Commission on Security and Cooperation in Europe

Testimony :: The Honorable James Gurule
Under Secretary of the Treasury for Enforcement -

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Chairman Campbell, Co-chairman Smith, Ranking Member Hoyer, and Members of the Commission, I am privileged to be here today to discuss the Treasury Department’s efforts in combating terrorist financing and ways in which the Department can work more closely with this Commission and the Member States of the Organization of Security and Cooperation in Europe (OSCE).

This is my first appearance before the Helsinki Commission since being confirmed as the Treasury Department’s Under Secretary for Enforcement. The Commission has played a crucial role since 1976 in monitoring and encouraging compliance with the Helsinki Final Act and other OSCE documents. Therefore, it is a special honor for me to be here today.

My testimony today will focus on three areas: 1) an overview of Treasury Enforcement; 2) the Treasury Department’s counter terrorist financing activities; and 3) the contributions of OSCE Member States in the war against terrorist financing and ways in which the Treasury Department and OSCE can coordinate more closely in this global financial battle.


Treasury Enforcement Overview

The mission of Treasury law enforcement is uniquely suited to combating terrorist financing, as well as to playing a leading role in homeland security efforts -- from protecting the Nation's borders to protecting its leaders, to ensuring the integrity of our financial institutions and critical infrastructures. Treasury Enforcement comprises approximately 40 percent of Federal law enforcement, with a budget of $5.3 billion and more than 31,000 dedicated men and women who quietly and selflessly serve their country every day -- often at great personal peril and sacrifice.

The Office of Enforcement oversees and provides policy guidance to five bureaus, and includes the Office of Foreign Assets Control and the Executive Office for Asset Forfeiture. I take this opportunity to highlight for the Helsinki Commission the roles and missions of the Treasury law enforcement bureaus and offices.



U.S. Secret Service

The U.S. Secret Service protects the Nation’s top leaders, combats financial fraud, protects the integrity of the financial systems against cyberattacks, and leads the effort to ensure the safety of thousands of citizens participating in designated National Special Security Events (NSSEs). We have seen the stellar work of the Secret Service in providing security for two recent NSSEs – the Super Bowl and the Winter Olympic Games in Salt Lake City.

U.S. Customs Service

The Customs Service is the vanguard agency in protecting the country against weapons of mass destruction as it monitors travelers and cargo crossing the northern and southern borders and through the Nation’s seaports and airports. Customs also is the second largest source of revenue for the U.S. Government.

Bureau of Alcohol, Tobacco and Firearms

The Bureau of Alcohol Tobacco and Firearms has developed the most respected program in the world for detection of explosives and accelerants. This expertise is vital in our war on terrorism, in which explosives are the terrorists’ weapon of choice.

Federal Law Enforcement Training Center

The Federal Law Enforcement Training Center (FLETC) conducts the training for the vast majority of the Federal Government's law enforcement personnel. FLETC is projecting the greatest increase in training requirements in its history as it responds in full measure to the
September 11th attacks.

FinCEN

The Financial Crimes Enforcement Network supports law enforcement investigative efforts to enforce the Bank Secrecy Act, combat money laundering and other financial crimes, and implement its new responsibilities under the USA PATRIOT Act of 2001. On November 7, 2001, President Bush, Treasury Secretary O’Neill, Secretary of State Powell and Attorney General Ashcroft visited the FinCEN offices. At that time, the President stated: “We put the world’s financial institutions on notice: if you do business with terrorists, if you support them or sponsor them, you will not do business with the United States of America.” FinCEN plays a critical role in this effort and will continue to provide this invaluable service to our Nation.

IRS Criminal Investigation

While the Office of the Under Secretary for Enforcement does not have direct oversight authority over IRS-Criminal Investigation, we do provide policy guidance for IRS-CI criminal investigators. These investigators offer a unique blend of accounting and enforcement expertise that is invaluable in perfecting complex financial investigations, including cases involving leaders and members of extremist groups who have committed tax, money laundering, or currency violations and individuals engaged in fundraising activities to support terrorism, especially if tax exempt organizations are being used.

