[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]
COUNTER-TERRORISM FINANCING
FOREIGN TRAINING AND ASSISTANCE:
PROGRESS SINCE 9/11
=======================================================================
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
__________
APRIL 6, 2006
__________
Printed for the use of the Committee on Financial Services
U.S. GOVERNMENT PRINTING OFFICE
30-535 WASHINGTON : 2006
_____________________________________________________________________________
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Serial No. 109-84
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:
April 6, 2006................................................ 1
Appendix:
April 6, 2006................................................ 43
WITNESSES
Thursday, April 6, 2006
Feierstein, Gerald M., Deputy Coordinator for Programs and Plans,
Office of the Coordinator for Counter Terrorism, U.S.
Department of State............................................ 21
McDonald, William Larry, Deputy Assistant Secretary, Technical
Assistance Policy, U.S. Department of the Treasury............. 18
Sabin, Barry M., Deputy Assistant Attorney General, U.S.
Department of Justice.......................................... 23
Walker, Hon. David M., Comptroller General of the United States.. 5
APPENDIX
Prepared statements:
Oxley, Hon. Michael G........................................ 44
Kelly, Hon. Sue.............................................. 45
Grassley, Hon. Charles....................................... 47
Royce, Hon. Ed............................................... 50
Feierstein, Gerald M......................................... 51
McDonald, William Larry...................................... 60
Sabin, Barry M............................................... 67
Walker, Hon. David M......................................... 84
Additional Material Submitted for the Record
Written responses to questions submitted by Hon. Barney
Frank, Hon. Carolyn B. Maloney, and Hon. Luis V. Gutierrez. 114
COUNTER-TERRORISM FINANCING
FOREIGN TRAINING AND ASSISTANCE:
PROGRESS SINCE 9/11
----------
Thursday, April 6, 2006
U.S. House of Representatives,
Subcommittee on Oversight
and Investigations,
Committee on Financial Services,
Washington, D.C.
The subcommittee met, pursuant to notice, at 10:00 a.m., in
room 2128 Rayburn House Office Building, Hon. Sue W. Kelly
[chairwoman of the subcommittee] presiding.
Present: Representatives Kelly, Garrett, Gutierrez, Lynch,
Scott, Cleaver, Wasserman-Schultz, and Moore of Wisconsin.
Chairwoman Kelly. This hearing of the Subcommittee on
Oversight and Investigations will come to order.
Without objection, all members' opening statements will be
made part of the record.
The subcommittee will hear the testimony of two panels this
morning. Mr. Walker, I know you are familiar with our light
system so I am not going to bother to explain it. Without
objection, you know your written statement will be made part of
the record and you know that you will be recognized for
approximately 5 minutes for your testimony. And with that, I am
going to talk for a minute about what the subject of this
hearing is--counter-terrorism financing foreign training and
assistance, the progress that we have made since 9/11.
This committee has been working very hard to improve
efforts to stop terror financing, both within the United States
and overseas. There have been many successes, but we know that
terror networks will always adapt to our successes in tracking
their financial activities. As the terrorists continue to
adapt, the cooperation of other nations becomes even more
essential. Recent examples remind us of the continuing need to
secure better assistance from other nations in fighting terror
financing. Just last week, The New York Post reported that a
bank in New York had moved more than $1 billion to terrorist
havens in the so-called tri-border area of Brazil, Argentina,
and Paraguay. The Holland-based ABN AMRO was recently fined $80
million for facilitating illegal trades with Iran and Libya.
And, as we speak, the Nation of Jordan, an important strategic
ally of ours, still lacks appropriate financial defenses,
despite reports that their financial system is being used to
finance the insurgency, and despite the Arab Bank scandal,
which revealed glaring weaknesses in the Jordanian-controlled
bank. Our efforts to compel better cooperation in securing the
international financial system rely on a strong and unified
approach from the Federal agencies which share the
responsibility on this issue. Unfortunately, we find that this
cooperation is often lacking.
This committee has seen it firsthand. For example, the
State Department testified before the International Relations
Committee in 2004 that Saudi Arabia had established a Financial
Intelligence Unit. Later that same year, Treasury Department
officials testified before this committee on more than one
occasion that the Saudis had not yet established an FIU. I went
to Riyadh last year and found out that the Treasury Department
was correct. While the Saudis have made substantial progress in
the last year towards establishing an FIU, the point remains
that Treasury and State were not on the same page regarding an
important anti-terror financing tool in a critically important
country.
The question is, what does this say about the broader
efforts? The GAO has presented us with another troubling
example with a detailed report requested by Senators Grassley,
Collins, and Durbin, on interagency cooperation in assisting
other countries in counter-terror cooperation. This report
concluded that better cooperation was needed between State,
Treasury, and other agencies in developing priorities
delivering aid and assessing results. In particular, the GAO
report found that State and Treasury disagreed about who the
lead agency is in technical assistance to foreign countries.
The U.S. Government does not yet have a system of measuring the
effectiveness of aid delivered. The Treasury Department lacked
the ability to provide an accurate account of terrorist funds
frozen. Unfortunately, these conclusions are not as surprising
as they should be. And we have to do more now to unify the
Government's efforts.
I have sponsored legislation with Mrs. Maloney that would
provide an objective assessment measure on technical
assistance. The Treasury-led certification regime on money
laundering and terrorism financing in H.R. 3505 would allow
each nation to be graded on how well it is doing. The fat of
process is no longer an adequate measure or else State and
Treasury would only be working with two countries and not a
dozen. This legislation passed the House by a vote of 415 to 2,
and it is now under consideration in the Senate. Without some
public measure of effectiveness, America's businesses,
investors, and taxpayers will never know if our efforts are
adequate or not. A fragmented approach sends the wrong message
to other nations whose cooperation we are seeking.
What I am hopeful to hear today are answers from these
agencies that will help us heal the fractures that I feel are
undermining the fight against terror financing.
Thank you very much for being here, and I turn now to Mr.
Gutierrez.
Mr. Gutierrez. Good morning, a special good morning to you,
Chairwoman Kelly. I want to thank you very much for calling
this hearing. At the February 15th hearing, a number of us
asked OFAC director Warner about the GAO report, and I am
pleased that we will have an entire hearing devoted to the
subject today. I am particularly pleased to welcome the
Honorable David M. Walker, Comptroller General of the GAO. Ms.
Kelly and I have been keeping your staff busy with other GAO
reports, and I must commend them on their excellent work. I am
also pleased that we are joined by representatives of State,
Treasury, and Justice here today.
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. Therefore, I am very interested in learning what steps
have been taken in the face of that report to improve the
working relationship between the agencies and how the roles,
responsibilities, and procedures are defined when the agencies
work together on designations and blocking assets. I am also
very interested to learn why the agencies have ignored most of
the GAO's fine recommendations regarding the development of a
strategic plan and a Memorandum of Understanding between the
agencies.
Finally, there was a point mentioned in the GAO report,
which several of my colleagues noted back in February. The GAO
recommended that Treasury provide more complete information on
the nature and extent of asset blocking in its Annual
Terrorists' Assets Report to Congress. I was shocked to see
that Treasury's reply to this recommendation was that the
Agency objected, and instead wanted the GAO to recommend
discontinuing these reports. As a Member of Congress,
particularly a member of this Oversight Subcommittee, I want
this information. I understand that we should receive the next
one this month. I think we need an accurate way to measure your
effectiveness. If these snapshots do not provide us with that
ability, please helps us figure out how to assess your
performance and include additional information to place the
numbers in context.
I want to thank you very much, and I look forward to your
testimony, Mr. Walker.
Chairwoman Kelly. Thank you. Mr. Lynch.
Mr. Lynch. Thank you, Madam Chairwoman. I want to thank
you, as well as the ranking member, for your great work on
this. I also want to thank the members of the panels that we
have today for helping Congress in this important work. This is
probably one of the most important hearings that our
subcommittee could be focusing on right now. There has been, I
think, considerable progress made up to this point, but having
spent--I just returned from my fourth trip to Iraq and also
visiting Afghanistan, having been in Amman, Jordan and Ramallah
on the West Bank, there is a lot of work that remains to be
done. I want to just acknowledge the work that has been done
thus far.
One of the interesting conversations I had with a couple of
our generals in east Fallujah about a month ago, I asked our
generals and a couple of the colonels there, I said, ``How much
of the foreign-based insurgency is attributable to foreign
fighters, how much of the insurgency is attributable to foreign
activity, foreign financed, foreign equipped, foreign
fighters?'' And they estimated that it was probably about 30
percent; 25 to 30 percent is foreign-sponsored of the
insurgency in Iraq. And I said, ``How much of this would go
away if we were able to cut off the financing? How much of this
insurgency would stop if we were able to scale down the
insurgency and the United States were able to eventually
withdraw?'' And their estimation was that all of it, or nearly
all of it, would go away.
So sometimes we think about the work on anti-terrorist
financing as being a latent threat, that people are out there
plotting against us and that they may, at some point, take
action. I just want to report for this committee's benefit that
the threat is active and the threat is ongoing, and that the
work that we do here on this committee and that is being done
by the Agencies present here today, has very real results on
the ground in Iraq and Afghanistan and elsewhere in the world.
I do want to say that along with some of the successes we
have had there are some frustrations. And I have read the GAO
report, and I know that it hallmarks certain areas. But one is
the seemingly--well, it seems like turf battles between various
agencies involved, and that is discouraging because of the work
we need to do, and also some resistance by foreign governments
in Amman, in Syria, and some of the lack of counter-terrorist
measures in places like Ramallah, where the financing situation
there is basically without any reliable controls.
