[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]
WEAPONS OF MASS DESTRUCTION:
STOPPING THE FUNDING--THE OFAC ROLE
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON
OVERSIGHT AND INVESTIGATIONS
OF THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
SECOND SESSION
__________
FEBRUARY 16, 2006
__________
Printed for the use of the Committee on Financial Services
Serial No. 109-73
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28-101 WASHINGTON : 2006
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HOUSE COMMITTEE ON FINANCIAL SERVICES
MICHAEL G. OXLEY, Ohio, Chairman
JAMES A. LEACH, Iowa BARNEY FRANK, Massachusetts
RICHARD H. BAKER, Louisiana PAUL E. KANJORSKI, Pennsylvania
DEBORAH PRYCE, Ohio MAXINE WATERS, California
SPENCER BACHUS, Alabama CAROLYN B. MALONEY, New York
MICHAEL N. CASTLE, Delaware LUIS V. GUTIERREZ, Illinois
EDWARD R. ROYCE, California NYDIA M. VELAZQUEZ, New York
FRANK D. LUCAS, Oklahoma MELVIN L. WATT, North Carolina
ROBERT W. NEY, Ohio GARY L. ACKERMAN, New York
SUE W. KELLY, New York, Vice Chair DARLENE HOOLEY, Oregon
RON PAUL, Texas JULIA CARSON, Indiana
PAUL E. GILLMOR, Ohio BRAD SHERMAN, California
JIM RYUN, Kansas GREGORY W. MEEKS, New York
STEVEN C. LaTOURETTE, Ohio BARBARA LEE, California
DONALD A. MANZULLO, Illinois DENNIS MOORE, Kansas
WALTER B. JONES, Jr., North MICHAEL E. CAPUANO, Massachusetts
Carolina HAROLD E. FORD, Jr., Tennessee
JUDY BIGGERT, Illinois RUBEN HINOJOSA, Texas
CHRISTOPHER SHAYS, Connecticut JOSEPH CROWLEY, New York
VITO FOSSELLA, New York WM. LACY CLAY, Missouri
GARY G. MILLER, California STEVE ISRAEL, New York
PATRICK J. TIBERI, Ohio CAROLYN McCARTHY, New York
MARK R. KENNEDY, Minnesota JOE BACA, California
TOM FEENEY, Florida JIM MATHESON, Utah
JEB HENSARLING, Texas STEPHEN F. LYNCH, Massachusetts
SCOTT GARRETT, New Jersey BRAD MILLER, North Carolina
GINNY BROWN-WAITE, Florida DAVID SCOTT, Georgia
J. GRESHAM BARRETT, South Carolina ARTUR DAVIS, Alabama
KATHERINE HARRIS, Florida AL GREEN, Texas
RICK RENZI, Arizona EMANUEL CLEAVER, Missouri
JIM GERLACH, Pennsylvania MELISSA L. BEAN, Illinois
STEVAN PEARCE, New Mexico DEBBIE WASSERMAN SCHULTZ, Florida
RANDY NEUGEBAUER, Texas GWEN MOORE, Wisconsin,
TOM PRICE, Georgia
MICHAEL G. FITZPATRICK, BERNARD SANDERS, Vermont
Pennsylvania
GEOFF DAVIS, Kentucky
PATRICK T. McHENRY, North Carolina
CAMPBELL, JOHN, California
Robert U. Foster, III, Staff Director
Subcommittee on Oversight and Investigations
SUE W. KELLY, New York, Chair
RON PAUL, Texas, Vice Chairman LUIS V. GUTIERREZ, Illinois
EDWARD R. ROYCE, California DENNIS MOORE, Kansas
STEVEN C. LaTOURETTE, Ohio CAROLYN B. MALONEY, New York
MARK R. KENNEDY, Minnesota STEPHEN F. LYNCH, Massachusetts
SCOTT GARRETT, New Jersey ARTUR DAVIS, Alabama
J. GRESHAM BARRETT, South Carolina EMANUEL CLEAVER, Missouri
TOM PRICE, Georgia DAVID SCOTT, Georgia
MICHAEL G. FITZPATRICK, DEBBIE WASSERMAN SCHULTZ, Florida
Pennsylvania GWEN MOORE, Wisconsin
GEOFF DAVIS, Kentucky BARNEY FRANK, Massachusetts
PATRICK T. McHENRY, North Carolina
MICHAEL G. OXLEY, Ohio
C O N T E N T S
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Page
Hearing held on:
February 16, 2006............................................ 1
Appendix:
February 16, 2006............................................ 23
WITNESSES
Thursday, February 16, 2006
Werner, Robert W., Director, Office of Foreign Assets Control,
U.S. Department of the Treasury................................ 6
APPENDIX
Prepared statements:
Oxley, Hon. Michael G........................................ 24
Kelly, Hon. Sue.............................................. 27
Werner, Robert W............................................. 28
Additional Material Submitted for the Record
Lee, Hon. Barbara:
Written responses to questions submitted to Robert Werner.... 42
WEAPONS OF MASS DESTRUCTION:
STOPPING THE FUNDING--THE OFAC ROLE
----------
Thursday, February 16, 2006
U.S. House of Representatives,
Subcommittee on Oversight
and Investigations,
Committee on Financial Services,
Washington, D.C.
The committee met, pursuant to notice, at 10:06 a.m., in
room 2128, Rayburn House Office Building, Hon. Sue W. Kelly
[chairwoman of the subcommittee] presiding.
Present: Representatives Frank, Kelly, Kennedy, Price,
Davis, Gutierrez, Cleaver, and Scott
Chairwoman Kelly. This meeting of the Oversight and
Investigations Subcommittee will come to order. Today's hearing
is on the role of the Treasury Department's Office of Foreign
Assets Control (OFAC) in fighting the proliferation of weapons
of mass destruction.
The spread of WMD, particularly nuclear weapons, poses the
greatest threat to the security of the United States and the
peace of the world. We know, then, that countries such as Iran
must be dealt with. We have all heard the hateful and ominous
rhetoric from the president of Iran, and we should all
recognize the grave threat posed by their possession of weapons
of mass destruction.
If Iran is successful, other nations will likely follow its
example, and Iran itself could become a base for proliferations
of WMD to enemies of the United States, including terrorist
groups such as Hezbollah and Hamas. Acquisition of WMD,
particularly nuclear weapons, is an activity that states cannot
easily undertake without assistance from nations that already
possess this technology. Even the United States' own Manhattan
Project, the first successful nuclear project weapons program,
required the technical skills not only of our own country, but
of industry from the British empire, and the best minds of
Germany, who were forced to flee because of Nazi persecution.
Recognizing the key role foreign industry plays in WMD
proliferation, President Bush signed Executive Order 13382,
blocking property of weapons of mass destruction proliferators
and their supporters. Under this order, 18 companies have been
designated as supporters of proliferation, including 6
companies in Iran, 11 in North Korea and 1 in Syria. This order
strikes at proliferation by stopping these companies from
having any access to the U.S. financial system.
