September 11, 2001 : Attack on America
Remarks by Deputy U.S. Treasury Secretary Kenneth W. Dam; October 22, 2001

Treasury News
From The Office Of Public Affairs
October 22, 2001
Money That Kills: The Financial Front Of The War On Terrorism
Remarks by Deputy U.S. Treasury Secretary Kenneth W. Dam

I would like to thank the Woodrow Wilson International Center for Scholars for inviting me to address its Board and Council this evening. I would also like to thank the Center's distinguished Director, my long-time friend Lee H. Hamilton, as well as Joe Cari for his kind introduction.

The subject of tonight's speech, "The Financial Front of the War on Terrorism," has received a great deal of attention since September 11th. In large part, this attention stems from President Bush's declaration-days after the tragic attacks against the World Trade Center-"that starving the terrorists of funding" would be a primary objective of our war on terrorism.

The President has declared that this new war will be a conflict "without battlefields and beachheads," in short, an unconventional war. While the Department of Defense, under Secretary Rumsfeld, has deployed special forces to Afghanistan and Secretary Powell has succeeded in bringing on board some new U.S. allies, I submit that nowhere is this conflict more unconventional than in the Administration's efforts to cripple the al-Qa'ida financial network.

Launching a financial front in the war on terrorism is a new endeavor, one that requires a fresh policy perspective. True, tracking al-Qa'ida's assets is not a "macho" task. But it is a thinking man's war, and that demands skillful diplomacy, vigilant coordination and seamless information sharing. Let me explain why, but first let me explain what we are facing.

At present, our best information tells us that al-Qa'ida has cells in more than 40 countries. And being a transnational entity means that al-Qa'ida behaves like one, often merging, absorbing and forging alliances with other prominent terrorist groups, like the Egyptian Islamic Jihad and Algeria's Salafist Group for Call and Combat.

Another key fact is that Bin Laden's personal fortune is no longer al-Qa'ida's most important asset. While Bin Laden's inheritance helped establish him as a terrorist leader, over the last several years Bin Laden has built an impressive fundraising operation. Today, al-Qa'ida receives the bulk of its financial support from a collection of Islamic charities and relief organizations, the majority of whose money comes from wealthy individual donors supportive of Bin Laden's cause.

If, as the State Department noted in its April 2001 report on "Patterns of Global Terrorism," state-sponsored terrorism is on the wane, then Bin Laden's borderless al-Qa'ida network is well ahead of the curve. It is also not altogether clear who is supporting whom these days in Afghanistan, the Taliban or al-Qa'ida. Al-Qa'ida provides financial support, the Taliban safe haven.

The real picture that emerges is one of Bin Laden and al-Qa'ida operating as "international venture terrorists," raising money from wealthy donors and seeding start-up terrorist cells in Europe, Asia, the Middle East and the Americas. For these terrorists, money is not an end. It is simply a means for financing future terrorism.

Since the mid-'90s, Bin Laden and al-Qa'ida also have taken special care to transfer and hide their finances in a way that avoids detection by even the most discerning authorities. Suitcases full of cash, informal Hawala transfers and even everyday money orders have become regular methods for sending terrorist money abroad. Front companies are also used to transfer funds. In addition, some banks help obscure terrorist money by allowing the transfer of funds from donor to destination. These illegal and unconventional methods complicate our tracking efforts.

Nevertheless, I believe we have made significant progress in limiting Bin Laden's and al-Qa'ida's ability to finance terrorism. I'd like to highlight a few of our recent accomplishments, starting with those on the domestic front.

In many ways, the President fired the first salvo in the Administration's war on terrorism by signing an Executive Order on September 24th, which blocks the U.S. assets of 27 individuals and organizations affiliated with the September 11th terrorist attacks. Just ten days ago, we added another 39 names to that list, bringing our current total to 66. As our global investigation continues to unfold, I am confident that more names will be added and more assets will be blocked. We will starve the terrorists of their funding.

Those of you familiar with the mechanics of asset blocking or the activities of the Treasury's Office of Foreign Asset Control, or OFAC -- the agency responsible for enforcing these sanctions-might be asking how these efforts differ from prior actions taken to disrupt terrorist financing.

