretary of Treasury and the Attorney General,
to designate organizations meeting stated requirements as Foreign
Terrorist Organizations ("FTOs"). Section 303 of the act makes it a
crime for a person within the United States or subject to U.S.
jurisdiction to provide material support to a designated FTO.
Financial institutions in possession or control of funds in which an
FTO or its agent has an interest are required to retain such funds and
file reports with the Treasury Department.
The second tool, established in Section 321 of the Anti-terrorism Act,
prohibits all financial transactions by U.S. persons with governments
designated by the Department of State as terrorism-supporting nations,
except as provided in regulations issued by the Secretary of the
Treasury. Regulations implementing Section 321 were issued by OFAC to
impose prohibitions with respect to governments not already covered by
comprehensive OFAC-administered sanctions. At the time regulations
were issued, those governments were Syria and Sudan. Currently, all
state sponsors of terrorism except Syria and North Korea are subject
to comprehensive financial and trade sanctions.
United Nations Participation Act
The United Nations Participation Act ("UNPA") gives the President the
authority to impose economic sanctions to implement mandatory
provisions of UN Security Council Resolutions.
Bank Secrecy Act
The reporting and record keeping rules contained in the Bank Secrecy
Act ("BSA"), administered by the Financial Crimes Enforcement Network
("FinCEN"), create a paper trail to trace funds through the financial
system. Information reported under existing suspicious
transaction-reporting rules for banks is currently being forwarded to
law enforcement on an expedited basis through the establishment of a
toll-free hotline operated by FinCEN. Under its BSA authority,
Treasury has also issued rules that would apply to the non-bank
financial sector that may be used by terrorists. For example, final
rules would require informal funds transfer businesses like Hawalas to
register with the Department of the Treasury by the end of the year.
Treasury is also preparing to issue suspicious activity reporting
rules to other non-bank financial institutions such as brokers and
dealers in securities and casinos.
Treasury Enforcement Bureau Participation
In addition, three of the Treasury law enforcement components, the
U.S. Customs Service, IRS-C.I. and the Secret Service are active
participants in the quest to investigate terrorist money laundering
leads. They have been working closely with the Joint Terrorism Task
Forces and at FBI headquarters to provide their considerable technical
expertise with respect to the terrorist money trail.
How the President's September 23 Executive Order Differs from Previous
OFAC-related Orders
President Bush's Executive Order 13224 blocks all property and
interests in property, in the United States or within the possession
or control of a U.S. person, of 27 foreign individuals and entities
determined by the President to have engaged in, threatened or
supported grave acts of terrorism against the United States or U.S.
nationals. The Secretary of State, in consultation with the Secretary
of the Treasury and the Attorney General, may designate foreign
persons who have committed or pose a risk of committing such acts of
terrorism. The Secretary of the Treasury, also in consultation with
others (including in certain cases, foreign authorities) may designate
persons who are owned or controlled by or act for or on behalf of
foreign terrorists subject to E.O. 13224. Executive Order 13224 also
prohibits any transaction or dealing in the blocked property of any
person designated by the President or the Secretaries of Treasury or
State, including the making or receiving of any donation to or for
these persons.
E.O. 13224 greatly expands the geographic scope of previous orders
intended to disrupt terrorist financing. As noted, previous programs
targeted specific governments or Middle East terrorists. Although the
Antiterrorism Act program targeting FTOs is broad geographically, it
limits the jurisdiction of the Secretary to financial institutions
rather than all U.S. persons, and does not provide the full blocking
authority granted under E.O. 13224.
By focusing more broadly on acts and threatened acts of terrorism
against the United States or U.S. nationals, the President has brought
to bear the full blocking authority of IEEPA to disrupt the financing
of international terrorism.
In addition, E.O. 13224 expands the President's authority to designate
persons subject to asset blocking and other sanctions by permitting
the designation of " " ... persons determined ... to be otherwise
associated with ... " terrorists designated by the President or the
Secretaries of Treasury or State. The Treasury Department has not
previously had the authority to block assets on the basis of an
association with a designated terrorist.
The Foreign Terrorist Asset Tracking Center
The complex nature of terrorist fund-raising demands a creative and
unconventional response from the U.S. government. The interagency
Foreign Terrorist Assets Tracking Center (FTAT), to be permanently
housed in OFAC, is now up and running. FTAT is an important tool in
our quest to dismantle the terrorist's financial bases and shut down
their fund-raising capabilities. FinCEN and its network partners
assembled on-site directly support the FTAT.
The center is dedicated to identifying the financial infrastructure of
terrorist organizations worldwide and curtailing their ability to move
money through the international banking system. It represents a
preventative, proactive and strategic approach to using financial data
to target and curb terrorist funding worldwide.
The FTAT differs from traditional law enforcement's use of financial
tracking in two critical aspects.