This Executive Order is a powerful weapon to be used
against WMD proliferators. It can only work to the extent that
financial institutions and other government agencies cooperate
with it. Unfortunately, there have been reports that one of the
largest financial institutions in the world, ABN AMRO, had a
deliberate policy of not reporting transactions with Iran to
OFAC. There is a possibility that these transactions going back
to 1997 may have allowed Iranian companies now listed under
E.O. 13382 to access the U.S. economy.
Evasion of sanctions regimes by financial institutions
endangers the United States and our allies and must be treated
in a way that reflects the severity of the crimes that are
facilitated. A recent article in The Wall Street Journal
reported that more than seven major financial institutions were
withdrawing from trade with Iran because of increased
regulatory monitoring. Several of them are under investigation,
according to filings with the SEC, for possible violations of
OFAC regulations while they did business with Iran.
This country should never tolerate businesses making money
from hostile regimes that are working to develop weapons of
mass destruction. We must make sure the system that we have in
place for addressing that is not easily circumvented. OFAC has
an important responsibility in protecting our national
security, and I look forward to receiving the testimony of
Director Werner and working with him to strengthen his agency.
I turn now to Mr. Gutierrez.
Mr. Gutierrez. Thank you, Chairwoman Kelly, for calling
this hearing, the first oversight hearing of 2006. We've worked
together on many issues and presided over many hearings,
particularly on today's subject; combatting the financing of
terrorist activities.
I want to welcome Director Werner here this morning. The
last time I recall receiving testimony from OFAC was in June of
2004. At that time, Mr. Werner's predecessor indicated just how
much OFAC had grown--from 10 employees to 144--administering 27
economic sanctions programs.
I see from the first page of your testimony that you
currently have 125 employees handling 30 programs. I know that
not everything can be evaluated in terms of numbers, but at the
appropriate time I will ask you, Director, if that means that
you have 20 vacancies currently at OFAC since the last time,
which was June of 2004, you had 134 employees, and if you're
working to fill those positions, and whether that work that the
people were doing was vital.
Recently, the front page of USA Today had a story called,
``Fewer Terror Assets Frozen. Lack of Urgency Feared in the
Front.'' I would ask unanimous consent to place this article in
the hearing record.
Chairwoman Kelly. So moved.
Mr. Gutierrez. Again, while I don't believe that the
numbers tell the complete story, and certainly immediately
after 9/11, there was a lot of low-hanging fruit which
artificially inflated the number of assets frozen at the time,
I'm concerned about some issues raised in that article as well
as in the report by the GAO last October.
The GAO report indicated a number of problems in the
overall efforts to combat terrorist financing, many of which
were directly linked to turf battles between Treasury and
State. While some of those issues are beyond the scope of
OFAC's activities, and are better addressed by others at
Treasury, many of your activities require OFAC, as in your
opening statement again, to work very closely with the State
Department.
Therefore, I'm interested in learning what steps OFAC has
taken in the face of that report to improve its working
relationship with State and how the roles, responsibilities,
and procedures are defined when agencies working together on
designations and blocking.
Finally, there is a point mentioned both in the USA Today
article and the GAO report which falls squarely within your
purview. The GAO recommended that Treasury provide more
complete information on the nature and extent of asset blocking
in its annual terrorist assets report to Congress. That's us.
I was shocked to see that Treasury's reply to the
recommendation was that the agency objected and instead wanted
the GAO to recommend discontinuing these reports. When I read
the GAO report, it said this is what we recommended, this is
what they responded, and I guess they wrote everything in the
report. That's what I read. As a Member of Congress,
particularly a member of the Oversight Subcommittee, I want the
reports. I understand we should receive the next one in April.
As I said earlier, I'm not hung up on numbers, but I think
we need a way to measure effectiveness. If these snapshots do
not provide us with that ability, please help us figure out how
to assess your performance and include additional information
to place the numbers in context. I think that's what the GAO
report--we said we needed more numbers to place it in context.
Thank you very much, and I look forward to the Director's
testimony.
Chairwoman Kelly. Mr. Price, have you an opening statement?
Mr. Price. Thank you, Madam Chairwoman. I also want to join
my colleague in thanking you for calling this hearing and
welcoming the Director. I look forward to your testimony. I
would also be interested in your assessment of whether or not
Congress is getting the kind of information that it needs.
There's some indication, as Mr. Gutierrez said, that we're not,
and I would appreciate your comments about that.
I also am interested in whether or not you are able to
interact with any other nations who have similar concerns in
terms of WMD and assisting in limiting the amount of resources
that are going to folks who are interested in developing that,
and I haven't seen that in your report. I look forward to your
testimony and welcome you.
Chairwoman Kelly. Thank you. And we're joined by the
ranking member of the Full Committee, Barney Frank.
Mr. Frank. Thank you, Madam Chairwoman, for this. And I
appreciate the way you and the ranking member have worked
together to make the Oversight Subcommittee an effective part
of our work.
Mr. Werner, I'm troubled by something that is not your
responsibility personally. You may be a victim of it, but
you're here as a representative of the Treasury Department. And
I read the GAO report. I should say that I don't usually get to
come to this subcommittee's hearings. I think the chairman and
ranking member work very well together. They do an excellent
job on oversight. And with the responsibilities of ranking
member of the Full Committee, with all of the subcommittees,
it's hard to get to them all.
But I was so appalled when I read the GAO report on
terrorist financing that came out in October, that I had to
come here. What the GAO says is that there is a major turf
battle going on between Treasury and State. Shame on us. This
is an extraordinarily important issue, terrorist financing, and
we have a State-Treasury dispute, according to the GAO. State
says it's the lead agency. Treasury says, no you're not.
Justice says they don't agree with either. And the fact that a
dispute of this sort goes on and isn't resolved is appalling to
me.
So one question I have is, why hasn't this been brought to
the National Security Council, which I assume would be the
appropriate place to mediate a serious interdepartmental
dispute, and have it resolved? The report, from pages 16 to the
end, talks about serious disagreements and says that this hurts
our efforts.
Let me read in the report just the headings. ``State and
Treasury officials also disagree on procedures and practices
for the delivery of counterterrorism financing, training and
technical assistance.'' ``State and Treasury officials disagree
on the use of OTA funding and contractors.'' ``State, Justice
and Treasury officials disagree on whether it is appropriate
for U.S. contractors to provide assistance in the legislative
drafting efforts.'' ``Treasury and State officials disagree on
the use of confidentiality agreements between contractors and
the foreign officials they advise.'' ``State and Treasury
officials disagree with the procedures for conducting
assessments of countries' needs for training and technical
assistance.''
This is appalling. And I really would hope you will tell
us, do these disagreements persist? This is a report issued in
October. Do these disagreements persist? What efforts have been
made? You know, have any of these six or seven disagreements
now, have we come to agreement? Maybe you can bring the U.S.