One difference is that the President's Executive Order greatly expands the coverage of previous Executive Orders from "terrorism aimed at disrupting the Middle East Peace Process" to "global terrorism." The Executive Order also expands the prohibited class to anyone providing financial or other support or services to terrorist groups. In addition to blocking U.S. assets, the order also denies foreign banks associated with terrorism access to U.S. markets. But the Executive Order is only a first step.

Another difference is that we are marshaling all of the investigative resources at our disposal in the fight against terrorist financing. And to do that, we are having to overcome interagency tensions, turf battles and differing priorities that have stunted our progress in the past. Let me mention three of these problems in detail.

First, consider the shackles placed on Treasury's Financial Crimes Enforcement Network, or "FinCEN," which collects information on suspicious financial activities from banks, analyzes it and then reports the results to law enforcement. In the past, FinCEN has maintained a certain distance from intelligence agencies because our rules limit the sharing of domestic information with our intelligence agencies. While an important safeguard, that distance hampered our efforts in the past to connect suspicious domestic financial behavior with foreign intelligence leads in fighting terrorism more effectively. Al-Qa'ida terrorism is, after all, a foreign conspiracy operating against U.S. targets, and it is impossible to stamp it out without coupling foreign intelligence and domestic information.

A second problem has been with using intelligence leads to designate terrorists and terrorist groups under the Executive Order. Doing so might expose "sources and methods" used to gather foreign intelligence in the first place, and that could comprise compromise intelligence operatives in field. In the past, OFAC has been particularly reluctant to rely solely on intelligence for fear of having to defend its actions in court.

Third, obtaining information from the FBI {Federal Bureau of Investigation] -- our nation's lead domestic investigator -- also has been difficult because the FBI is preoccupied with building the strongest possible criminal case for conviction. The FBI's primary interest has been pursuing and protecting evidence, not exchanging leads with other federal agencies.

Many of you have read about recent anti-terrorism and money laundering bills now under congressional consideration. Once signed into law, these bills will help us break down some of these barriers.

This week we expect Congress to pass amendments to the Bank Secrecy Act, the Fair Credit Reporting Act and the Right to Financial Privacy Act that will allow the broad sharing of terrorist-related information between FinCEN and our foreign intelligence agencies. Under these laws, law enforcement and intelligence agencies will be able to share grand jury material and electronically intercepted evidence to the extent such information pertains to foreign intelligence and counterintelligence.

Moreover, these new laws will authorize judges to consider classified information in reviewing blocking orders, provided such review is performed in camera. By removing the judge's review of classified information from the normal adversarial process, intelligence "sources and methods" will be protected from disclosure.

As for resolving the inherent conflict between prosecution and terrorist asset tracking, the President has made it clear that prevention of terrorism is at least as important as its prosecution. Still, the tracking of terrorist finances must be carefully balanced with the tracking of the terrorists themselves, lest we interfere with the vital mission of the FBI. In these and many other ways, Congress is giving us the tools we need to win the war on terrorism.

How then are we going about the search for terrorist money? Since mid-September, we have put together an interagency task force that includes the Treasury's enforcement and international affairs components, CIA [Central Intelligence Agency], the Departments of State and Justice, the FBI and the NSC [National Security Council]. This task force works to identify potential financial intermediaries of suspected terrorists and their associates. A new Financial Terrorist Asset Tracking Center is also looking at all terrorist organizations worldwide so that we can create a big picture profile of what the financial infrastructure of these groups look like.

In addition, Treasury's Secret Service, IRS [Internal revenue Service] and Customs investigators have joined the financial front against terrorism, providing fresh leads and added expertise. Besides working directly with FinCEN and the FBI, these investigators are forming a joint venture that leverages their incomparable financial skills to advance the financial war to a new level of sophistication.

Another feature of our financial front against terrorism has been to benefit from the expertise of the financial institutions. Without going into specifics, I can say that U.S., as well as foreign, financial institutions have been very helpful and cooperative in the struggle against terrorism. Over the long term, the continued cooperation of banks and financial institutions is essential.

