04 April 2006
U.S. Gains International Support in Blocking Terrorist Funds
Regulation of U.S. banking transactions should not be eased, officials say
By Elizabeth Kelleher
Washington File Staff Writer
Washington -- Countries are cooperating with multilateral organizations and the United States to cut off terrorists' and money launderers' access to global financial system, officials from the U.S. Treasury and State departments said.
Testifying April 4 before the Senate Banking Committee, Treasury Under Secretary Stuart Levey said the “global designation program,” in which United Nations members report terrorist supporters to the U.N. Security Council, “might be the most powerful tool” against supporters of al-Qaida. All 191 member-states can act as one to ban reported terrorist supporters from using their countries and from opening accounts at their banks. In 2005, 18 members reported names to the committee, according to Levey.
Although countries like Iran and Syria present a “vexing problem” for the world financial community, Levey said, private financial institutions are taking note of such state sponsors of terrorism. For example, international bank UBS recently announced it will cut off all business with Iran and Syria. Other institutions are reviewing their business arrangements with such countries, Levey said.
In March, U.S. officials and private bankers from American Express, Citibank, J.P. Morgan Chase and Pershing met with 350 bankers from Egypt, Saudi Arabia, Kuwait and Lebanon to share approaches for combating money laundering and terrorist financing. Levey said this meeting was the beginning of what he hoped would be an ongoing dialogue in “a priority region.” (See related article.)
E. Anthony Wayne, assistant secretary of economic and business affairs at the State Department, said that 17 countries updated their laws in 2005 to deal with terrorists trying to use their financial systems. He said 10 more countries criminalized terrorist financing and a handful, including Indonesia and Philippines, recently met international standards for combating money laundering and terrorist financing.
Wayne said the United States will continue to provide technical assistance to countries changing their laws and noted that a Group of Eight (G8) industrialized countries committee has given technical assistance to 120 countries.
CURBING MISUSE OF CHARITIES BY TERRORISTS
Forty charities worldwide have been designated as supporters of terrorism by the United States. Under U.S. pressure, foreign offices of one U.S.-based charity – the Islamic African/American Relief Agency (IARA) – which had provided hundreds of thousands of dollars to Osama bin Laden, has experienced pressure to the point it may fold, according to Levey.
Wayne said Saudi Arabia is working on stopping charitable money from going to terrorists or insurgents in Iraq or Southeast Asia.
Officials said that the United States and Saudi Arabia also recently started tracking donations by private individuals and holding them accountable. “Those who reach for their wallets to fund terrorism must be pursued and punished in the same way as those who reach for a bomb or a gun,” said Levey.
REGULATORY RELIEF FOR U.S. BANKS UNLIKELY
Levey and other officials at the hearing defended the filing of currency transaction reports (CTRs) that are required of U.S. banks for certain cash transactions. The reports are used by the FBI to track terrorist financing.
Senator Michael Crapo, a Republican from Idaho, said bankers spend 25 minutes per report they complete. Furthermore, he said, the banks do not take advantage of exemptions from such filings because the process is too complex and they do not want to be second-guessed by regulators. He said they have filed 13 million CTRs and have spent $170 million in wages to do so.
One way to ease the burden would be to increase the threshold amount at which the rule applies to a transaction.
But officials argued – partly because efforts to catch rogues have succeeded – that there has been a decrease in the average amount of terrorist transactions and that this solution would hinder investigations.
For additional information on U.S. policy, see Money Laundering.
See also U.S. State Department electronic journals, The Fight Against Money Laundering and The Global War Against Terrorist Financing.
(The Washington File is a product of the Bureau of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)
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