Trade Representative in and he can negotiate a treaty here. He
doesn't seem to be doing too well in Dubai. He may have some
extra time.
Have these been resolved? If not, what's going on to
resolve them? Has this gone to the White House? Has it gone to
the National Security Council? I would think this is what you
have a National Security Council for. And apparently, you know,
I should say there may be some Congressional problem here. This
reports cites some statutes that aren't explicit about some of
these things. But that's what you have a White House
coordination body for. And this kind of three-way disagreement
is a serious problem.
Now, I also think it does not do, frankly, to ignore
problems. You make one reference here to the State Department
and how you work with the State Department in your statement,
and that's a good thing, but frankly, when you read this GAO
report, you have to question the kind of bland notion of things
about how you work together. And as I say, these are not simply
jurisdictional issues with no substance. These are substantive
issues.
And so I will be asking you, do these disagreements listed
in the GAO report persist? If so, what efforts are being made
to resolve them? Is there some interagency procedure that is
set up to deal with them? The persistence of disputes. I mean,
I've got to say, this is so dysfunctional. I listened to what
GAO reports, and what Treasury and State think, and I think I'm
seeing one of these kinds of major disagreements like between,
you know, I don't know, between the head of FEMA and the head
of Homeland Security. I mean, we're talking about apparently a
serious disagreement about how to function, and on something
that is so important, terrorist financing.
For the Treasury and State Departments to be in prolonged
disagreement and for the White House not to have resolved it is
a serious problem. Some problems you can't fix in the world.
But I would think these kinds of disagreements over who's in
charge and what procedures to follow between two American
governmental departments ought to be solvable if the
Administration simply had its attention called to it.
Thank you, Madam Chairwoman.
Chairwoman Kelly. I thank you. And, Mr. Frank, I would be
delighted if you are still here that you ask questions, but if
you are not here, if you want to submit those in writing, we
will accept them and put them in the record.
Mr. Frank. Thank you, Madam Chairwoman. I'm going to try
and stay.
Chairwoman Kelly. Thank you. I also would like unanimous
consent to put a statement from Chairman Oxley in the record.
So moved.
And we'll turn now to Mr. Davis.
Mr. Davis. Thank you, Madam Chairwoman. I think in the age
of the global economy where countries, economies, corporations,
people, and groups around the world become increasingly
interconnected, many of our traditional governmental mechanisms
that we've used for regulation and oversight are not as
effective as they once were.
And as we look at this problem, the seriousness of it, I
see tremendous opportunities for the Treasury and State
Departments to come into a new type of hybrid relationship
dealing with these issues at the root.
And particularly as somebody who's watched the emergence of
Iranian nuclear capability very, very closely, one of the
ironies that I have found in that and other purveyors of
weapons of mass destruction, that some of the very countries
that are trying to prevent or deter Iran's emergency in the
nuclear world actually had corporations and businesses who had
a tremendous vested interest in selling components or
supporting elements, technologies, providing services,
infrastructure and construction, that contributed to this
problem in the long run. So in a sense, it facilitated creation
of it and now we're trying to solve that problem.
And I think one of the things that we would hope to hear
about, and to help you with in any way from our perspective, is
bringing to account these entities in countries with whom we do
a tremendous amount of business, have a tremendous amount of
trade, to prevent and deter them at the root from continuing
these relationships in the long run.
And with that, I yield back.
Chairwoman Kelly. Thank you, Mr. Davis. Our witness today
is Robert Werner, Director of the Office of Foreign Assets
Control, U.S. Department of the Treasury. Director Werner has
led OFAC since October of 2004. Prior to then, he served as
chief of staff of FINCEN. He has also served in the U.S.
Attorney's Office, the Connecticut Attorney General's Office,
and has clerked for two U.S. Supreme Court justices. He is a
graduate of New York University School of Law, Columbia
University, and Amherst College.
We welcome you here this morning and look forward to your
testimony. You may proceed, Mr. Werner. I assume that you
understand our light system for the timing. I will extend to
you as much courtesy as I can, depending on how long you go.
But because this is a busy place, I tend to try to keep people
within the 5-minute rules. The green light means there's 5
minutes. The yellow light means there's 1 minute, and please
sum up, and the red light obviously means that we're out of
time.
Please--we're very interested in this topic, so please
proceed. Thank you.
STATEMENT OF ROBERT W. WERNER, DIRECTOR, OFFICE OF FOREIGN
ASSETS CONTROL, U.S. DEPARTMENT OF THE TREASURY
Mr. Werner. Thank you very much. Chairwoman Kelly, Ranking
Member Gutierrez, and distinguished members of the
subcommittee. Thank you for this opportunity to discuss the
Administration's efforts to combat the financial underpinnings
of the proliferation of weapons of mass destruction.
I also thank you for your long-standing leadership and
support in fostering an ongoing dialogue on this and other
issues concerning national security that affect all Americans.
OFAC is dedicated to carrying out the complex mission of
administering and enforcing U.S. economic and trade sanctions
based on U.S. foreign policy and national security goals. We
currently have approximately 30 such programs, including
residual enforcement actions related to programs that have been
lifted. These programs target rogue nations as well as
particular groups, entities, and individuals.
I also note, Madam Chairwoman, that all of the programs we
administer require that we work closely with a broad range of
government agencies and private sector industries. We are
presently making efforts to expand and improve our
communication with our diverse constituencies, ranging from the
financial and service sectors to manufacturing and agricultural
industries. In turn, the cooperation we receive from U.S.
businesses in complying with sanctions is generally
exceptional.
I would now like to turn to the primary reason we are
gathered here today. In the aftermath of the September 11,
2001, attacks, the horrifying prospect of WMD falling into the
hands of terrorist or rogue regimes has become all the more
real to us. Recent events involving the nuclear programs of
North Korea and Iran demonstrate the challenge we face.
Prior to the President issuing the new WMD order, the U.S.
Government had imposed a variety of other sanctions with
respect to proliferation of WMD. For example, Executive Order
12938 authorizes the Secretary of State to impose procurement
assistance and import bans against foreign entities and
individuals determined to have contributed materially to the
proliferation efforts.
In examining the existing arsenal of financial sanctions
tools to combat proliferation, however, the President and
others, such as the members of the Silverman-Robb WMD
Commission, believe that more could be done. On June 29, 2005,
as you noted, the President took an additional step by issuing
Executive Order 13382. This order adds powerful tools, a
transaction prohibition and an asset freeze, to the array of
options available to combat WMD trafficking. The strong new
blocking provisions imposed by the President apply to property
and interests in property of entities and individuals
designated under the order.
By prohibiting U.S. persons from engaging in transactions
with entities and individuals targeted by the order, we can
effectively deny proliferators and their supporters access to
the U.S. financial and commercial systems, cutting them off
from the benefits of our economy.
At the same time the President issued Executive Order
13382, he also designated eight entities in North Korea, Iran,
and Syria. The entities designated by the President based on
evidentiary packages developed by OFAC investigators in close
cooperation with colleagues in various agencies reflect some of
our government's primary proliferation concerns.