By the way, both OFAC and FinCEN have established toll-free 1-800 numbers for financial institutions, and this method of instant communication already is being used extensively.

Nevertheless, even with better interagency cooperation and resource allocation, we are well aware that Osama Bin Laden and al-Qa'ida are not stupid enough to park the bulk of their wealth in the United States. That is why our international coalition building is so critical. We can send B-2 bombers from Missouri to Afghanistan and back, and we can launch Tomahawk missiles from the Indian Ocean into Jalalabad. But we can't just reach into foreign financial institutions and block terrorist accounts. Local governments must be persuaded to do that. Allies are important in the physical struggle against terrorism; they are a sine qua non on the financial front.

Both multilaterally and bilaterally, we have been working hard to enlist the cooperation of other countries. An important first accomplishment of newly confirmed U.S. Ambassador to the UN John Negroponte was the prompt passage UN Security Council Resolution 1373. This U.S.-sponsored measure calls on members to criminalize the provision of funds to all terrorists, which effectively denies terrorists safe financial haven anywhere. UN resolution 1373 drew heavily from the text of President Bush's Executive Order against terrorism and expanded an earlier UN Security Council resolution (1333) that required states to freeze all assets belonging to Osama Bin Laden and his associates. The UN will update its designations of terrorist entities as member states, including the U.S., continue to release additional names.

As with any UN resolution, members must have the political will to implement these measures. And on this score, I am pleased to report that members are taking swift action to draft and pass implementing legislation.

I know this because, almost daily, I spend time on the phone with other Finance Ministers and Central Bank Governors to discuss their commitment and their progress in the financial war. Treasury, with the help of U.S. diplomatic missions, is kept currently informed of asset blocking and other actions taken in furtherance of our coalition goals. Since September 11th, 144 countries have joined the effort to disrupt terrorist assets. 70 have put blocking orders in place. And, at last count, hundreds of suspected terrorist accounts are under investigation.

This worldwide effort has an important deterrent effect and little has been made of this important point in the press. Because of our coalition efforts, terrorist entities, as well as those who aid and abet terrorism financially, have been put on notice that their activities are being scrutinized by investigators in just about everywhere in the world. This fact was underscored last month by a joint call of the G-7 Finance Ministers for all countries to establish functioning Financial Investigative Units (FIUs), similar to FinCEN.

We also that expect a model information exchange process will be agreed upon when the 58-member Egmont Group, which coordinates such activities, meets later this month in Washington, D.C.

Another organization playing a key role in the coalition is the 31-member Financial Action Task Force, or FATF. FATF has taken a lead in the global fight against money laundering. Now, FATF is turning its attention to the financial war on terrorism. When FATF members meet later this month, they hope to establish international standards and issue special guidance for financial institutions on practices associated with the financing of terrorism. They are working to develop a process -- similar to their influential money laundering "name and shame" approach -- for identifying countries helping to facilitate terrorist financing. This will step up global pressure being put on countries who fail to crack down on terrorist financing within their borders.

At the same time, we are pushing forward on our program of negotiating a network of tax information exchange agreements with countries throughout the world. Terrorist financing, money laundering and tax evasion are a trio of closely related phenomena. Countries that tacitly collaborate in promoting tax evasion schemes and that facilitate money laundering create fertile ground for terrorist financing.

Even those countries-many of them among the world's poorest -- who are not members of the above groupings and may even have been the targets of censure -- are showing interest in not being left out of the coalition. But many of these countries need help in becoming effective coalition members. Many have neglected proper regulation of their banking sectors in the past. Sometimes legislation has to be passed, often to the chagrin of self-interested opposition leaders. Implementation requires new bureaus and new regulators. Already we have offered and extended technical assistance to many nations. We need to help them so that they can in turn help in the struggle. We cannot rest until no place remains for terrorist money to hide.

We welcome public declarations of support from foreign governments. We welcome new legislation. All of these steps are important in building momentum. But implementation and enforcement are what is critical. We are keeping track, account by account, dollar by dollar. We expect all countries to do the same. The war on terrorism may be an unconventional war, but it's a real war. We will win if we stay the course.

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