Office of Foreign Assets Control

The Office of Foreign Assets Control (OFAC), an office within the Office of Treasury Enforcement, administers and enforces economic and trade sanctions against targeted foreign countries, terrorism sponsoring organizations and international narcotics traffickers based on U.S. foreign policy and national security goals. OFAC plays a key role on the inter-agency working group, chaired by Treasury, that has been targeting and listing individuals and entities pursuant to Executive Order 13224 which President Bush signed on September 23, 2001. In this process, we have identified, among other entities, front companies, charities, banks, and a hawala conglomerate that served as the financial support networks for al-Qaida and other global terrorist groups.


Treasury’s Role in Combating Terrorist Financing

Combating terrorism and terrorist financing has become the Nation’s primary agenda and is the top priority for the Treasury Department and the Office of Enforcement. As you are aware, on September 24, 2001, President Bush 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.” Under Secretary Paul O’Neill’s leadership, we in Treasury Enforcement have devoted extensive resources and expertise to fulfill this mandate.

Our war against terrorist financing extends to financial intermediaries and facilitators who infuse terrorist organizations with money, materiel, and support. We have come to clearly appreciate and understand that terrorism has been nourished by ample funding channeled from and through a plethora of sources, including banks, charities, hawalas1, narcotics traffickers, and money launderers.

Since September 11th, Treasury Enforcement, including its component bureaus, has launched a number of new initiatives to identify, disrupt, and dismantle terrorist financial networks both domestically and abroad. I am pleased to report to the Helsinki Commission this morning that Treasury has named 210 individuals and entities as financiers of terrorism pursuant to the President’s September 23rd Executive Order, and has blocked over $34.3 million in assets. Our Coalition partners have blocked another $81.3 million. A portion of that amount has since been unblocked for the new Afghan Interim Authority to assist in its critical period of rebuilding.

This is truly a global effort -- 196 nations have expressed support to disrupt terrorist financing and 149 nations can block terrorist assets.


Operation Green Quest

On October 25, 2001, Treasury created Operation Green Quest (“Green Quest”), a new multi-agency financial enforcement initiative designed to augment existing counter-terrorist efforts by bringing the full scope of the government’s financial expertise to bear against systems, individuals, and organizations that serve as sources of terrorist funding. This task force is led by the Customs Service and includes the Internal Revenue Service, the Secret Service, ATF, OFAC, FinCEN, the Postal Inspection Service, the FBI, the Department of Justice, and the Naval Criminal Investigative Service. Operation Green Quest also receives support from Interpol’s National Central Bureau, based in Washington, D.C. Green Quest brings together the extensive financial expertise of the Treasury Enforcement bureaus along with the exceptional experience of our partner agencies and departments to focus on terrorist financing.

Green Quest has complemented the work of OFAC in identifying terrorist networks at home and abroad, and it has served as an investigative arm to aid in blocking actions. Green Quest’s work has led to 12 arrests, 6 indictments, the seizure of nearly $4 million, and bulk cash seizures -- cash smuggling -- of over $12 million. Green Quest agents, along with those from the FBI and other government agencies, have traveled abroad to follow leads, exploit documents recovered, and to provide assistance to foreign governments. In this effort, Green Quest has made full use of its overseas Customs Attachés to investigate suspect networks and to gather information for its own use and the use of OFAC. The work of these financial experts is just starting as they have opened well over 200 terrorist financing investigations and are following leads on a daily basis. Green Quest’s work, in combination with the work of OFAC, serves as a seminal part of our enforcement efforts.

Blocking Assets

One of the higher profile results of OFAC and intelligence community analysis was the identification of Al-Barakaat as a major financial operation that supported terrorist organizations. The Al-Barakaat case is a good example of model coordination between the Treasury Department, the FBI, and other enforcement agencies both domestically and abroad.