I guess what I would want to say is that we are looking for
ways to help as Members of Congress, and this is not a Democrat
versus Republican thing, this is for the benefit of our troops
and of our Nation, as well as our international partners,
against terrorism. And this is sort of where the rubber meets
the road. And so we need to know from all of the witnesses
today what we can do to help you do your job and where would
Congress' best efforts lie in terms of producing the greatest
benefit in this war on terrorism and on terrorism financing. I
look forward to the responses of both our panels, and again I
want to thank Madam Chairwoman and Ranking Member Gutierrez for
their great work on this.
I yield back.
Chairwoman Kelly. Thank you, Mr. Lynch. Mr. Scott?
Mr. Scott. Thank you very much, Madam Chairwoman. And,
again, I want to just thank you, as the chairwoman of our
subcommittee, and Ranking Member Gutierrez, for convening
another hearing. This is an extraordinarily important hearing.
And as we look out at this country, each generation has had to
rise to the occasion to meet its great challenges. In the
revolutionary period, there was a Revolutionary War, and the
Civil War, and they all rose to their occasions, all the way
down through World War I and II, the Depression, each
generation faced theirs. Well, this war on terror is this
generation's moment of challenge to maintain the greatness of
this country and the civility of the world. With that, however,
it is very, very disheartening, and quite frankly, very scary
to read about the turf battles among the various Departments
and Agencies involved with the Terrorist Financing Working
Group, TFWG. President Bush's Administration is constantly
defending itself from charges of an inability to coordinate
efforts and respond to unique challenges, whether they be
intelligence failures before and after September 11th, or
Katrina preparation and response, and most recently we caught
another glimpse of the Administration's coordination
shortcomings, the shocking events surrounding the Dubai ports
deal.
The United Arab Emirates' connection to terrorist financing
seems to have been ignored in the approval of the sale of P&O
and the WF Ports world deal. Members of Congress, ourselves,
and even the President of the United States himself, did not
find out about the deal until it appeared on every front page
of every newspaper in this country and was the leading story in
every newscast on television and radio in this country.
The GAO report offers specific examples of childish
squabbles among the members of the body whose job it is to
identify countries vulnerable to terrorist financing. The GAO
report offers us both a potential partial explanation as to why
this deal was allowed to go through, but it also is very
important to treat this report as yet another opportunity for
us to improve upon the Bush Administration's, and the entire
Federal Government's, prosecution of the war against
fundamental terrorism. We have so much work to do. This is a
new ball game for us. We must rise to this occasion. The future
of our country, future generations, are depending upon us.
So I look forward to this hearing. I look forward to the
recommendations of the GAO for fixing some of the TFWG's
problems and how the Departments of State, Treasury, and
Justice plan to address them. I am very hopeful that our
witness will impress upon their bosses, Secretary Rice,
Secretary Snow, Attorney General Gonzales, that this
committee's desire is to see that the TFAG's coordination is
improved. This Nation's future is very much in your hands, and
certainly in our hands as Congress, and the Nation is very much
tuned into this. They are watching. They are looking. Quite
frankly, they are hoping. And they are praying that we get it
right.
Thank you, Madam Chairwoman.
Chairwoman Kelly. Thank you, Mr. Scott. Mr. Walker, we
welcome you. We have our first panel here, the Honorable David
M. Walker. He is the Comptroller General of the GAO. David
Walker became the seventh Comptroller General of the United
States and began his 15 year term when he took his oath of
office on November 9, 1998. As Comptroller General, Mr. Walker
is the Nation's chief accountability officer and head of the
U.S. Government Accountability Office. That is a Legislative
Branch Agency that was founded in 1921. The mission of the GAO
is to help improve the performance and assure the
accountability of the Federal Government for the benefit of the
American people.
And, as you have heard here this morning from the
statements, Mr. Walker, that is the purpose of this hearing. We
are concerned that we do, as Mr. Scott, my colleague said, that
we do get this right. We appreciate that you are able to find
time to be here this morning, and we look forward to your
testimony.
I have already described the function of the lights. You
know how they work. And please proceed.
STATEMENT OF THE HONORABLE DAVID M. WALKER, COMPTROLLER GENERAL
OF THE UNITED STATES, GOVERNMENT ACCOUNTABILITY OFFICE
Mr. Walker. Madam Chairwoman and members of the
subcommittee, it is a pleasure to be before you. I am glad I
was able to work out the time to come, I think this is a very
important topic.
I would like to address some of our recent work dealing
with counter-terrorism financing efforts, primarily based upon
the GAO report that was issued in October of 2005. I would also
like to recognize for the record your work, Madam Chairwoman,
and the work of this subcommittee in providing leadership in
this area, which is very much appreciated and very important.
As you have said on many occasions, Madam Chairwoman,
disrupting terrorist financing can raise terrorists' cost and
risks of gathering and moving assets and is necessary to impede
their ability to carry out significant operations.
In October of 2005, GAO issued a report on the United
States' efforts to counter terrorist financing abroad. We noted
that the United States plays an active and ongoing role in
building international support for measures to combat terrorist
financing. For example, the U.S. Government has participated in
efforts to develop and implement international standards to
combat terrorist financing, sometimes leading these efforts.
The United States also conducts various intelligence and law
enforcement activities designed to identify and disrupt the
flow of terrorist financing abroad. These activities include,
among other things, gathering intelligence and sharing
information with other countries.
Further, the United States provides training and technical
assistance to help countries that are vulnerable to terrorist
financing activities and to help them establish effective
counter-terrorism-financing regimes.
In addition, the United States has participated in global
efforts to publicly designate individuals and groups as
terrorists and to block their access to assets.
As our October 2005 report showed, much has been
accomplished by the combined efforts of these agencies.
However, our report also noted that various challenges exist
that could serve to negatively impact our effectiveness, as
well as Congress' ability to perform its own oversight,
appropriations, and other activities.
I might note, as is contained in my written statement,
which you have kindly put into the record, that GAO is not only
involved in doing our traditional oversight, insight, and
foresight work in this area, but we also are involved as part
of the international auditor community. We are head of
strategic planning for auditors general around the world and on
the board of directors of the International Organization of
Supreme Audit Institutions, which is comprised of 186
countries, and has a task force focusing on what auditors
general can do to help in this area. And let me say for the
record, including to the agencies that are here, we can help,
we are willing to help to the extent that they deem it possible
and appropriate, obviously without compromising our
independence.
Although the U.S. Government provides a range of training
and technical assistance to countries it deems vulnerable to
terrorist financing, it does not have a strategic and
integrated plan to coordinate the delivery of this assistance.
We found that interagency efforts lack three basic elements
that we believe are critical to effective execution of
operations within and across agencies. First, there needs to be
key stakeholder acceptance of the various roles and
responsibilities and procedures that will be used. Secondly,
there needs to be strategic alignment of resources, which are
limited to meet essential needs. And, thirdly, there needs to
be a performance measurement process in order to assess the
effectiveness of activities that are being engaged in.
In our October 2005 report, we recommended that the
Secretaries of State and the Treasury, in consultation with the
National Security Council and other Government agencies,
implement an integrated strategic plan and sign a Memorandum of
Agreement or Memorandum of Understanding to improve
coordination of counter-terrorism-financing training and
technical assistance. In their March 2006 letters to the
Congress regarding their responses to our recommendations,
State and Treasury describe, in general, certain steps that
they are taking to improve the interagency process. For
example, working with one another and with the Terrorist
Finance Working Group (TFWG) members, to review and revise
related procedures and to try to obtain better acceptance.
However, the letters do not provide any information regarding
steps to systematically assess and align U.S. resources with
country needs or to measure the results of the training and
technical assistance, and they did not address our
recommendation for the need for a Memorandum of Agreement.
U.S. agencies have accomplished much in their efforts to
combat terrorism-financing abroad. Despite the difficulties of
interagency coordination, TFWG has delivered counter-terrorism-
financing training and technical assistance to numerous
vulnerable countries and as designated and blocked significant
amounts of terrorist assets. However, without a strategic and
integrated plan for coordinating the funding and delivery of
training and technical assistance by agencies, the U.S.
Government cannot maximize the use of its resources in the
fight against terrorist financing. Interagency disputes over
State Department-led TFWG roles and procedures have hampered
TFWG leadership and, unfortunately in some cases, wasted
valuable staff time and talent.
Furthermore, the U.S. Government's, including TFWG's,
failure to integrate all available U.S. and international
resources may result in missed opportunities to leverage
resources to maximize value and mitigate risk.
Finally, without a functional performance measurement
system, TFWG lacks the information needed for optimal planning
and coordination, and Congress lacks the information that it
needs to conduct effective oversight.
Finally, with regard to the Congress. In view of
Congressional interest in U.S. Government efforts to deliver
training and technical assistance abroad to combat terrorist-
financing and the difficulty of obtaining a systematic
assessment of U.S. resources dedicated to this endeavor, as
stated in our report, we would respectfully suggest that
Congress should consider requiring the Secretary of State and
the Secretary of the Treasury to submit a meaningful annual
report to the Congress, showing the status of interagency
efforts to develop and implement an integrated strategic plan
and to ensure that a Memorandum of Agreement is entered into to
assure the effective activities of TFWG and its related
responsibilities.
Madam Chairwoman, this concludes my opening statement, and
I would be more than happy to answer any questions that you or
Ranking Member Gutierrez or any other members may have.
[The prepared statement of Mr. Walker can be found on page
84 of the appendix.]
Chairwoman Kelly. Thank you very much, Mr. Walker. We
really appreciate your work on this, the work of your Agency,
and the sincere effort to try to make sure that this becomes a
reality sooner rather than later in terms of cooperation.