First, the FBI and other law enforcement entities look at financial
data as it relates to a specific case -- in this instance the horrific
attacks of September 11. By contrast, FTAT will be looking at all
global terrorist organizations implicated in several different attacks
-- we seek to create a "big picture" profile of the financial
infrastructure of these groups.
Second, we are collecting and analyzing this information for the
express purpose of identifying and disrupting the various sources of
funding that these groups are receiving.
The FTAT will focus on foreign terrorist groups that threaten U.S.
national security by assessing their sources and methods of
fund-raising and movement of funds. This information will be used to
conceptualize, coordinate and implement strategies within the U.S.
government to achieve four goals: deny these target groups access to
the international financial system; impair their fund-raising
abilities; expose, isolate, and incapacitate their financial holdings;
and to cooperate with other governments to take similar measures.
This strategy brings to bear the full weight and influence of the
federal government relating to financial matters -- drawing upon the
defense, diplomatic, enforcement, intelligence, and regulatory
communities -- and involves foreign and domestic actions.
What Additional Legislation is Needed
As the Secretary discussed earlier, the Treasury Department is
committed to dismantling terrorist fund-raising mechanisms with every
tool we have at our disposal. To do this effectively, I am here today
to reiterate the Secretary's request that we remove the handcuffs that
are hindering law enforcement and intelligence agencies from doing
their job.
We are currently evaluating proposals that would equip the Treasury
law enforcement components with the necessary tools for the task at
hand. For instance, we believe more needs to be done to permit the
sharing of information between relevant law enforcement and
intelligence agencies for purposes of terrorism investigations. We are
also examining certain limitations currently imposed by IEEPA, and
evaluating whether the Customs Service would benefit from enhanced
jurisdictions and powers. We anticipate putting together proposed
legislation to address these important concerns and look forward to
working with Congress on this matter in the near future.
The Extent of International Cooperation
Because terrorism is global in nature, international cooperation is an
essential component of any enforcement strategy. I am pleased to
report that in addition to the domestic measures we have taken, we
have also received substantial cooperation internationally as well. To
date, at least 27 countries have taken steps to implement President
Bush's September 23rd Executive Order. Another 27 are acting on UN
Security Council Resolution 1333. Still others have expressed support
and are working on taking specific actions. We now stand shoulder to
shoulder with those in the civilized world who are committed to
ensuring that terrorists' access to financial resources is
significantly impeded.
The Department of Treasury is working closely with other G-7 Finance
Ministers in the fight against the financing of terrorism. Last week,
Secretary O'Neill organized a lengthy G-7 Finance Ministers' phone
conference call to discuss the economic and financial situation in our
countries since the attack. As part of this discussion, all
participating countries shared our national action plans to block the
assets of terrorists and their associates and reviewed progress to
date.
On Saturday, Secretary O'Neill will meet with his G-7 colleagues in
Washington to discuss these issues in more detail. They will also be
discussing the role that the Financial Action Task Force can play in
the fight against the financing of terrorism. They will also review
the issue of offshore financial centers and their role in financing
terrorism. In addition, I anticipate that Secretary O'Neill will
address the important subjects of information sharing arrangements
amongst financial crimes experts, and the possible establishment of
terrorist asset-tracking centers in the other G-7 countries similar to
the one created by the United States after the September 11 attacks.
In addition to numerous contacts with the G7 countries, senior
Treasury officials have contacted finance officials in China, Russia,
India, Saudi Arabia, Pakistan, Indonesia, Egypt, the Netherlands, the
Philippines, Spain, Argentina, Brazil, Bahrain and Kuwait. In these
calls we have informed them that President Bush's September 23rd Order
is only the first step in a multi-phase U.S. action plan to combat
terrorist financing. We have emphasized the importance we have
attached to strong action in support of the global effort against
terrorist financing. We have asked that they cooperate with OFAC in
tracking terrorist money movements and move rapidly to remove any
legal or other barriers that might hinder our joint efforts.
Second, OFAC will lead bilateral missions to several key countries to
press for immediate effective actions to block terrorist assets, cut
off terrorist fund flows, and more closely regulate the fund-raising
activities of various organizations and groups. Technical assistance
will be offered where it is useful. These bilateral efforts will be an
extension of two previous missions undertaken by OFAC in the past
couple of years.
Third, we have been working very hard to improve existing
international sanctions and anti-money laundering coordination
mechanisms. Prominent among these are a multilateral sanctions
administrators coordinating group which meets regularly with OFAC on
U.N. and EU sanctions issues and the G7 Financial Crimes Experts
Group. Both of these groups are meeting in Europe this week to
strengthen coordination and information-sharing arrangements.
Mr. Chairman, this concludes my formal testimony. I would be pleased
to answer any questions that you, or members of the Committee, may
have regarding the Administration's goals and policies.
(end text)
(Distributed by the Office of International Information Programs, U.S.
Department of State. Web site: http://usinfo.state.gov)
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