The risks of WMD proliferation associated with North Korea,
Iran and Syria are of tremendous concern to all of us. By
publicly designating entities and individuals that engage in
proliferation activities and those that support them, we aim to
first expose their illicit activities. Through public
designation, we intend to inform third parties who may be
unwittingly facilitating proliferation through what they
believe to be legitimate business activity of their association
with WMD proliferators. We also mean to isolate these
proliferators financially and commercially by denying them
access to our system, and to disrupt and impede the operations
of the WMD proliferators and their supporters.
While the public designation of these entities by the
President which exposes their illegitimate activities to the
light of public scrutiny is very important, OFAC's continuing
role as part of administering the sanctions program is to look
behind these entities. For our investigators, the entities
named by the President represent a starting point as we seek to
unravel the support networks that enable these entities to
function.
In addition, the subsequent designation of any entity or
individual serves as an additional basis for aggressive
investigation by OFAC in pursuit of designating additional
parties. We refer to these as derivative designations, and it
is this approach, targeting the broader support networks, that
has over time proved to be a determining factor behind
successful designations. With decades of experience in
administering and enforcing dozens of economic sanctions
programs, one lesson is clear to OFAC: True success is based
not on isolated designation actions, that is, actions
undertaken only once with no follow-up. Quite to the contrary,
our greatest areas of success have been based on sustained
aggressive action over time that evolves and adapts to match
the ever-changing methods of our adversaries.
As we apply the designation criteria of the order to strike
our adversaries again and again, we disrupt their attempts to
disguise their illicit activities in the stream of illicit
commerce. In the context of the new order, this means we target
not only the missile or bomb maker, but also the procurement
funds, the brokers and middlemen, the logistical apparatus used
to move dangerous weapons to market, and the financiers that
provide the financial mechanisms that facilitate proliferation
activities. And we've tried to visually display that on the
slide above, because that's very, very important and key to how
we approach our designations.
I should also emphasize that interagency coordination is
clearly a critical part of the designation process, because we
have to ensure that our public designation of entities and
individuals comprising a network do not jeopardize the ongoing
operations of our colleagues in law enforcement, with the
intelligence community, and are consistent with our
government's foreign policy and national security objectives
and interests.
Finally, I also think it is important to highlight that
this new sanctions program underscores the President's
commitment to work with our international partners to foster
cooperative efforts against WMD proliferation, including those
undertaken through the Proliferation Security Initiative.
In addition, we hope that this program can provide a model
for other nations to draw upon as they develop their own laws
to stem the flow of financial and other support for
proliferation activities as called for in the United Nations
Security Council Resolution 1540 and the Gleneagles statement
of the G-8. In that regard, a number of agencies, including
Treasury and State, have been engaging in active outreach
across the world.
Once again, I thank you for the opportunity to discuss
OFAC's role in this important program, and I would be pleased
to answer any questions you have.
[The prepared statement of Mr. Werner can be found on page
28 of the appendix.]
Chairwoman Kelly. Thank you so much, Director Werner.
You're doing very important work. And also thank you so much
for the slides that you have shown us.
I've got a couple of questions. First is a question about
whether or not the United States is concerned that ABN AMRO was
laundering WMD money for Iran through Dubai. Are you concerned?
Mr. Werner. I'm very concerned by the kind of activity that
the ABN AMRO case demonstrated may have been going on. We know
what was going on with ABN AMRO, and that activity is a real
threat to OFAC programs, which is why we were so pleased to be
able to join with the Federal Reserve in taking very, very
significant action against that bank for what, as you said,
Madam Chairwoman, was really a very intentional, systemic
program to strip information out of transactions and thereby
deny U.S. persons the ability to understand what sort of
transactions were flowing through the United States.
Interestingly enough, what we saw in that case was some of
the transactions that they're shipping information out of the
United States were, with respect to the underlying
transactions, not illegal. They were U-turn transactions, which
are permitted by the Iran program. But other transactions we do
see landed in the United States. They were not U-turned and
clearly violative of our programs. And more importantly, the
practice of stripping that information, while U-turns may be
okay in Iran, they're not okay in other programs. And that very
practice was really, really troubling to us.
We were pleased to be able to make a very strong statement
with the ABN AMRO action, and we intend to continue to look at
other situations that may involve other international banks
involved in that kind of conduct, because as you know, it's
WMD, it's terrorism, it's narcotics trafficking. It's
everything that our programs are aimed at that can really be
circumvented by that kind of systemic program.
Chairwoman Kelly. Americans now know that Dubai was a
financial center for Al Qaeda prior to the attacks of 9/11.
Would Americans be wrong to think that now Iran may be running
some of its WMD acquisition program through the banks in Dubai?
Mr. Werner. Dubai is an area, because it is such a growing
transit point for trade, that is of tremendous concern to us,
and it's an area that we will continue to try and work on with
the UAE and with other industries that we regulate, to make
sure that we can understand what sort of activities are going
through the ports there and what are the vulnerabilities that
we face.
Chairwoman Kelly. Has Treasury ever raised the concerns
about WMD proliferation and the massive Iran sanctions busting
with Dubai?
Mr. Werner. We have; in fact, my Deputy Director just got
back from a trip to the UAE with an interagency team where the
issue of proliferation and developing joint ways of addressing
that was raised.
Chairwoman Kelly. Were these issues raised when Treasury as
the head of the Committee on Foreign Investments in the United
States reviewed and recently approved a Dubai company, Dubai
Ports World, taking control of six major U.S. ports, including
the ports of New York and New Jersey?
Mr. Werner. Madam Chairwoman, I know that's an issue of
concern to you. It's both outside of my responsibilities at
OFAC and outside of my knowledge base. I'm unable to address
that.
Chairwoman Kelly. Mr. Werner, would you be able to get me
an answer for that, please?
Mr. Werner. I will take your question back to Treasury.
Chairwoman Kelly. What would you say to suggestions that
Dubai should be a candidate for designation as a jurisdiction
of primary money laundering concern?
Mr. Werner. Again, that's outside of the specific OFAC
role. It's a significant policy issue. I think that while
there's no question that we have to pay a lot of attention to
the kinds of activity that may be flowing through the ports in
Dubai, and my experience has been that our outreach to the UAE
is well received by them, and that they're anxious to engage in
a dialogue with us.
And so again, others would decide whether to designate them
as a primary money laundering concern. But what I can say is I
agree with you that it's an area that we have to pay attention
to. On the other hand, my own feeling is that they're striving
to work with OFAC on our issues.
Chairwoman Kelly. Of course they're going to appear to
strive, simply because they want to buy six major ports. But I
would hope that you can come back to me with an answer on that
question I asked about the ports. But I also understand that
perhaps a bit of cynicism on our part from Treasury in dealing
with these people might be beneficial.
I am very concerned about Dubai and their role in what we
know was funding and passing the money through from Al Qaida
prior to 9/11.