I would like to ask a couple of questions, we asked you to
report on the status of interagency efforts and I am very
interested in how Treasury works as a single Agency, in
particular the relationship between the international affairs
and the TFI stove pipes. Can you explain to the committee what
coordination, if any, you saw between these two branches of the
Treasury?
Mr. Walker. Yes, there is detailed information contained in
the report.
Chairwoman Kelly. Mr. Walker, do you want to identify this
gentleman and have him come sit at the table?
Mr. Walker. If you wouldn't mind, Madam Chairwoman, he is
involved in the details.
Chairwoman Kelly. No, we would be very happy to have him.
Mr. Walker. This is Loren Yager, who is one of our
executives in the international affairs and trade area.
Mr. Yager. Thank you, Madam Chairwoman. We looked at a
number of the efforts in the specific field of terrorist
financing training and, as we detail in the report, we found a
number of activities that were ongoing, some were very
successful and some indicated that there were disagreements
between the agencies that frankly had not been resolved and
these difficulties had persisted for some years in the time
before the publication of our report. So I think it is
certainly a mixed picture, as the Comptroller General has
indicated. There were examples of successful coordination but
there were other cases where the disagreements persisted for
many years and, as you indicated, could have had an effect on
the effectiveness of U.S. efforts, as well as the ability to
take advantage of opportunities and needs outside of the United
States.
Chairwoman Kelly. Can you give me any specific information
about the TFI and the international affairs stove pipes?
Mr. Yager. Well, our report, one of the things we tried to
focus on in the report, and I think is part of our advantage,
is the ability to look at the agencies who work together, not
just within Treasury but also between Treasury, State, and
Justice. And I think those were the areas where we found the
most significant disagreements, that the procedures that
Treasury has in place, when it delivers training and technical
assistance, differed from those of what State likes to do. And
so we found that some of those disagreements, certainly there
were longstanding efforts to put this training in place, but at
the same time when brought together through the TFWG, we found
that they just were unable to resolve those differences, and it
did affect their ability to deliver the training in vulnerable
countries.
Chairwoman Kelly. Thank you very much. Mr. Walker, you
mentioned the important role that FATF plays in the terrorist
financing technical assistance role, but the NCCT list is now
down to two nations and never was higher than 19 members. Given
the limited nature of the NCCT list, do you see the need for
other public benchmark measures of terror financing
effectiveness?
Mr. Walker. As you mentioned before, Madam Chairwoman, I
think FATF is focused on this issue and they have done some
good work. At the same point in time, with their list now being
reduced down to two, there is little question that I think we
believe, and I am sure you will find that the other witnesses
will state on the second panel, that the United States is
concerned with well more than two countries. Therefore we
should not just be focused on the list that FATF has.
Chairwoman Kelly. Thank you. I want to go to one more
question about the lead agency role of the TFWG. It is not
really spelled out in legislation. My question is whether or
not you think we need legislation to clarify the roles and what
other legislation you think might be necessary besides the
annual report on the proposed MOA?
Mr. Walker. We think it may be appropriate that there be
legislation with regard to the annual report; legislation that
would also require some type of clarity and a Memorandum of
Agreement or Understanding between these parties, as I
mentioned before. One would hope that you would not have to
enact legislation to make that happen. But in the absence of
the discretionary action by the Executive Branch, should the
Congress so desire, that may be necessary.
I think it is important to think about what leadership
means. You need to have a lead to try to help facilitate the
development of a strategic and integrated plan that can be used
for entities within Departments, as well as between
Departments. That is critically important. But beyond that, and
beyond overseeing and being aware of what all is going on,
leadership in this regard may be more facilitation rather than
control. This is one of the issues that has to be addressed as
well. So you need to have a lead for development of a plan, for
overseeing the execution of that plan, and you need to have a
lead who is facilitating things getting done rather than
controlling what is getting done. Sometimes people don't
understand the difference between those functions.
Chairwoman Kelly. Well, I would hope that we might be able
to work this out without legislation, but if legislation is
needed, I am certainly sure that Mr. Gutierrez and I, as well
as others on this subcommittee, and on the full Financial
Services Committee, will be taking a look at that. And I very
much appreciate the testimony that you have given. We turn now
to Mr. Gutierrez.
Mr. Gutierrez. Thank you. Comptroller Walker, in your
testimony you explained that the State Department's Office of
the Coordinator for Counter-Terrorism is ``charged with
directing, managing, and coordinating all U.S. agency efforts
to develop and provide counter-terrorism financing programs,
including, but not limited to, those in priority countries.''
However, the Treasury Department responded to questions from
Ranking Member Frank that Treasury believes that the State
Department has the lead role only in coordinating these
efforts, not in managing or directing, but coordinating. Can
you explain the discrepancy?
Mr. Walker. Ranking Member Gutierrez, that is directly the
point that I am making. Without there being any clarification
of what leadership means, it means different things to
different people based on what they would like it to mean. My
view is what needs to be clarified is that you need to have a
lead for developing that strategic and integrated plan. You
need to have a lead who has overall responsibility for
monitoring what is going on, for collecting that information,
and for providing the periodic reporting to the Congress. At
the same point in time, that lead is not necessarily someone
who has to direct others. They need to try to provide
reasonable assurance that people are meeting their part of the
deal on the Memorandum of Agreement or Memorandum of
Understanding. I would, however, respectfully suggest that in
this area you want that lead to be a facilitator. We have a
number of players on the field here. They all have significant
capabilities. They all can make a difference and are making a
difference, and I think part of the problem may be merely when
you say ``direct,'' that means that we are going to do it
slower, and time is essential in this type of business. I do
not know if we need somebody to direct; we need somebody to
coordinate and facilitate.
Mr. Gutierrez. Forgive the redundancy of the question--I
think, Madam Chairwoman, that this is where a lot of our
efforts might have to be focused in terms of our conversations
and dialogue with the different agencies in terms of those
verbs--directing, managing, and coordinating, just who is in
charge of what and what that really means and what the
implications of those things are because then we get people
coming, as the State Department did come and say, we do not
direct, we do not manage, we coordinate. And then sometimes I
think to myself, well, if you coordinate, maybe you do manage.
Maybe we should flesh out some of those directives so that
everybody knows exactly what is expected of them and that you
could have better coordination, to be redundant once again with
the word.
Comptroller Walker, the GAO made almost 2,000
recommendations last year. I know that most of your
recommendations are taken very seriously and many agencies act
quickly upon your suggestions. In your experience, where would
you rank this audit in terms of compliance with your
recommendations?
Mr. Walker. First, one of our key performance measures in
our Annual Performance and Accountability Report to the
Congress and the American people is what percentage of our
recommendations that we made 4 years ago have been adopted. And
we monitor them in the interim. But we figure if people do not
do it within 4 years, they are probably not going to do it.
Last year, 85 percent of the recommendations that we made 4
years ago had been adopted within that 4-year period, some
quicker than others. That is an all time record.
I would say based upon the letter responses that we have
seen, they are partially adopting our recommendations but not
fully adopting our recommendations. As I mentioned before, we
do not see anything about a Memorandum of Agreement or
Memorandum of Understanding. We have not seen an express
commitment that there will be a strategic and integrated plan,
and I am not sure if they are going to be able to reach
agreement on what the role of the lead person or agency is or
not. You can ask them. Therefore, I would say a partial
adoption but not full adoption. In addition, a couple of our
specific recommendations were not directly addressed and
responded to.
Mr. Gutierrez. Okay, thank you very much, Comptroller. I
was going to ask those two questions, Madam Chairwoman, because
I think they both go to the heart of what I know is your
priority, and my priority, and the priority of the members of
this subcommittee, in terms of helping to coordinate the
efforts and giving the agencies everything they need, but at
the same time helping.
Thank you very much, Comptroller Walker, for your answers
and to our staff for all the wonderful work they have done.
Thank you.
Mr. Walker. Thank you. We have a great staff.
Chairwoman Kelly. Yes, you do. Mr. Lynch?
Mr. Lynch. Thank you, Madam Chairwoman. Mr. Walker, in the
GAO report that we have, in one of the sections that is
particularly disturbing it says that, ``In May of 2005, the
State Department denied a Treasury official entry into a
priority country to help set up an FIU, a Financial
Intelligence Unit, at the Central Bank's minister's request.
State officials told us because the country had been designated
as a priority country after Treasury began preliminary work
there, State wanted to conduct a TFWG assessment before
allowing Treasury to continue its work. At the U.S. Embassy's
request, State delayed the assessment and Treasury's work
proceeded but the Treasury official's entry into the country
was delayed several months.''
That gives me a reason for grave concern about the
cooperation and what is going on with these turf wars. What the
heck is going on here if the State Department is not allowing
Treasury to go into a certain country, and where we all know,
Madam Chairwoman, that these FIU's are extremely important to
have them established. Until we have them up and running and
there is some cooperation within these governments, these
fallen governments, they are tough enough to get anyway. It
just frustrates me greatly that even though we had an agreement
from the host agreement, the priority country, to set up an
FIU, the State Department is blocking Treasury from going in
and setting it up? I guess I have higher expectations of both
Treasury and State in this matter. I am going to ask these
folks when they come up what is going on here but I would like
to have your impression as well?