Al-Barakaat is a Somali-based hawaladar2 operation, with locations in the United States and in 40 countries, that was used to finance and support terrorists around the world.3 The investigative work of the FBI, Customs, and IRS-Criminal Investigation, along with analysis by OFAC, FinCEN, and the intelligence community, identified Al-Barakaat as a major financial operation that was providing material, financial, and logistical support to Usama bin Laden and other terrorist groups.

Treasury, along with the Department of Justice, coordinated efforts to block assets and to take law enforcement actions against Al-Barakaat on November 7, 2001. As part of that action, OFAC was able to freeze approximately $1,100,000 domestically in Al-Barakaat-related funds. Treasury also worked closely with the United Arab Emirates (UAE) to enable the UAE to block Al-Barakaat’s assets at its financial center of operations in Dubai. Disruptions to Al-Barakaat’s cash flows, resulting from OFAC’s designation actions and international cooperation, are estimated to be in excess of $65 million from the United States alone. In addition, the combined work of OFAC, Operation Green Quest, and law enforcement has led to additional leads and a money laundering conviction in the Al-Barakaat investigation.

Joint Designations

Our efforts to block the assets of terrorist financiers and supporters have truly become an international endeavor. Over the past two months, our partners abroad have engaged directly in proactively identifying and freezing the assets of terrorist organizations and supporters.

On May 3, 2002, the European Union and the United States took coordinated actions against the assets of several terrorist groups and individuals – including seven individuals and one group related to ETA, the Basque terrorist group. This follows the EU’s actions, which we joined, in late December of 2001. On April 19th, the G-7 Finance Ministers joined in Washington and jointly designated nine individuals and one entity as terrorist supporters or financiers related to al-Qaida. Among those designated were The Aid Organization of the Ulema (AOU), headquartered in Pakistan, which was previously operating as al Rashid Trust, an entity that was among one of the first organizations named as a terrorist financial facilitator in September 2001. This organization has been raising funds for the Taliban since 1999. In addition, the G-7 designated two prominent individuals, Abu Hamza al-Masri and Ahmed Idris Nasreddin, who have been facilitators of terrorist organizations linked to al-Qaida. This action was the first multilateral joint designation, which marks a new stage of information sharing, collaboration, and coordinated action in this field.

The G-7 action followed on the heels of the March 11th joint designation between the United States and the Kingdom of Saudi Arabia. On the six month anniversary of the September 11th attacks, our countries jointly took a bold step in the war on terrorist financing by making the first joint designation of a financial supporter of terrorism. Prior to that date, Treasury received significant cooperation from other countries in blocking accounts of those named by the United States, and our European allies have made designations of their own.

With the March 11th action, Treasury and the Saudi government blocked the accounts of the Somalia and Bosnia-Herzegovina branches of the Saudi Arabia-based Al-Haramain Islamic Foundation. While the Saudi headquarters for this private charitable entity is dedicated to promoting Islamic teachings, Treasury and our Saudi Arabian allies determined that those specific branches of Al-Haramain have been engaged in supporting terrorist activities and terrorist organizations such as al-Qaida, AIAI (al-Itihaad al-Islamiya), and others. This action also highlights the special need to safeguard charities, so that well-intentioned donors can be assured that their donations will be used only for their intended good purposes, and not for acts of terrorism.

The joint blocking actions of April 19th and March 11th , and the continued cooperation with the EU, are especially significant because these actions signify the growing strength of the anti-terror coalition and mark a new level of international coordination and cooperation.
As part of our overall strategy to maintain the international momentum in our battle against terrorist financing, Treasury Secretary O’Neill has taken critical trips to the Persian Gulf region and Europe to discuss the importance of coordinated action in this arena. While in Europe last month, the Secretary met with his counterparts in Germany, France, and the United Kingdom where he obtained commitments to work closely on operational and structural issues related to the war against terrorist financing. On this trip, our European colleagues recommitted to taking aggressive steps along with the United States to attack the structural underpinnings of terrorist financing. In the Persian Gulf, the Secretary gained the commitment of our allies to work together on regulatory issues, like the oversight of charities and hawalas, and to combat generally the menace of terrorist financing. In these trips, the Secretary has reiterated this country’s commitment to battle terrorism on all fronts, and he has obtained the support and cooperation of all these countries.