I want to ask you another question. Last year, a man was
indicted in Connecticut for allegedly selling prohibited
equipment to a branch of the Iranian government which is
involved in producing ballistic cruise missiles. The indictment
alleged that he hid the deal using an Iranian bank with a
branch in the UAE.
The indictment quoted a fax this individual sent to this
Iranian weapons agency, and I'm going to read a quote from that
fax. The quote is, ``All transactions between our firms can be
handled through Bank Saderat, Dubai, main branch, by directly
depositing the funds to our account to avoid tracing of foreign
agencies.''
Is the Bank Sadarat an entity of specific concern? And if
not, why not?
Mr. Werner. Well, Bank Sadarat, which is an Iranian-
controlled bank, is actually under our current Iranian
sanctions program. No U.S. person is permitted to deal directly
with that bank. So, yes, Bank Sadarat is an entity of concern
under our existing sanctions programs.
Again, Madam Chairwoman, you're raising an excellent point.
The whole issue, though, of front companies and the possible
use of UAE incorporated companies by Iranian entities or
citizens is an issue of concern for us. It's a challenge in all
of our programs, from the narcotics trafficking program to the
terrorist program to WMD, which is that as people strive to use
the formal financial commercial system, they've developed very
creative ways of creating entities that appear innocent but
aren't. And that is one of the areas in which we've attempted
to target our resources. It's very labor intensive. The more
transparency we can get in our system--as well as in the
systems of other countries--the more that will facilitate our
ability to trace people as they create these front companies.
Chairwoman Kelly. Well, clearly, this gentleman felt that
all he had to do was be at Bank Sadarat in a Dubai branch,
which raises the concern of how carefully OFAC is looking at
branches, international branches of banks.
I'm interested in knowing whether or not Bank Sadarat used
money for other groups like Hezbollah and Hamas. Should the
British be concerned about the fact that Bank Sadarat has a
very large office in London?
Mr. Werner. I think as the Director of an entity that
spends a lot of time administering the Iran sanctions program,
I'm concerned about any Iranian bank and the branch of any
Iranian bank. I would suggest that other countries should be as
well.
We know that one of the things we need to do is engage in
very robust international outreach, and OFAC does some of this,
but other parts of Treasury and State are also engaged in this,
because we're only as good as our weakest link. And the fact of
the matter is, without really gaining international consensus
on these issues, it's very, very difficult to completely
disrupt the flow of finances. And so, these are issues of
concern.
Chairwoman Kelly. I would hope that they would be
addressed. The Wall Street Journal reported last year that the
United States suspects the Bank of China of laundering North
Korean money. I'd like to know whether you feel this is true;
has that issue ever been raised with the Chinese; and has the
bank become another candidate for Treasury Department
designation like Banco Delta Asia was?
Mr. Werner. Madam Chairwoman, I apologize. I can't comment
on any specific examples that may or may not be under
investigation, but what I can tell you is that we are
constantly as a general matter looking at major financial
centers and major banks to see if there's facilitation in any
of the areas that we administer our programs, whether it's WMD,
terrorism, narcotics trafficking, or even our country programs.
And I think in that respect, the ABN AMRO action is a good
example of that, where the result of that action is a major
bank that is completely reforming the way that it operates
internationally, including beginning to use the OFAC list to
screen all currency transactions, not just U.S. dollar
transactions. Therefore, I'm in complete agreement with you
that OFAC, with the resources it has, needs to stay vigilant
and keep track of all these institutions and take aggressive
action wherever we find systemic violations.
Chairwoman Kelly. Since you brought up ABN AMRO, I have one
last question about that. A Wall Street Journal article
indicated that the chairman of ABN AMRO, Chairman Grunick,
ordered the destruction of an internal review of the bank's
dealings with Iran and Libya. He apparently rescinded this
order, but he had ordered it. Has OFAC seen the document? And
if so, can you characterize it for us?
Mr. Werner. I have not seen that document.
Chairwoman Kelly. Is that something--you are aware of the
document?
Mr. Werner. I would need to go back and review what parts
of the record that OFAC has that are open source versus not
open source.
Chairwoman Kelly. Perhaps, Mr. Werner, you could get an
answer for me on that one also?
Mr. Werner. I will be happy to do that.
Mr. Werner. Thank you very much. I turn now to Mr.
Gutierrez.
Mr. Gutierrez. Hi. I'd ask unanimous consent, Madam
Chairwoman, to yield my time and turn to the ranking member of
the Full Committee, Congressman Barney Frank. Thank you.
Mr. Frank. I thank the ranking member. I appreciate it. Let
me say, Mr. Werner, none of this may be your fault, and some of
it may not be your responsibility, but it is so important, I'm
going to ask you to comment, and if you can't give me the
answer, then you can go back and get it.
You do mention in here that you work with State, although I
must say a little more optimistically than I would have thought
after reading this. First point of disagreement. There were six
separate disagreements. I'm going to ask you about each one,
the status of it.
In the report that came out in October--maybe things got
cleared up:
Treasury does not accept State's position that State needs
all U.S. counterterrorism financing, training, and technical
assistance. Disagreements continue between some Treasury and
State officials concerning the Terrorist Financing Working
Group. According to State, State leads the U.S. effort to
provide counterterrorism financing, training, and technical
assistance to all countries the U.S. Government deems
vulnerable. According to Treasury, State's role is limited to
coordinating other U.S. agencies' provisions of
counterterrorism financing, and there are numerous other
efforts outside of State's program.
Does that disagreement persist?
Mr. Werner. Congressmen, none of the issues on technical
assistance do fall within OFAC's purview. Those involve other
components of Treasury. What I can tell you is, because I'm
very proud of it, is that our cooperation with not just the
State Department but the Commerce Department and other agencies
that we have to deal very closely with on our programs, is
excellent.
We work closely with the State Department not only in
designations that our investigators are working on, but also in
very significant--
Mr. Frank. Does that mean, then, that the Secretary of the
Treasury or whomever is in charge of this overall, could learn
from you how to play well with the others and maybe give that
instruction to your colleagues?
Mr. Werner. I don't believe that Treasury agreed--or State
agreed that the disconnect that was in the GAO report
accurately reflects the state of play between Treasury and
State.
Mr. Frank. Well, you think these disagreements are wrong.
Is there a disagreement between--does Treasury accept the fact
that State is the leader of all counterterrorism financing,
training, and technical assistance or does State no longer
believe that?
Mr. Werner. Congressman, I think I'd have to bring your
questions back to the people at Treasury.
Mr. Frank. All right. Well, then, I agree with that, but if
you don't want to answer, or if you're not able to answer,
that's okay. But then you shouldn't answer. I mean, if you
can't answer, okay. But then don't--I'm troubled if you tell me
you can't answer but then there's no real problem, because
that's an answer. And then I will have to try and probe that.
Now, let me ask you this. Yes, this talks about OTA that
it's not true, but it says State, Justice, and Treasury
disagree on whether it is appropriate for U.S. contractors to
provide assistance in the legislative drafting efforts on anti-
money laundering and counterterrorism financing.