Mr. Walker. We did provide at least one example of where,
because of the lack of understanding between the agencies
regarding their respective roles and responsibilities and what
it meant to be the lead, there was at least one occasion where
assistance was not provided in a timely manner. Now, I am sure
there are many other occasions where they did not have a
problem, but there have been some where there has been a
problem. I think it comes back to what we said before, what
does it mean to be the lead? What is the understanding as to
the different roles and responsibilities of these
organizations? What are the agreed upon rules of procedure that
they are going to operate under and as long as they operate
under those procedures, you FYI somebody as to what you are
doing. You do not get approval for what you are doing. After
you have the strategic and integrated plan, after you have the
Memorandum of Understanding or Agreement with those rules of
engagement or rules of procedure, then how can you facilitate,
not control, how can you facilitate people being able to get
things done quicker? So it goes back to our recommendations,
and I would respectfully suggest, Mr. Lynch, that you may want
to ask the directly responsible parties about this matter and
how pervasive this may or may not be.
Mr. Lynch. Thank you. Madam Chairwoman, I expect that type
of difficulty and that type of resistance in dealing with a
foreign country but it is unacceptable when it is our side. It
is the U.S. Government, just different Departments of our
Government having that type of difficulty. It really compounds
the problem greatly.
Mr. Walker. Candidly, as we all know, when you have a large
organization, and the U.S. Government is a very large and
complex organization, that has a number of different
Departments and agencies and layers and players, this is not
the only area in which we have had difficulty in coordinating.
At the same time, when you are dealing with safety and
security, which is the most fundamental, in Maslow's hierarchy
of needs, it is the foundation that is the most important thing
that everybody is concerned with, we need to find a way to be
able to combat bureaucracy and get things done quicker.
Mr. Lynch. Mr. Walker, in the last segment of your report,
you talked about the lack of a measurement tool with regard to
performance. And you mentioned that back in July of 2005, that
the database and the software that had been recommended had not
been implemented at that point. Has it since been adopted?
Mr. Walker. Mr. Yager tells me that it has been promised
but not delivered based upon the latest information that we
have.
Mr. Lynch. Okay, I think the Justice Department had a
database that they recommended for measuring progress. Can I
ask you is it functional or are we still talking?
Mr. Walker. If you do not mind, Mr. Yager can.
Mr. Lynch. Yes, I am fine with that. I am sorry, sir, what
is your name again?
Mr. Yager. My name is Loren Yager. I am a Director in GAO's
International Affairs and Trade Group.
Mr. Lynch. Okay, thanks for coming, thanks for your help.
Mr. Yager. Thanks for your question. The issue that we
raised, really there were two parts to your question, the first
had to do with the performance indicators of OFAC and we did
take a look to see whether those were in place and we asked
numerous times before this hearing to try to find additional
information regarding the status of that plan and their
development of additional indicators. We have not received any
indication that they do have a detailed plan worked out which
would provide the kind of oversight that the Comptroller
General has mentioned, the kind of indicators that demonstrate
progress, and, frankly, to help resolve some of the disputes
that may have been going on.
Mr. Lynch. Okay, and last question, have they given you
sort of a score card, State and Treasury, TFWG, or a country-
by-country analysis of where we are in terms of our progress in
either getting an FIU up and running or getting cooperation
from the host government?
Mr. Walker. We do not have that. It is something they may
have but we do not.
Mr. Lynch. Okay.
Chairwoman Kelly. Thank you, Mr. Lynch.
Mr. Lynch. Thank you, Madam Chairwoman. I yield back.
Chairwoman Kelly. Mr. Scott.
Mr. Scott. Thank you very much, Madam Chairwoman. Mr.
Walker, again thanks for appearing before the committee. As I
mentioned earlier in my opening remarks, there is just so much
at stake here. Every time an American gets on an airplane, goes
into a mass meeting, or even comes out of his home now, there
is a certain amount of fear. We have to show the American
people that they are safe, and we are not doing that. And it is
just ironic that the major reason is that apparently folks in
the State Department think it is about them or folks in the
Justice Department think it is about them. I want to ask you,
first of all, about the report. In your testimony, your key
recommendation, as I understand it, is that Congress require
State and Treasury to submit an annual report to Congress
showing how these Agencies have developed and implemented a
strategic plan and a Memorandum of Agreement or Understanding.
Take me through each of the Agencies and tell me why they are
fighting you on this. Go ahead on that first point.
Mr. Walker. First, I do not know if they are fighting us.
The issue is, is it for the Executive Branch, and as you know,
we are in the Legislative Branch. The Executive Branch needs to
have a strategic and integrated plan to clarify what leadership
means, who is responsible for what. One that has some metrics
to be able to assess how you are doing and to be able to use
that information as a basis for the annual report to the
Congress. Information that we would be able to also take a look
at and provide information for your benefit. So I think the key
is you might ask them why they did not specifically address our
recommendation on having a strategic and integrated plan, on
executing a Memorandum of Agreement or Memorandum of
Understanding, and other issues that were not directly
addressed in their letter. I do not want to respond for them.
They are in a better position to say why they did not respond.
Mr. Scott. Well, we will get to them but right now we only
have you, so I have to ask you these questions because it is
apparent that the problem is a lack of coordination or a lack
of cooperation in terms of your recommendations with Justice
and with the Treasury Department. Now, just according to your
report, much of the dispute seems to be coming from the
Departments of State and Treasury. Can I get a yes or no from
you on that?
Mr. Walker. That is correct. State is designated as the
lead. There is a difference of opinion between State and
Treasury as to what that means. And some of the challenges that
we have seen, including the one that Mr. Lynch mentioned, had
to do with a difference of opinion between State and Treasury.
Mr. Scott. Over turf, would you say that is the dispute?
Mr. Walker. Over what the State Department's role and
responsibilities are as being lead in this area, as to whether
or not they are supposed to coordinate and facilitate or
whether or not they are supposed to control and direct.
Mr. Scott. Okay, very good. Now, how would you categorize
the Justice Department's participation?
Mr. Walker. I would ask Mr. Yager to comment on that.
Mr. Scott. Yes.
Mr. Yager. We directed our recommendation to the State
Department and to the Department of the Treasury primarily
because those are the two Agencies that have funding to perform
the training and technical assistance. Justice does perform
some training and technical assistance abroad, but they do that
through the funds that are provided by one of those two other
agencies. So in our recommendation we included this, and we
directed it primarily at State and Treasury because they have
the funding. We certainly believe that other agencies, like
Justice in addition with the support of the NSC, should be
involved in developing that plan. But because those were the
two agencies with funding, we thought it was appropriate to
direct our recommendation to them.
Mr. Scott. Okay, now, let me ask you this about the
interagency Terrorist Financing Working Group, just give me a
brief explanation of that group, what it is composed of and
what its mission is as you understand it?
Mr. Walker. First, we have a board that we can put up that
shows you the composition of that group. And, Mr. Yager, if you
could explain that board.
[Chart]
Mr. Yager. This is a group, as you can see from the board,
that contains a large number of members from within the key
agencies. Given the importance of tracking and trying to combat
and prevent financing from going to terrorists, the TFWG was
created in order to bring all the groups together that have
some role. The State Department chairs that TFWG through two of
its sub-units. Of course, there are members of that group from
Justice, from Treasury, as well as other Departments around.
This is the attempt by the U.S. Government to get the right
people into the room to talk about how progress can be made,
not just on training but on a variety of other issues related
to terrorist financing.
Chairwoman Kelly. Excuse me, but I would like to just
simply point out that there is a copy of that chart in your
packet in front of you. So if you cannot see the board, at
least you can get it in paper in your hand and get it up close
so you can read it.
Mr. Scott. Thank you.
Mr. Walker. It is also in our testimony. If I can, Mr.
Scott, let me come back at your first question. With regard to
our recommendations for an integrated and strategic plan, with
regard to our recommendations to clarify roles and
responsibilities through a MOA and rules of procedure, and with
regard to having metrics to measure how you are doing, I would
say that is Management 101. If you want to maximize value and
mitigate risks, by the way in this area there will never be
zero risk, we will never be 100 percent safe, that is
impossible. But what we need to do is target the resources and
authorities that we have, which comes back to the thrust of our
recommendation. Frankly, it applies in virtually every area of
Government, it is even more critical when you are dealing with
safety and security.
Mr. Scott. Thank you very much.
Chairwoman Kelly. Thank you, Mr. Scott. Mr. Cleaver.
Mr. Cleaver. Thank you, Madam Chairwoman. At the last
meeting, Ranking Member Barney Frank had asked for some
information that was promised to the committee. Has that been
forwarded?
Mr. Walker. I was not here, so I will ask Mr. Yager.
Mr. Yager. We did take a look at the hearing record and the
discussion; we did not get a copy of the answers that might
have been provided by the Agencies. So our most recent
information that we worked off for the statement were the
responses to our recommendations that were provided. We call
them the 60-day letters. They were provided to the Chair of the
appropriations committees, as well as the oversight committees.
And that is the most recent information that we are working off
of.
Mr. Walker. Stated differently, as you know, statutorily
the Agencies are required by law to respond within 60 days
whether, and to what extent, they are going to adopt our
recommendations. If Mr. Frank has additional information that
has been provided by the Departments and Agencies, we have not
been provided that. But if he does provide that to us, we would
be happy to take a look at it.
Mr. Cleaver. All right, I will pass that along to him. I
did not know if he had been here, I came in late. But my number
one question and concern is, as you know, we just raised the
debt ceiling--well, not ``we,'' I voted against it, but we are
headed toward $9 trillion. We are borrowing money as if we can
actually get out of debt by borrowing. And we do not seem to
understand what you do not owe will not hurt you. But where we
are now is we are borrowing a lot of money from a lot of
different places. Some money we are borrowing--the top three,
Japan, China, and the UK, that is 40 percent of our debt, which
is owned by foreign republics. Two-thirds of that is with China
and Japan. But we also owe OPEC almost $20 billion. Is it
possible that we are inadvertently financing terrorists because
of the debt we are wallowing in and continuing to go to foreign
countries to pay for the operation of the U.S. Government?