We at Treasury have been extensively engaged in this international outreach. In my trip to Europe in December 2001, I called on my Spanish, French and British counterparts to work with us to develop new ways of sharing information and taking aggressive steps to shut down terrorist financing networks. Treasury will continue to work with our allies for concrete actions in this area.

International Cooperation

Our efforts will not have the greatest success if prosecuted unilaterally, and may ultimately fail if we cannot obtain the cooperation of other nations. To date, all but a handful of countries have expressed their support for the international fight against terrorist financing. The Treasury Department, in concert with other Federal agencies, is providing technical assistance to a number of countries to strengthen their capacity to freeze terrorist funds. Daily, we are in contact with foreign financial officials and are engaged in bilateral and multilateral discussions regarding international cooperation and action against terrorist activities and financing.

The Office of Enforcement has also helped coordinate the deployment of financial "jump teams" consisting of experienced accountants, bank examiners, and other financial experts from OFAC, the Customs Service, IRS, FinCEN, the FBI, and other agencies. These experts review business records and possible links to money associated with bin Laden's al-Qaida network.

Treasury has worked with regional organizations such as APEC and the Manila Framework Group to further coordinate international efforts to stop the financing of terrorism. In March, we, along with the State Department, participated in an ASEAN Regional Forum (ARF) and Pacific Island Forum (PIF) regarding counter-terrorism and financing issues. These fora provide an opportunity to expand our efforts and to engage the entire world in this endeavor.

In light of the regional composition of the OSCE and the jurisdictional interest of the Helsinki Commission, I would like to take this opportunity to highlight Treasury Enforcement’s work with a number of European multilateral organizations. The members of these organizations also are Participating States within the OSCE.

Treasury has engaged in numerous international fora, including the G-7, G-8, G-20, the Financial Action Task Force (FATF), the Egmont Group -- the global network of Financial Intelligence Units (FIUs) of which FinCEN is a key member -- and with the international financial institutions to combat terrorist financing in a global, systematic way.

At this point, I will highlight specific examples of counter terrorist financing activities in these organizations. On November 17, 2001, the G-20 finance ministers and central bank governors met in Ottawa, Canada and agreed that they would block terrorist assets in their respective countries, and report publicly on precisely which terrorist groups each country has blocked and the amount of actual monies blocked, if any. Meeting the next day, the governing body of the International Monetary Fund (IMF) announced that the IMF would take similar steps.

In February 2002, the G-7 group of industrialized countries met in Ottawa and agreed to an ambitious new work program. In particular, the G-7 agreed to develop a mechanism to identify jointly terrorists whose assets would be subject to freezing. This announcement has led to even closer cooperation and commitment between and among the G-7 countries. Treasury continues to work with the G-7 on developing key principles regarding information to be shared, the procedures for sharing it, and the protection of sensitive information.

The Financial Action Task Force on Money Laundering (FATF) is a 31-member organization committed to attacking the problem of money laundering on an international basis. Treasury’s Office of Enforcement chairs the U.S. Delegation to FATF, and through its leadership, has applied the use of the successful FATF to address the issue of terrorist financing.

At the end of October 2001, the Treasury Department, in conjunction with the Departments of Justice and State, hosted an Extraordinary Plenary session of FATF in Washington, D.C., to address terrorist financing. This meeting was immediately followed by a meeting of the Egmont Group to discuss information sharing and terrorism. At the plenary session, FATF established eight Special Recommendations regarding terrorist financing which represent an important step to establishing a global regime to cut terrorists off from the international financial system.

These new Recommendations were endorsed by countries throughout the world at a special FATF Forum on Terrorist Financing held in February and attended by over 55 jurisdictions. Moving forward, FATF, with the strong support of the U.S., is now leading a global effort to bring all countries in compliance with these new standards. The U.S. has recently completed a self-assessment questionnaire against these standards, which is posted on the Treasury web site. In June, FATF will begin to consider a process with respect to countries that are not cooperating in the international effort against terrorist financing.