Does that involve you at all, drafting of anti-money
laundering and other legislative proposals?
Mr. Werner. Congressman, I'm going to take your advice and
tell you that I can't answer.
Mr. Frank. Are you not involved in the legislative drafting
of money laundering?
Mr. Werner. I am not involved in that, and OFAC does not
provide that sort of technical assistance.
Mr. Frank. Okay. Well, I would then ask, Madam Chairwoman,
perhaps we could write to the Secretary, and to the Secretary
of State. There are from pages 14 through 18, 6 separate
disagreements listed, and I would ask that we ask both State
and Treasury about that and maybe ask people to come and have a
hearing, and maybe we could even approach, because we ought to
set a good example about turf, our colleagues, our counterparts
at the International Relations Committee, and maybe we could
have a joint hearing with both State and Treasury, and it might
be I think a useful thing for us to be able to help resolve
this.
Chairwoman Kelly. I think that sounds like a good idea.
Actually, this committee's staff has been working with OFAC
staff to see if we could have a hearing on the broader aspects
of this, possibly in March.
Mr. Frank. I appreciate that, and I yield back.
Chairwoman Kelly. Thank you. Mr. Price.
Mr. Price. Thank you, Madam Chairwoman, very much. Mr.
Werner, I won't give you any instructions about how to answer,
for fear that you might not answer.
I appreciate your testimony. I am struggling a bit, though,
because I think there's a disconnect between your report and
certainly the GAO report, and I'm struggling as to whether or
not to probe the process that you're going through or whether
or not to ask questions about specific incidents.
But I do want to point to the GAO report for a couple of
the conclusions that they reach. One is that OFAC reports on
the nature and extent of terrorists' U.S. assets don't provide
Congress with the ability to assess your achievements. Do you
agree or disagree with that statement?
Mr. Werner. That is an OFAC issue, and I would agree with
that statement, and we were working on new metrics during the
time that the report was being formulated.
In addition, the TAR Report, which was historically never
intended to be a performance-based report, was looked at as
well and we saw that the way it was formatted was not as
informative as it could be. So that's why the submission of
that report is delayed, because we are working on reformatting
that information so that it also will be more useful.
Mr. Price. Your testimony to us would lead me to believe or
would lead one to believe that we're doing very well, that
we're tracking what we need to track, and that we're having a
positive effect. But I'm not certain that I can sit here with
all confidence and say that, yes, in fact that's what's
occurring. Are you able to give me any greater confidence or
give us greater information which would give us that
confidence?
Mr. Werner. I would note that the 9/11 Commission gave
terrorist financing an A-minus, so hopefully that was some
indication that we were on the right track. But beyond that,
it's easier to measure things with numbers, and so people tried
to grab things that had quantitative aspects, and freezing
assets was one of them. And again, right after 9/11, there was
a lot of low-hanging fruit, and there were a lot of assets that
were frozen.
But, frankly, that's just not a good measure of the overall
success of a program, because the assets we freeze are only one
component of what we do. What we're really trying to do is
disrupt the network. And, frankly, whether they have assets
within the United States or not, a designation that disrupts
their ability to transact business in the international economy
is disruptive and effective. And we have indications that is
the case. We see other countries beginning to work with us on
our various programs and joining us in freezing assets.
We see them excluding business from their jurisdictions. We
also begin to see banks voluntarily pulling their business out
of Iran or other jurisdictions. Even when they're outside of
our jurisdiction now, they're telling us they're going to use
the OFAC list to screen transactions, even transactions that
are not in U.S. dollars.
Those are all indications to me that our programs are being
effective, not only in terms of asset freezing and not only in
terms of disruption and exclusion from the U.S. economy, but in
creating awareness and exposing and isolating terrorists and
drug traffickers and proliferators internationally.
And so, while some of these things are anecdotal, and we
have to collect information over time, I do believe that we're
seeing positive results. We can always do better. We can always
do more. We're allocating the limited resources we have as best
we can. But I would say that I can assure you that our programs
have a positive effect, and they're meeting objectives that we
set in terms of disruption and isolation and exposure.
Mr. Price. Thank you. I appreciate that. The subcommittee
here has found the task of tracing the assets of foreign
leaders, and has been somewhat stymied with bank secrecy laws.
And so the relative lack of transparency that exists in many
other nations, how can you ever know whether front companies
anywhere are working with terrorist financing?
Mr. Werner. Congressman, you've hit on an excellent issue,
a very difficult issue. In some countries, for example, in
Colombia, our narcotics trafficking program is very effective
because we've been able to work with the Colombian government
on their corporate laws and their transparency. And as they've
become more transparent, working together, our two countries
have become much more effective in tracking front companies and
networks.
In other places where there isn't that kind of
transparency, it's very difficult. And I would add, in the WMD
program, it's particularly difficult because we're dealing not
just with private entities. In many cases, we're dealing with
governmental entities, and their ability to impact the official
records that would lead you to be able to trace corporate
entities makes it even more challenging. So this is a very,
very significant challenge for us.
As we administer these programs, we're going to hopefully
learn how to get around that or work within it, but it's going
to require a lot of international outreach. It's why we do need
to work closely with the State Department. It's why OFAC needs
to rely very heavily on other elements of TFI as they do
outreach through FATF and through the G-8 and other
international bodies; it's critical in order for us to be
effective in the way we administer these programs.
Mr. Price. My time has expired, but I do want to commend
you for what you're doing. And I know that you know that your
work is incredibly vital to each and every American citizen,
and I appreciate what you're doing and ask you to view us
please as partners and allow us to assist you if there's
anything that we can do to help you accomplish your efforts.
Mr. Werner. I appreciate that. Thank you, sir.
Chairwoman Kelly. Mr. Gutierrez.
Mr. Gutierrez. Let me ask you a question about the GAO
report. Maybe you can answer this question. I hope you can. Why
did Treasury ask the GAO to recommend the discontinuation of
your annual terrorist assets report to Congress? Do you feel it
should be discontinued? And why or why not? I understand the
next one will be ready in April.
Mr. Werner. I'm a little bit confused by that question,
because I was not aware that we had asked for the elimination
of that report. I know that there's another report that
Treasury was responsible for being involved in that I think
Treasury did maybe seek to have eliminated.
Mr. Gutierrez. Okay. And given the lack of time and the
confusion between what I understood the GAO report to say and
what you're testifying the GAO report might have said, could
you report back to us on just what it was Treasury asked the
GAO you should discontinue? There's no disagreement that there
was a discontinuation of something.
Mr. Werner. I'll have to get back to you on that. I don't
want to misstate something. And I'm not really sure.
Mr. Gutierrez. Just get back to us and tell us what annual
report it was that the GAO report actually was correct or
incorrect about when Treasury asked that it be discontinued.
Mr. Werner. Sure.
Mr. Gutierrez. Okay. The decline in OFAC's staff from 144
in June to 125 today. I see your testimony provides for 10
additional employees to implement Executive Order 13382, and 15
additional positions.