Mr. Walker. I do not think that we are inadvertently
funding terrorists. I will say this, this country has three
major financial deficits. We have a budget deficit. Last year,
$760 billion on an accrual basis, a 35 percent negative bottom
line, the worst in the history of the United States.
Mr. Cleaver. $435 in this budget coming up, but go ahead.
Mr. Walker. Well, that is on a cash basis. On an accrual
basis, it is much worse than on a cash basis. Secondly, we have
a balance of payments deficit, which includes a trade deficit.
And now the percentage of our debt held by the public--that is
held by foreign players is up to about 50 percent. Over 90
percent of the new debt that we have issued within the last
several years has been purchased by foreign players, which
means that we are increasingly turning over part of our
mortgage to foreign players who may or may not share the same
economic, foreign policy, and national security interests as
the United States. And one of the reasons we have done that is
because of our third deficit, we have a savings deficit. The
United States is great at spending and poor at saving. Last
year for the first time since 1933, the depth of the
Depression, Americans spent more money than they earned. We had
a negative personal savings rate and the U.S. Government did
too. So we are on an imprudent and unsustainable fiscal path. I
would respectfully suggest the biggest threat to the future of
the United States is our fiscal irresponsibility.
Mr. Cleaver. That is exactly where I am going. Americans,
if they understood this, would tremble at what we are laying
out for our children and our grandchildren. And Asian markets
are holding enough U.S. Treasury notes or U.S. assets, they
could buy a controlling interest in almost every company being
traded on Wall Street. And we cannot fight terrorism and ignore
the debt and the fact--Asians have a 20 percent savings rate,
ours is zero, negative zero. I think this is chilling.
Mr. Walker. The last thing that I would say on this is it
is pretty simple, the more of our debt that is held by foreign
players, the less leverage we have on those foreign players,
and the more leverage they have on us. It is that simple.
Chairwoman Kelly. Mr. Walker, just because the issue of the
debt was brought up, do you have the percent of U.S. debt with
regard to the GDP, the U.S. GDP? Isn't that around 32-, 35
percent?
Mr. Walker. That is only for debt held by the public. If
you add up debt held by the trust funds, which are Social
Security and Medicare, which we have already spent that money
in other Government operating expenses, you can roughly double
the percentage of GDP. And so it depends upon whether you are
just talking about debt held by the public or total debt. If
you take the $8.1 trillion, we were at about $8.1 trillion, the
economy is what, $11 trillion to $12 trillion, the total debt
is about $8.1 trillion. And Congress just authorized taking it
up to about $9 trillion. By the way, I would respectfully
suggest that we need to raise the debt limit because otherwise
we will default. We have to get serious about the deficit and
we have not yet.
Chairwoman Kelly. Just out of curiosity, how does that
compare, how does the U.S. figure with GDP compare to a country
like Japan?
Mr. Walker. Japan has higher debt than we do. I would be
happy to provide for the record information on this from the
latest report that was issued by the Organization of Economic
Cooperation and Development, which were 30 major industrialized
nations, including the United States and Japan. I will provide
information for the record as to where debt as a percentage of
GDP stands.
Chairwoman Kelly. I think we are a little off target here.
It is just that it was brought up and it is an interesting way
that the figures seem to move around. It is hard to grab hold
of them. The last I heard the Japanese debt was 170 percent of
their GDP. So I think that it is very difficult to figure out
where all these things land. So any information you can give
us, we would be very grateful for. Mrs. Wasserman-Schultz.
Mrs. Wasserman-Schultz. Thank you, Madam Chairwoman. In the
background information that I have looked at, State does not
apparently agree with your recommendation to develop and
implement an integrated strategic plan. They say that a series
of NSC documents and State's Office of the Coordinator for
Counter Terrorism's Bureau Performance Plan served that
purpose. Could you describe for us how the documents that State
describes and their own internal office differ from what GAO
recommended and how what they are suggesting would work falls
short of this goal?
Mr. Walker. That plan does not clearly and unambiguously
lay out the relevant roles and responsibilities. That plan does
not have key metrics in order to be able to assess performance.
Those are two of the major elements that are not addressed in
that plan.
Mrs. Wasserman-Schultz. Thank you. And in page 9 of your
testimony, you mention that senior Treasury officials strongly
disagree with State's degree of control over TFWG decisions and
that State creates obstacles rather than coordinating efforts.
And that is a serious disagreement. How can we more clearly
define State's role?
Mr. Walker. My view is that if they cannot handle it
themselves, then the Congress can end up legislating in this
area, and you should be prepared to do that if the Executive
Branch cannot deal with it within a reasonable period of time.
I am hopeful that they can and I am hopeful that they will. But
the Legislative Branch has quite a bit of power under our
Constitution.
Mrs. Wasserman-Schultz. And, lastly, I guess I am still all
right on my time, I have also reviewed the dispute over the use
of contractors between the agencies. Treasury is working to
resolve its differences with State on the use and role of
contractors. The reason for the dispute is really
understandable. I can understand that using contractors rather
than direct employees would compromise confidentiality and that
it seems to warrant clarity. Can you talk about what procedures
we should be establishing for needs assessment and other
disagreements between the agencies that you outlined and how we
can resolve that because it seems like a really necessary
element to fix?
Mr. Walker. I will start, and I will ask Mr. Yager to
provide some more details. First, it is understandable that
reasonable people might disagree on whether and to what extent
you should use contractors for certain types of functions and
activities. I am a substance over form individual. Merely
because somebody is a contractor does not, per se, mean that it
is a problem. You have to look at who is that contractor? What
is the nature of the contractor? Is it a person who has the
requisite security clearances, who is a former employee of the
Treasury Department or the State Department or the Defense
Department or one of the intelligence agencies? That would be
substantively different obviously than if it is another type of
entity or individual who might not meet those criteria. So I
think it is something that needs clarity. It is something that
we ought to try to provide a reasonable degree of consistency
on, but I would respectfully suggest we need to have certain
principles or safeguards that we would operate rather than
saying yes or no you should or should not ever use contractors.
Loren?
Mr. Yager. Let me just make one brief addition. I think it
also suggests why performance measures are so important because
it is difficult to make these systematic decisions on the basis
of anecdotal information about either successes or failures in
the efforts to combat terrorist financing or provide that
training. So we think with a solid set of performance
indicators, it will be much easier for the Agency to work
together and say we have had success using these types of
contractors or others and here is our proof of that success. We
believe this is a type of effort, for example, that might go
forward. Without those performance measures, it becomes quite
difficult to make those decisions on a systematic basis.
Mrs. Wasserman-Schultz. Madam Chairwoman, as someone who
comes from a State that has widespread use of performance
measures with regular legislative oversight, I can completely
agree that is an effective means of ensuring that we have a
policy that is implemented effectively, and it also provides
clarity, so I would completely agree with you.
Thank you. I yield back the balance of my time.
Chairwoman Kelly. Thank you very much. Senator Grassley had
intended to come and testify before the committee today. His
schedule, unfortunately, was not able to permit him to be here
but with unanimous consent, I will insert Senator Grassley's
full statement in the record.
And, Mr. Walker, we thank you very much for your testimony
today. And with that, this panel is excused.
Mr. Walker. Thank you.
Chairwoman Kelly. While that panel is leaving, I would
appreciate it if the second panel would take their seats.
We welcome the second panel. And without objection, your
full statements will be made part of the record. Our first
speaker is William Larry McDonald, from the U.S. Treasury. He
is the Deputy Assistant Secretary for Technical Assistance
Policy. He oversees the program that provides assistance to
approximately 70 countries in Central and Eastern Europe, the
former Soviet Union, the Middle East, Africa, Asia, and Latin
America. We appreciate your being here today, Larry, and thank
you very much for being here.
Our second panelist is Mr. Gerald--I am going to pronounce
it wrong--Feierstein, I should guess that ``ei,'' Feierstein.
Mr. Feierstein here with the State Department in Washington. He
has previously served as the Desk Officer for Nepal, Pakistan,
and Egypt, as Deputy Director in the Office of Arabian
Peninsula Affairs, and Director of the Office of Pakistan and
Afghanistan and Bangladesh Affairs, and the Office of Regional
Affairs in the Near East Bureau.
Our third panelist is Mr. Barry Sabin from the Justice
Department. He presently serves as the acting Deputy Assistant
Attorney in the Criminal Division of the Justice Department in
Washington, D.C. Mr. Sabin started in that position in January
of 2006 and is responsible for overseeing the Counter Terrorism
Section, Fraud Section, Criminal Appellate Section, and Capital
Crimes Unit. We thank you very much, Mr. Sabin. We thank all
three of you for being here, and we look forward to your
testimony. And we will begin with you, Mr. McDonald.
STATEMENT OF WILLIAM LARRY MCDONALD, DEPUTY ASSISTANT
SECRETARY, TECHNICAL ASSISTANCE POLICY, U.S. DEPARTMENT OF THE
TREASURY
Mr. McDonald. Chairwoman Kelly, Ranking Member Gutierrez,
and members of the committee, I very much appreciate this
opportunity to speak to you today about the GAO's report on
U.S. efforts to deliver training and technical assistance
abroad to combat terrorist financing. I would also like to
express my appreciation for the leadership, commitment, and
support that you bring to combating terrorist financing.
In my written testimony for the record, I have given a
detailed description of the Treasury Department's technical
assistance program and Treasury's role in the interagency
process. I have also provided a number of examples of
Treasury's technical assistance that illustrate our track
record in this area over the last several years. In my oral
remarks, I will focus on the issues that you asked me to
address in your invitation letter.