Treasury Enforcement also supports FinCEN's active involvement in the growing network of financial intelligence networks or FIUs. The specialized agencies created by governments to fight money laundering first met in 1995 at the Egmont-Arenberg Palace in Belgium to share experiences. Now known as the Egmont Group, these FIUs meet annually to find ways to cooperate, especially in the areas of information exchange, training, and the sharing of expertise.

This global network of information exchange and cooperation has been a valuable and responsive avenue of terrorist-related information. As I mentioned above, FinCEN hosted a special meeting of the Egmont Group on terrorist financing in October 2001, to support the unprecedented law enforcement investigation in the wake of the events of September 11th. During that 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 in screening requests for information; and (5) pool Egmont Group resources, where appropriate, to conduct joint strategic studies of money laundering vulnerabilities, including Hawala.

Combating Money Laundering

The Office of Enforcement is about to publish the National Money Laundering and Terrorist Financing Strategy of 2002, and is overseeing the implementation of the 2001 National Money Laundering Strategy. The main focus of the Strategy is on the prosecution of the war against terrorist financing and investigation of major money laundering enterprises and sophisticated networks. This work has been significantly impacted by the passage of the USA PATRIOT Act.

One recent enforcement success has international implications -- Operation Wire Cutter, a 2 ½-year joint DEA/Customs undercover operation targeting the largest Colombian Black Market Peso Exchange (BMPE) money brokers. These brokers are professional money launderers who sell their services to the Colombian drug cartels. On January 15, 2002, U.S. and Colombian officials arrested 37 people in the U.S. and Colombia and seized over $8 million in cash, over 800 pounds of cocaine, and a total of over 1,000 pounds of narcotics.

The Multinational Black Market Peso Exchange (BMPE) Experts Working Group (Colombia, Aruba, Panama, Venezuela, and the United States), led by the Office of Enforcement, has produced a report that recommends BMPE initiatives to participating governments to improve international cooperation in efforts to combat and dismantle the BMPE. In March 2002, a joint statement was issued embodying the conclusions and recommendations of this Working Group. We are also working closely with senior executives of major trade associations and corporations operating in the United States whose products are vulnerable to being involved in BMPE transactions.

Treasury’s anti-money laundering efforts directly involve the cooperation of European countries, and our efforts will not be successful without the continued cooperation of our allies in Europe.

OSCE Contributions and Treasury Coodination

The Treasury Department supported the action taken by the OSCE in Bucharest on December 4, 2001, when the OSCE adopted the Bucharest Plan of Action for Combating Terrorism. Section 24 of the Bucharest Plan of Action, entitled “Suppressing the financing of terrorism,” calls on Participating States to suppress the financing of terrorism, criminalize the collection or provision of funds for terrorist purposes, and freeze terrorist assets, all within the framework of the U.N. Convention on the Suppression of Financing of Terrorism. The section also calls on Participating States to enhance information sharing.

Less than two weeks after the Plan of Action was adopted, the OSCE, in partnership with the U.N. Office for Drug Control and Crime Prevention (UN ODCCP) sponsored an international conference in Bishkek, Tashkent, on Enhancing Security and Stability in Central Asia: Strengthening the Comprehensive Efforts to Counter Terrorism. This forum provided an important opportunity to consider the special challenges and threats to the security of the Central Asian region as a neighbor to Afghanistan.

In addition to these strong actions taken by the OSCE, many of the Participating States of the OSCE also are members of other European multilateral organizations. Much progress already has been made since September 11th, and we look forward to continued cooperation on operation as well as macro-level structural issues related to terrorist financing.

It is my view that there are a number of areas for enhanced participation by OSCE Participating States in the financial war against terrorism, as well as for enhanced cooperation between Treasury Enforcement and the OSCE.