Will this simply bring up your numbers to 2004 numbers? Or
are there vacancies present? And how are you doing more work
with fewer employees? Is that okay? Or you just need to hire
people? What's going on?
Mr. Werner. What happened there is that a component of
OFAC, the Foreign Terrorist Division, was transferred into the
new Office of Intelligence and Analysis that was established in
2004, and there was a transfer of about 23 analysts.
The reason that was done is that they were all working on
the terrorist targeting programs, which were very, very heavy
intel-related programs. And it was believed, and I think it's
proven to be true over the last year, that moving those
analysts into the Office of Intelligence and Analysis headed by
an Assistant Secretary that was an intel professional, would
enhance their ability to do their work. And I think we've seen
that.
I remain a customer, because the designations are still
done under my authority, and we still administer and enforce
the programs. But that was why OFAC went from the 144, went
down. This year actually we've got an additional 10 FTE's that
have been allocated. Next year, under the President's budget,
we're requesting an additional 25 positions or 15 FTE's. But
those are really--
Mr. Gutierrez. So you sent people over to another division,
and you still get the information, but they're working under
another system?
Mr. Werner. That's correct.
Mr. Gutierrez. That clears up the mystery. I just wanted to
make sure if you needed any help or what was going on, maybe if
people weren't getting hired.
I want to ask you a question. Do you agree with former
Under Secretary Guru's comments in USA Today? Specifically, he
said, a lack of urgency is hurting efforts to block terrorist
financing. Is OFAC a priority within Treasury? Is your work a
priority for this Administration? What about the former Under
Secretary's comments, that a lack of urgency is hurting the
blocking of terrorist funding?
Mr. Werner. I don't agree with those comments. I don't
understand what they're based on.
Mr. Gutierrez. Did you read the article?
Mr. Werner. I did.
Mr. Gutierrez. Okay.
Mr. Werner. I know when I see our investigators working all
hours of the day and night, the motivation and enthusiasm in
which not only Treasury approaches the work we do, but in the
interagency, I see no lack of urgency. This is complicated
work. Terrorist financing in particular is very, very
difficult, because as you all know, you're taking good money
and turning it into bad. The amount of money you need to
involve yourself in terrorism is small compared to other areas.
For example, in WMD, you're usually dealing in large volumes of
money. It is very difficult to detect and track. There are a
lot of other sensitivities, operational, law enforcement, and
others, that impact the way designations go forward.
And I see no lack of urgency at all. In fact, to me it's
impressive that people day after day, month after month, year
after year, have been able to sustain the sort of effort that
they're currently engaging in.
Mr. Gutierrez. Let me ask you one last question then,
Director. The GAO noted that turf battles with State have hurt
your ability to coordinate efforts within our own government.
Do you agree or disagree with that statement?
Mr. Werner. I can only speak to my experience as the
Director of OFAC.
Mr. Gutierrez. Speak to your experience as best you can.
Mr. Werner. My experience is that interagency cooperation
on the programs we administer is excellent. I meet monthly with
my counterpart from EB. Our staffs are interacting constantly.
State is involved in foreign policy guidance on the licenses we
issue. We participate in numerous interagency working groups
involving the State Department. I have daily contact with
someone from the State Department on at least one of our
programs. And I actually am very impressed that it's as good as
it is, because bureaucracies often don't interact well. We seem
to have a system where we understand each other's roles and
responsibilities, and we coordinate very well.
Mr. Gutierrez. Thank you, Mr. Director.
Chairwoman Kelly. Thank you very much. Mr. Cleaver.
Mr. Cleaver. Thank you, Madam Chairwoman. Mr. Werner, thank
you for being here. On a scale of one to ten, ten being the
highest, where are we in terms of detecting and interrupting
the flow of funds to terrorist organizations?
Mr. Werner. It's a hard question to answer, because even
though you've given me a one to ten scale, it's not clear what
it's relative to.
Mr. Cleaver. One to five.
Mr. Werner. Rather than give you a number, I'd rather give
you a narrative, because I think we're still learning. It's a
very, very complicated, difficult area. What I can tell you is
I believe that we continue to improve. The effort is high.
We're seeing success in areas--what we're beginning to see
is that there are overlaps in some of our programs. WMD and
terrorism are a good example of two programs that can
complement each other. And my sense is as we gain increasing
international cooperation and sophistication so that other
countries pass laws that support our efforts and they gain
expertise in how to implement programs like ours, that we're
having increasing success.
At the end of the day, we're only as strong as the weakest
link. I know you've all heard that many times, but it's true.
So that to really be successful from an economic terrorist
financing perspective, we do need international consensus
cooperation and implementation.
Mr. Cleaver. Let me ask the question another way, and you
may have hit on it at the end of your comments. Are there any
gaps in OFAC that Congress can close? If you were sitting here,
are there things that you would want to do to strengthen your
job, and to further reduce the opportunities for terrorists to
have their operations funded?
Mr. Werner. Well, one of the things--yes. The answer is
yes. And I think what I would do is point to the President's
2007 budget request where he seeks 25 additional positions for
OFAC, which considering we're an organization of approximately
125 people, is a very significant request. And a large piece of
that is intended to permit us to have additional resources
necessary to do the kind of follow-up on primary designations
that is so essential.
As I testified, what's critical to the effective
implementation of any economic sanctions program, is that you
don't just designate the bomb builder or the bomb thrower or
the drug manufacturer, but also the network that it supports.
And as the terrorist organization morphs and changes its name
or shifts its funding to a sister entity, we need to be able to
have the resources to track that, stay on top of it, and
redesignate or add supplemental designations. And to do that,
we really need additional resources.
Mr. Cleaver. So the answer is yes, and--do you have--one
final question, Madam Chairwoman. The cost of the new personnel
or additional personnel, do you remember offhand what that was?
Mr. Werner. It comes out to 15 FTE's. Well, our total
request for WMD and terrorism was, I think, about 13 FTE's in
actual funding, because it will take us a while to hire and
bring on board. I don't recall the exact dollar amount that it
comes to, but we can get that to you.
Mr. Cleaver. Is it detectable in the budget?
Mr. Werner. Yes. Yes. It's broken out in the budget.
Mr. Cleaver. Okay. Thank you.
Chairwoman Kelly. Thank you, Mr. Cleaver. Mr. Werner, the
President of the United States has drawn attention to the super
bills used by North Korea to fund its illegal activities. This
is not well understood, and I wonder if you could explain to
the committee how counterfeiting, especially in North Korea,
facilitates the acquisition of WMD technology.
Mr. Werner. Again, you're stepping beyond my personal
expertise, and we can follow up with experts to get you a more
complete briefing in response. But the obvious answer is that
as they counterfeit U.S. dollars, because they're very
sophisticated at it, it gives them capital to make
acquisitions.