First, I want to confirm at the outset that the Treasury
Department does accept the State Department's lead role in this
area. If I accomplish nothing else today, I hope to put this
one to bed. The State Department indeed has a mandate to lead
the interagency effort, to prioritize, and de-conflict capacity
building programs in the area of terrorist financing. Given its
broad foreign policy mandate, the State Department is well-
positioned institutionally to play this role.
And, if I may add, the interagency effort is well served by
the leadership and the right kind of leadership of my
colleague, Mr. Feierstein. He brings experience,
professionalism, and skill in weighing the many factors that
have to be considered in reaching difficult judgments on issues
that do not lend themselves to a simple or straightforward
calculation. He is a facilitator, and here I am referring back
to the remarks by the Comptroller of the GAO; he is a
facilitator. He is a consensus builder. He is not a control
freak. And the same goes for my other colleague on the panel,
Mr. Sabin. Since assuming my position as Deputy Assistant
Secretary in December of 2005, I have gotten to know Mr.
Feierstein, Mr. Sabin, and others involved in the interagency
process, and I could not be more pleased about our
collaboration.
Regarding the procedures and practices of the interagency
group, I would like to confirm that Treasury does accept them.
These procedures are essential to help ensure an orderly,
coordinated process in a complex area involving many
participants. At the time the GAO report was prepared, there
were Treasury officials who honestly felt that the procedures
and practices would benefit from greater flexibility in their
application--shock absorbers, if you will--to help us get over
the occasional bump in the road and improve our effectiveness.
I am pleased to tell you that a number of structural and
operational changes have indeed been made over the past several
months that have enhanced the effectiveness of the interagency
group and the interagency process more broadly.
First, the interagency group is now chaired at a more
senior level. I have already noted Mr. Feierstein's role in
that regard. Second, the procedures and practices of the
interagency group have been fine-tuned in a way that allows for
greater flexibility. In particular, I welcome the increased
openness to conducting so-called ``table top'' assessments of a
country's assistance needs here in Washington, rather than
conducting a full-blown in-country assessment. In certain
cases, where sufficient information is available, this option
provides flexibility that can expedite our work and marshall
scarce resources. Third, the reconstitution of the Training and
Assistance Sub-Group is a welcome enhancement of the
interagency process. It brings together agencies providing
technical assistance in all areas related to combating
terrorism and serves as a useful forum for addressing any
differences that cannot be resolved at the staff level.
Madam Chairwoman, the GAO report gave considerable
attention to the third party contractor issue, and I know that
this is a matter that interests the committee, so let me say a
bit about that. First, I would like to clarify that Treasury's
advisors work under personal services contracts, not third
party contracts, and are individually selected by Treasury
management. They become for a time Treasury Department hires
and are fully integrated members of Treasury's technical
assistance family. I believe that Treasury, Justice, State, and
other Agencies agree that such contractors can play an
important complementary role in the area we are discussing
today. Contractors with the requisite experience and expertise
can complement the limited number of U.S. Government officials
available to address the enormous need for technical
assistance, especially when long-term assistance rather than
short-term assistance is what is needed. The ability to deploy
expert long-term personal services contractors is one of the
special features and strengths of Treasury's program. I do not
mean to suggest by this that such contractors are a substitute
for U.S. Government officials in all matters. Contractors
cannot and do not provide assistance in certain areas that are
appropriately reserved to U.S. Government officials.
If I may, I would like to make one other observation about
the issue of contractors. The term ``contractors'' conjures a
number of different images, I think our colleague from the GAO
alluded to this. When I took this job, I learned that personal
services contractors make up the backbone of Treasury's
program. And I made it my business to meet with them, learn
about their backgrounds, and get to know them. What I have
learned about them has been more than reassuring, it has been
inspiring. Treasury's financial enforcement advisors consist
primarily of retired assistant United States attorneys and
agents from the FBI, former agents from the Criminal
Investigation Division of the Internal Revenue Service, former
regulators and examiners from the Federal Reserve, the FDIC and
the OCC, former agents of the U.S. Customs Service, the
Immigration and Naturalization Service, the Financial Crimes
Enforcement Network, and the Drug Enforcement Administration.
In the first days following the tragedy of 9/11, these
former officials came forth in droves asking simply, ``How can
I help?'' There are certain things they should not, and will
not do, but they can and do make a valuable and, I would argue,
indispensable, contribution. They are a source of intellectual
capital and greatly and flexibly strengthen our human resource
base. I assure you there is no finer, more qualified or
dedicated group of men and women. And their dedication is
producing results. The work of these advisors has resulted in
the removal of eight countries from FATF's blacklist of non-
cooperative countries and territories and the creation of
Financial Intelligence Units in a number of other countries.
Finally, Madam Chairwoman, my invitation letter asks that I
note any recommendations that Treasury may have based on the
GAO report. My recommendation, and this is a recommendation I
make to myself as much as anyone else, is to treat the GAO
report as a catalyst for self-scrutiny, to consider what has
worked well over the past several years and what needs
addressing, and to make any adjustments in light of that.
Madam Chairwoman, that process is well underway, and, I
think my co-panelists would agree, will continue. That
concludes my statement, and I will be happy to take any
questions at the appropriate time.
[The prepared statement of Mr. McDonald can be found on
page 60 of the appendix.]
Chairwoman Kelly. Thank you, Mr. McDonald.
Mr. Feierstein.
STATEMENT OF GERALD M. FEIERSTEIN, DEPUTY COORDINATOR FOR
PROGRAMS AND PLANS, OFFICE OF THE COORDINATOR FOR COUNTER
TERRORISM, U.S. DEPARTMENT OF STATE
Mr. Feierstein. Chairwoman Kelly, Congressman Gutierrez,
and members of the committee, thank you for the opportunity to
speak to you today about interagency cooperation on combating
counter-terrorism financing and providing international
training and assistance since the terrorist attack of September
11, 2001.
That tragedy changed the way the U.S. Government approached
terrorist financing. We have worked to create and implement
programs that enhance the capacity of key partner nations to
detect, disrupt, and dismantle global terrorist financing
networks. Our objective is to deny financial safe havens to
terrorist organizations and their supporters. Together, we are
building sustainable, dynamic, anti-money laundering, and
counter-terrorist financing regimes, and implementing effective
programs in the legal, financial, law enforcement, and judicial
fields. Improving the capability of our partner nations to
combat terrorist financing significantly enhances our own
ability to detect and isolate terrorist financiers and follow
the money, right to where it links global terrorists to their
support networks.
In pursuit of this goal, the interagency created the Terror
Finance Working Group in October of 2001 to leverage existing
anti-money laundering expertise across the U.S. Government and
to develop specific CT finance capacity building programs. Co-
chaired by the State Department's Office of the Coordinator for
Counter Terrorism and the Bureau for International Narcotics
and Law Enforcement Affairs, this interagency forum brings
together the Departments of Treasury, Justice, and Homeland
Security, independent financial regulatory agencies, and the
law enforcement and intelligence communities.
This interagency working group has achieved a notable
record for its efforts. We have provided CT finance and anti-
money laundering assistance for over 1,850 foreign counterparts
in over 18 priority countries. A number of countries have
either adopted new legislation to shut down terrorist financing
or are in the process of doing so. Our assistance has led to
the arrest and conviction of terrorists in Southeast Asia and
the Middle East, as well as the conviction and subsequent
designation of a terrorist fundraiser in the Middle East. Our
training has enabled other Middle East partner nations' law
enforcement agencies to identify and take action against
several Al Qaeda cell members. Additional specific examples of
the record are provided in my written testimony submitted for
the record.
Nevertheless, all interagency mechanisms are subject to
constant review and revision and may be altered at any time. We
have taken measures following the GAO's report to strengthen
interagency coordination and enhance the development and
delivery of CT finance foreign assistance programs.
Specifically, we have elevated the leadership of the Working
Group to the Deputy Assistant Secretary level. Another change
was the resuscitation of the Training and Assistance Sub-Group,
TASG, led by the coordinator for Counter Terrorism at the State
Department. The Terrorist Finance Working Group now reports to
this body. Should any issue arise that cannot be worked out by
the members of the Working Group, something that has not
occurred since I assumed duties as co-chair in January, it is
referred to the TASG for resolution.
Also, in response to the GAO report, we have dedicated
resources at the Department of Justice Office of Overseas
Prosecutorial Development Assistance and Training, OPDAT, to
measure the effectiveness of our counter-terrorism financing
and anti-money laundering programs. OPDAT measures the basic
elements of an effective counter-terrorism financing and anti-
money laundering regime for each country that has received U.S.
foreign assistance in this area.
In addition, we analyze what type of practical impact our
training programs have had on the ground. With this system, we
hope to determine how and where our capacity building programs
have had the most impact and how we can improve and apply them
in other countries.
Members of the Working Group agree on each other's
respective roles. We agree that the State Department chairs the
Working Group and coordinates training and technical assistance
abroad for priority countries. Given its expertise in the area,
we support the Justice Department's lead role in prosecutorial
and judicial assistance matters, including drafting anti-money
laundering and CT financing legislation. We support the
Treasury Department's lead role in providing financial
regulatory assistance and Financial Intelligence Unit
development and implementation of targeted financial sanctions.
We support the Department of Homeland Security's lead role in
providing training to combat illicit cash couriers.
In closing, we have made substantial progress since
September 11, 2001. We have developed a broad and strong
international coalition against terrorist financing. We have
supported development of laws, regulations, and regulatory
institutions, as well as trained intelligence and law
enforcement officials around the world to combat terrorist
financing and money laundering. We are opening, cultivating,
and strengthening dialogues and relationships with foreign
counterparts in vulnerable regions as a means of strengthening
their counter-terrorism financing regimes. As a result, we have
made it harder for terrorists and their supporters to use both
formal and informal financial systems.