I had the opportunity to meet at the Treasury Department with Ambassador Stephen Minikes, shortly after he was confirmed as the new U.S. Ambassador to the OSCE and prior to his departure for Vienna. We discussed a number of new ways Treasury Enforcement and other programs within Treasury could support his efforts and the work of OSCE and its membership in counter terrorism and counter terrorist financing. I am scheduled to meet again with Ambassador Minikes later this month to discuss additional ways to enhance cooperation and coordination.

OSCE Economic Forum

One area in which Treasury Enforcement can work directly and immediately with the OSCE is at its annual Economic Forum in Prague, scheduled for May 28 - 31, 2002. This year’s conference topic is water management and transboundary issues; however, a special meeting on terrorist financing issues has been included in the agenda. I have authorized two officials from Treasury Enforcement to participate in OSCE’s annual Economic Forum in Prague scheduled for May 28 – 31, 2002. They will join their colleagues from the State Department to support OSCE’s efforts on counter terrorist financing.

The Economic Forum will provide an excellent opportunity to discuss international standards in the fight against money laundering and terrorist financing, including the role of FATF and its Eight Special Recommendations. National experts will participate to advise on ways to strengthen OSCE Participating States' capabilities in implementing these guidelines, especially the establishment of Foreign Intelligence Units (FIUs). The Forum also will provide the opportunity for bilateral and multilateral discussions on counter terrorist financing cooperative initiatives.

Another area in which the OSCE can be especially helpful is to encourage and assist other countries in developing legislation or setting up FIUs, especially in Central Asia and the Caucasus. A number of Central Asian states agree in principle with the need to adopt the FATF recommendations, but require advice or assistance in how to accomplish this objective or overcome technical (and in some cases, legal) obstacles to implementing them. The Participating States of the OSCE which have mechanisms in place for counter terrorist financing could share their expertise with those OSCE Participating States that require technical assistance.

International Law Enforcement Academy -- Budapest

Another area in which the Treasury Department and its Office of Enforcement can assist Participating States of the OSCE is in the provision of international training. Treasury’s Federal Law Enforcement Training Center has conducted training programs in support of the U.S. Government's interest in international law enforcement activities since 1984. FLETC was a founding partner in the Department of State’s Antiterrorism Assistance Training Program, which has provided specialized training in topics such as seaport and aviation security to countries cooperating with the United States. Some of those programs have been conducted overseas and others at FLETC sites and other locations arranged by the Department of State in the U.S.

Typically, FLETC’s international training has been a three-pronged effort: 1) assessment in conjunction with the foreign government of existing needs; 2) implementation of the training; and 3) follow-up validation of the training to measure effectiveness or address needed adjustments. FLETC also is a principal member agency of the group formed by the Department of State for its International Law and Democracy Program. FLETC supports this effort through the International Law Enforcement Academy (ILEA) operations in various regions of the world, including the ILEA in Budapest, Hungary for countries in that region, and through bilateral training programs.

Of special interest to the members of the Helsinki Commission, the ILEA in Budapest has provided International Banking and Money Laundering training to officials in Russia, Poland, Romania, Ukraine, Lithuania and Kazakhstan. Examples of other programs which have been provided include Human Dignity and Police Training, Health Care Fraud, Computer Investigations and Security and Under Cover Operations. FLETC, working with the State Department has assisted in numerous training needs assessments for newly emerging democracies throughout Eastern Europe.

I am pleased to report to the Helsinki Commission that I have requested FLETC to develop a Terrorist Financing Training Program in Europe and elsewhere. My goal is to be able to provide a three to five day training program on Terrorist Financing at the ILEAs in Budapest and Bangkok in the near future. When this program is implemented, it will be of immediate benefit to law enforcement officials in the OSCE region.


Conclusion

In conclusion, the OSCE’s Bucharest Plan of Action for Combating Terrorism, the Bishkek Declaration, and the upcoming Economic Forum represent three significant steps the OSCE has taken since September 11th to counter terrorism and terrorist financing. The Treasury Department’s enhanced cooperation and coordination with the OSCE and its Participating States will result in a force multiplier in this global battle.

I thank the members of the Helsinki Commission for holding this hearing today and for your support of Treasury Enforcement. I look forward to answering any questions you may have.