Chairwoman Kelly. Thank you. If you would follow up, I
think that would be helpful, because then it will give all the
committee members an idea of how this works. And I'm not sure
there's a great deal of knowledge on that.
I also want to point out that when you showed your first
slide, you actually have two others.
Mr. Werner. Yes.
Chairwoman Kelly. I'd like to know if you would like to
show those two slides and discuss them with the committee.
Mr. Werner. I'd be delighted to, if that's okay.
Chairwoman Kelly. Of course.
Mr. Werner. This slide was intended to just demonstrate the
designation process. At times I think people don't really
understand how incredibly comprehensive it is and how much it
does involve an interagency process.
And so what this slide depicts is that we begin with
identifying a target. And the identity of a target can flow
from a lot of different sources. It can flow from open source,
from a newspaper article. It can come from law enforcement
sensitive information. It can flow from intelligence. But based
on an all-source review, our analysts are constantly generating
targets.
Once a target is identified, that begins the evidentiary
process in which additional information and evidence are
collected. An actual evidentiary is drafted. It's important to
remember, though, during this entire process, we're constantly
coordinating with other agencies and deconflicting, because you
can have law enforcement equities, you can have diplomatic
concerns. There are other operational issues that we need to
carefully vet with other agencies so we don't disrupt their
processes as well.
But as it moves through the process, we reach a point where
we draft an evidentiary, which is essentially an administrative
record for the designation, which then undergoes a legal review
both by lawyers at the Treasury Department as well as at the
Justice Department. We then have a formal interagency
coordination. The Executive Orders generally require, and the
WMD one does, concurrent consultation with other agencies. The
WMD Executive Order specifies the State Department and the
Justice Department but also refers to other appropriate
agencies.
And finally, if the deconfliction is resolved and the
evidentiary is legally sufficient, we'll actually send it in
for a final agency review. And that then results in a public
announcement, and everybody knows about the OFAC list. And we
do publish the identifying information of the entity on our
list.
We also, at the same time we designate, blast out notices
to thousands of financial institutions and to State and local
law enforcement components, as appropriate, and to Federal
components. And we make sure our lists are incorporated into
appropriate databases, such as the Visa databases. That's
essentially a very abbreviated version of our designation
process.
And then I think the next slide goes to just trying to
depict how incredibly broad our authorities are. When we
actually designate, that results in a block of any interest of
a targeted person or entity that comes within the jurisdiction
of the United States or a U.S. person. And that doesn't just
refer to bank accounts and money. It also includes houses and
cars and, frankly, future interests, such as inheritances--all
are blocked by our action.
And as our list-based programs grow, we, in fact, are
beginning to collect blocked houses and cars and other things,
which is interesting, because unlike in a seizure where the
Federal agency will take title to the property, OFAC does not.
We are not the custodian. The assets are merely blocked. And so
that can often create some interesting and complicated
licensing and maintenance issues for us.
Chairwoman Kelly. Thank you. That's very interesting. And
we've been joined now by Mr. Scott. Mr. Scott, do you have any
questions?
Mr. Scott. Certainly. Thank you very much, Chairwoman
Kelly, for your leadership on this important issue. And may I
add that I feel our committee is making significant progress.
Terrorist organizations certainly need money to function. And
according to the 9/11 Commission, our efforts to freeze
terrorist assets is in many ways the crown jewel of the Federal
anti-terrorism campaign, and we're very proud of that. It's an
area in which we are succeeding the most, but we certainly can
do better.
And with that in mind, let me ask you this. Recent media
reports describing a significant decline in the amount of
terrorist assets frozen since September 11th have cited a lack
of cooperation and commitment among different Federal agencies,
and other countries. I think that this really is sort of the
stone in our shoe in terms of even making further progress.
Cooperation between the Federal agencies involved in this, and
cooperation with other countries.
Can you describe for me the plans that you have and the
plans that you have implemented or that you're working on which
would reverse this trend of a failure of communications and
cooperations between agencies and countries?
Mr. Werner. Certainly. To address the asset freezing issue
first, I think in many ways a decline in assets frozen under
any particular program can actually be evidence of the success
of that program, because as you drive people out of the use of
the former financial system, you're naturally going to exclude
them from our trade and transactions with the United States,
and there will be less assets available to freeze.
But also I think it represents the fact that many of the
designations we're doing now are involving networks in
concentric circles around from the obvious targets that were
designated right after 9/11. And so I don't look to the amount
of assets frozen as really determinative of performance. I
think we really concentrate on whether we have evidence that
we're disrupting networks and disrupting the ability of the
networks to do business.
With respect to cooperation, I think the GAO report was
targeted at an area that is outside of OFAC's scope of
responsibility, which is the technical assistance provided
internationally. And I'll let others in the Treasury and State
Department address that particular issue.
But with respect to cooperation within my programs, the
cooperation is really excellent. We work hand-in-glove with the
State Department not just on the designation components of our
programs, but also with respect to very difficult licensing
decisions and enforcement decisions that we make. And we have
interagency groups that we participate in, in all of our major
programs, where we do joint targeting with multiple agencies
and we rely, for example, in the weapons of mass destruction
program, our investigators--this is a new program for us. We're
learning the technical aspects of that program.
And we rely very heavily on expertise from other
department, the Department of State, Department of Commerce,
Department of Energy, where there are folks who have years and
years of knowledge and experience dealing with WMD-related
issues. So that from that perspective, we couldn't get our work
done without that cooperation, and we emphasize it, and it's a
culture that is important for me to instill within my
organization.
Mr. Scott. Do you know of any countries that you could sort
of point to that might not be cooperating with us as much as
we'd like? Countries that offer more of a challenge than
others.
Mr. Werner. I think with respect to cooperation, I would
defer to my colleagues at the State Department and others
within Treasury who deal more directly with international
liaison. That's not to say that OFAC isn't involved in
international outreach. We are. We do a lot of very technical
compliance with international banks and with other governments
on OFAC-related programs.
There are areas of concern. Obviously, the Gulf is a region
where there's a lot trade and financing going on there that we
know we need to pay attention to. And there are other areas--
for example, we're very focused on Iran and North Korea and
Syria at this time. Those countries not only are a risk when it
comes to weapons of mass destruction, but they are state
sponsors of terrorism. And those are some of the areas that we
have a lot of concerns about and direct a lot of our resources
to.
Mr. Scott. Okay.
Chairwoman Kelly. Thank you very much, Mr. Scott. We've
been called for a vote. There are no more questions. Without
objection, your written statement, your full written statement,
Mr. Werner, will be made part of the record. And the Chair
notes that some members may have additional questions, and
certainly there are some you are going to come back with
answers for, for this panel. There may be some questions
submitted in writing. So, without objection, the hearing record
will remain open for 30 days for members to submit written
questions to this witness and to place their responses in the
record.
With that, this hearing is adjourned with great thanks to
you, Mr. Werner.
Mr. Werner. Thank you very much.
[Whereupon, at 11:12 a.m., the subcommittee was adjourned.]
A P P E N D I X
February 16, 2006
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