Chairwoman Kelly, Congressman Gutierrez, and members of the
committee, our work is far from done. As we continue to fight
on this and other fronts in the war on terror, we face a
resilient, adaptable, and ruthless foe, and must constantly
anticipate and help countries all over the world prepare for
the next move before it happens. Terrorists and terrorist
tactics are evolving and persisting, and so must our efforts.
Key to our continued success in tackling terrorist financing is
strong, effective U.S. interagency coordination.
Chairwoman Kelly. Mr. Feierstein?
Mr. Feierstein. Yes, ma'am.
Chairwoman Kelly. Your red light has been on for some time
and since we are going to be called for a vote shortly, I would
ask you to sum up, please?
Mr. Feierstein. Ma'am, I only had one more sentence.
Therefore, we must continue to pool our expertise and resources
in order to continue to realize real success in the future.
I look forward to taking your questions. Thank you.
[The prepared statement of Mr. Feierstein can be found on
page 51 of the appendix.]
Chairwoman Kelly. Thank you.
Mr. Sabin?
STATEMENT OF BARRY M. SABIN, DEPUTY ASSISTANT ATTORNEY GENERAL,
U.S. DEPARTMENT OF JUSTICE
Mr. Sabin. Chairwoman Kelly, distinguished members of the
subcommittee, I appreciate the opportunity to discuss the issue
of the Government Accountability Office's report on terrorist
financing and the Department of Justice's successful
involvement in this cooperative effort to provide counter-
terrorism financing training and technical assistance abroad.
The Department of Justice plays a critical role in the
delivery of training and technical assistance to our
international partners. Justice plays a central role in this
arena, in concert with the Departments of State, Treasury, and
Homeland Security, even though the Justice Department does not
receive direct appropriations from Congress to provide training
and technical assistance to combat terrorist financing abroad.
Consequently, we respectfully disagree with the GAO's
recommendation that the Departments of State and Treasury enter
into a formal Memorandum of Understanding, without
participation of the Department of Justice, to develop a
training and technical assistance delivery plan.
Justice and its interagency partners do not believe that
such a Memorandum of Understanding is necessary or appropriate.
More fundamentally, such a recommendation highlights our basic
concern with the GAO report, that it overlooks the valuable
contribution of the Justice Department and others, including
DHS in providing legal training and assistance to combat
terrorist financing and money laundering around the world. We
also provide essential input to the fundamental interagency
decisionmaking process of prioritizing and strategizing the
delivery of technical assistance and training. Such input helps
ensure that the training and technical assistance plan is
consistent with other Department and Administration counter-
terrorism initiatives. In addition, excluding the Department of
Justice would deprive DOJ of one of the critical byproducts of
technical assistance--the building of long-term operational
relationships which are critical to facilitating international
cooperation.
It is axiomatic that in providing terrorist financing and
technical assistance to our most vulnerable partners in the war
on terror, the U.S. Government should be represented by its
most highly skilled and knowledgeable experts. In 2002, the
Administration determined that the Department of Justice should
be the Agency primarily responsible for training and technical
assistance concerning our core areas: legislative drafting and
training of prosecutors and judges in priority countries. DOJ
assistance helps governments that are vulnerable to terrorist
threats to draft legislation which criminalizes money
laundering and financial and other material support to
terrorists. DOJ also provides technical assistance and training
to help such governments implement and enforce these laws.
DOJ remains firmly committed to interagency efforts to
ensure that priority and vulnerable countries receive
substantive training and technical assistance from the most
qualified experts that the U.S. Government has to offer.
Preventing terrorist attacks and protecting our Nation is
the top priority at the Justice Department. Aggressive
investigation and prosecution of terrorist threats and
activity, including terrorist financing and all other manner of
providing material support to terrorists, is a principal means
to achieve this end.
As a result of our ongoing involvement in this rapidly
changing area and our commitment to this objective as a first
priority, Justice Department lawyers and investigative agents,
both in Washington and in the field, have extensive experience
in this area. The Department of Justice delivers approximately
half of the anti-money laundering terrorist financing
assistance to priority countries, acting either individually or
in combination with our partners.
The Department has participated in the interagency process
since its inception. The interagency process provides a forum
for candid discussions and strategic planning for delivering
appropriate assistance. Consensus is reached in this forum to
ensure our international partners receive the guidance
necessary for them to build strong counter terrorist financing
regimes. Through this process, the U.S. Government ensures that
we take a holistic approach, avoid duplication, and prevent
redundant delivery of previously provided assistance.
In my written statement, I provide specific examples of
countries which illustrate the assistance we have rendered in
this field and the long-term gains it has yielded for the
recipient countries and the international community. The
Department is proud of its role in equipping other countries
with the legal tools necessary to combat terrorist financing
and money laundering, but we realize that there remains work to
be done.
Thank you for providing me the opportunity to discuss these
important issues with you today. The Department of Justice
looks forward to our continued role in the interagency process
to deliver and develop effective anti-money laundering and
counter terrorism financing training and technical assistance
and to benefit from the goodwill, personal relationships,
understanding of our international partners, and tangible
operational benefits that result from our crucial role in
providing that assistance. We are committed to working with our
peer agencies to develop a comprehensive and integrated
training and technical assistance program abroad. We each have
our areas of expertise, and we believe that a unified, yet
delineated approach, to the global problem of terrorist
financing will result in success that is effective and
enduring.
Thank you.
[The prepared statement of Mr. Sabin can be found on page
67 of the appendix.]
Chairwoman Kelly. Thank you very much, Mr. Sabin. Mr.
McDonald, you said that you are very pleased with the
cooperation that you have with State. The GAO sat here and said
it is not working. As a matter of fact, in the letter that was
sent to Chairman Oxley about this, and in the comments from the
GAO as of your response involving State, and I quote from page
72 of their report, ``As Treasury states, they believe that
State's role is limited to coordination for priority countries
and does not accept State's position that it leads all U.S.
training and technical assistance efforts to vulnerable
countries, not just priority countries.'' Now, this is exactly
what I believe we heard this morning. Who is the lead?
Mr. McDonald. State Department is the lead.
Chairwoman Kelly. Well, then if the State Department is the
lead, sir, then you are going to have to accept what you
apparently have rejected here in this statement.
Mr. McDonald. And I do. The information in the statement
that you are reading from reflected the perspectives of
Treasury officials who were reacting to a situation that they
observed or they perceived at that time. And, as I think all of
us have tried to explain today, a lot of water has flowed under
the bridge since then and a number of clarifications and
strengthening of the process have taken place. And I do believe
that the Treasury Department and the State Department are
completely on the same page with respect to the role of the
lead agency, and it is the State Department for those
countries.
Chairwoman Kelly. Then why is the NSC reviewing it?
Mr. McDonald. Why is the NSC reviewing what?
Chairwoman Kelly. Reviewing the cooperative effort that is
talked about here in this report, and certainly Chairman Oxley
had some questions here. It says that, ``NSC, the Departments
of State, Homeland Security, Justice, and Treasury are
reviewing the work of the Terrorist Finance Working Group and
its operating procedures in light of the past 4 years
experience with a view to making any appropriate updates.'' Why
are they reviewing it if you have already accepted it?
Mr. McDonald. What was referred to in that letter, what is
being reviewed is not only--not particularly the question of
the lead role. What is being reviewed is the overall set of
procedures and practices, and the lead role is a subset of that
question. So we are taking a look at the whole operation in
light of the GAO's report to assess what we need to do better,
what we need to adjust.
Chairwoman Kelly. This GAO report came out in October.
Everybody has been looking at it and so forth and yet there is
still no Memorandum of Understanding between the agencies. My
question is why is that so? Why is there no plan to develop
metrics for success to make this happen? It is frustrating to
keep asking for people to review and review and review. There
is more review here that is talked about in this letter that we
just discussed. When does the review stop and when do we get a
Memorandum of Understanding? Are you working on this? I would
ask both of you. Well, actually all three of you. You too, Mr.
Sabin.
Mr. Feierstein. Madam Chairwoman--
Chairwoman Kelly. Let Mr. McDonald answer.
Mr. McDonald. I was just going to start by saying that
there is not a Memorandum of Agreement. My understanding of the
GAO's thinking in making that recommendation was that it was a
vehicle, a mechanism for encouraging and ensuring collaboration
and the sorting out of any issues that there might be between
Treasury, State, and other agencies about procedures,
practices, objectives, and how to measure progress toward them.
We are doing that. We have not waited for a Memorandum of
Understanding. From the first day that I took my position in
December, and I am sure that from the first day that Mr.
Feierstein took his, we have been leaning into that entire set
of issues. So I believe, this is my view and I will ask for Mr.
Feierstein to express his, that the Memorandum of Understanding
is not required for the things that we are already doing.
Mr. Feierstein. Madam Chairwoman, that was also certainly
our view and that was the view that we expressed to the GAO,
both when they initially did their study and also in our
response to their recommendations, that in fact the Terror
Finance Working Group is much broader than just State and
Treasury, that we do believe that we have an agreement in place
about roles and responsibilities. Those are well understood by
all of the participants in the Working Group. And, as Larry has
suggested, we do believe that process is working effectively
and efficiently now without need of drafting an additional
agreement. So we think that we have the structure in place, we
have the understandings in place, and we believe that we are
moving forward.
Chairwoman Kelly. As of when did you feel that that
structure was in place?
Mr. Feierstein. Ma'am, I started in this position in
January and that was at a point in which the structures were
evolving. The Training and Assistance Subgroup had just resumed
its activities. The decision has been made that we would raise
the level of the Chair of the Working Group to help facilitate
and move forward with interagency coordination. And so I would
say that certainly since the beginning of this year we have had
in place the structures that we believe are appropriate and
effective.
Chairwoman Kelly. That is really not exactly the answer to
my question, sir. I asked you when you felt this was finished,
when you felt this comfort level that you spoke of?
Mr. Feierstein. Ma'am, as I said, I have been on--
Chairwoman Kelly. I am not asking about the history, I want
to know within the last month, within the last week, within the
last 2 weeks?
Mr. Feierstein. As I said, since the beginning of this
year, since I started in this position.
Chairwoman Kelly. From January when you started?
Mr. Feierstein. Yes.
Chairwoman Kelly. Mr. Sabin?
Mr. Sabin. I agree with the Comptroller's remarks that we
need to have an interagency process that is effective and
accountable. The vehicle to achieve the delineation of the
roles and responsibilities, I would suggest is not in a
formulaic Memorandum of Understanding but in the structure of
the interagency process in the Working Group, with clearly
defined roles and responsibilities where people are accountable
and can articulate our strategic planning in that regard. So to
exclude Justice, as is recommended in the GAO report, I would
respectfully suggest, is not the vehicle in which to achieve
those ends, nor to exclude Homeland Security. There is a
structure. There is an interagency process in the Terrorist
Finance Working Group. People understand their roles and
responsibilities, and we are going forward to ensure that we
achieve the mission and that we are accountable for achieving
that mission. But that vehicle to achieve that is not through a
formal Memorandum of Understanding.
Chairwoman Kelly. So if I understand what you are saying
correctly, none of you really feel that you agree with the GAO
report because you do not feel you need structure to make sure
that the agencies are discussing and working with each other,
you think you can do that on your own?
Mr. Feierstein. Ma'am, we believe that the structure is
there. The structure is there and the directions from the
deputies and from the Counter Terrorism Support Group, which is
chaired by the NSC, the guidance that they have provided to us
and of course the guidance that we receive from the Training
Assistance Sub-group. So we think that we have received the
appropriate structure, the structure is in place, and the
structure we believe is working effectively.
Chairwoman Kelly. Mr. McDonald?
Mr. McDonald. I was thinking about your question about the
timing when I had this feeling of reassurance, and I remember
two very precise moments when I felt that. It was in late
January, I think, when I attended the first meeting of the
TASG. I accompanied Assistant Secretary O'Brien from TFI. And
both during that meeting, which was chaired by Ambassador
Crumpton of the State Department, I felt that there was a real
sort of center of gravity of leadership in that meeting. And,
as I was walking back from that meeting with Treasury Assistant
Secretary O'Brien, we both remarked that we felt like an
important change had been affected.
The other time that it struck me was the first meeting of
the TFWG that I attended under Mr. Feierstein. I think it was
in early February, so it happened in a couple of steps. And I
left that meeting feeling like there was a very different
atmosphere and a different way of doing business. So those are
the moments when it occurred to me.
Chairwoman Kelly. Well, then that leads me to the next
question that I have. I am going to go to the State Department
first because you came here, the State Department came and
repeatedly said that the Saudi FIU was operational. When I went
a year ago to Saudi Arabia, it was not operational. Treasury
came here and said it is not operational. State came here and
said it is operational. Was this matter ever discussed with
what you call the TFWG?
Mr. Feierstein. Ma'am, I would have to take that question
and go back, that long pre-dates my arrival on the scene so I
cannot respond to your question, but I will be happy to ask and
see if we can get an answer for you.
Chairwoman Kelly. Mr. Feierstein, I wish you would, please.
I still feel a great deal of skepticism about how this is
working, about how it is integrated, and how the chains of
command are braided together to give us one unified approach
and understanding of what is happening with regard to terrorist
financing.
We have been called for a vote. We have two votes, so I am
not finished with my line of questioning. I have a couple more
questions. I am going to, however, recess the committee
temporarily. I would imagine it would take us--one is a 15
minute and one is a 5 minute vote, I imagine within that
timeframe, it will be probably 25 to 30 minutes before we
arrive back here to be able to continue. Mr. Scott, we will
keep going with questions when we come back. I thank you very
much, and I apologize for the interruption but we will be back
presently.
[Recess]
Chairwoman Kelly. Thank you very much for your indulgence
in our going off to a vote. I would like to resume with the
line of questioning that I was starting with. I want to go back
to the question about the issue of the fact that we had
different statements from different agencies about the state of
the Saudi FIU. And it involved setting up an FIU, joining the
Egmont Group is to be encouraged in all of the countries that
we deal with. It is one of the very real ways that countries
can all cooperate in a very transparent and supportive way to
try to stop the terrorist movement of money around the world.
Not knowing whether or not an FIU is actually in place is a
serious problem, and I am concerned about what the process was
that caused the disparity in the responses to the questions
that I asked about the FIU. I really did not get an answer that
I was comfortable with, and I would like to go back to ask that
question about the TFWG. If there was discussion at the TFWG
prior to the testimony that was given here at the committee,
whether anybody here knows, maybe somebody sitting behind you
might know, whether there was discussion there about the Saudi
FIU? And any one of you can answer that or I will ask you each
individually.
Mr. Feierstein. Madam Chairwoman, during the brief recess,
we did discuss this, and I can offer you only that to the best
of the recollection of the people who are sitting behind me,
some of whom were involved at that time, this was not an issue
that came before the FIU--or before the TFWG. But having said
that, I must say that I am still not comfortable, and I would
much prefer to have an opportunity to take that question back
and research it more thoroughly and give you a considered
response.
Chairwoman Kelly. Okay, thank you. I am more comfortable
with that answer, thank you. I want to go then to my other
question that I asked just before I left and that was the
question about what plan is being developed to set in place
some metrics for success in this interagency discussion? When
Secretary Snow was here at one point, I asked him where the
buck stopped on this, and he said, ``It stops on my desk.'' And
he then came back and told us that they had set up within
Treasury an interagency desk that was working fairly well. I do
not know at this point whether it is still working well within
Treasury or whether it has been stood down? And, Mr. McDonald,
maybe you can answer that question for me.
Mr. McDonald. I know that as Under Secretary Levey
testified earlier this week before a Senate committee, that he
has been in very close touch with the Secretary and other
senior officials within Treasury about the entire range of
issues that have to do with terrorist financing, of which
technical assistance is one component, and that developing
metrics for measuring success and combating terrorist financing
is a very big item on his agenda. I do not know, frankly, the
status of efforts to develop metrics for success for combating
terrorist financing broadly. I can tell you--
Chairwoman Kelly. Can you find that out for us and come
back with an answer?
Mr. McDonald. Yes.
Chairwoman Kelly. Can you answer the second question that I
asked--is that desk that had several agencies from Justice and
other Departments still in existence at Treasury and is it
still functioning?
Mr. McDonald. I don't know about that, and I will have to
find that out too.
Chairwoman Kelly. Can you come back with an answer for
that?
Mr. McDonald. Yes.
Chairwoman Kelly. Thank you.
Mr. Sabin. Madam Chairwoman?
Chairwoman Kelly. Yes.
Mr. Sabin. I can supplement on the metrics point.
Chairwoman Kelly. Yes.
Mr. Sabin. The Criminal Division of the Justice Department
has a metrics system that examines the five basic areas of an
effective counter terrorism financing and asset forfeiture,
money laundering mechanism for each of the countries that
receive United States assistance that goes to, as articulated
in the GAO report, the five key areas of legal development and
reform, financial regulatory aspects, capacity for financial
investigations, law enforcement and judicial and prosecutorial
capabilities, so in those five areas. As a baseline, you have
reports, initial reports that are conducted called the
Financial Systems Analysis Team Reports, and that is also
referenced in the GAO report. That baseline information is
compiled and then used against those five areas to ascertain,
both short term and long term, whether there is appropriate
reporting and to analyze what kind of practical impact occurs,
so how U.S. foreign assistance has been allocated, to which
countries, for which particular courses for training, for how
many different foreign counterparts. And then drilling down in
terms of the specifics, what legislative drafting has been
undertaken in those particular areas, what reports have been
issued relating to bulk cash smuggling, and how that, in turn,
has led to specific actions by an FIU. Those kinds of specifics
compiled, analyzed, tracked, I am not saying it is perfect or
that it is all that we would want to be and that it is to the
extent of something that we are comfortable with, but we are
committed to making sure that, as we indicated before, that it
is an integrated approach that is accountable and that we can,
when called upon to do so, be accountable and transparent in
relaying that information.
Chairwoman Kelly. An integrated intra- and interagency?
Mr. Sabin. Correct.
Chairwoman Kelly. Good, thank you very much. For that, I
thank you because that is much more information than I was
getting before.
I now want to go on to how you are working with the other
nations, our friends and our allies, with regard to the
terrorist money movement. Are you working at doing some
parliamentary assistance with the other nations of the world
with regard to trying to get them to pass laws and do what you
can to get them to use--everybody has to use the same set of
metrics or it is not integrated enough to be worthwhile--are
you doing that? And I am going to each Agency to answer that.
Let's start with you, Mr. McDonald.
Mr. McDonald. Sure, yes, by all means. Although Treasury
technical assistance providers tend to be based in a finance
ministry or a central bank or an institution like that, they
spend a lot of time and work a lot with parliamentarians.
Intermittent advisors provide executive seminars to parliament
in many countries around the world to explain the rationale and
the benefits of passing anti-money laundering legislation and
legislation related to creating Financial Intelligence Units.
Resident advisors who are on the ground week after week in
those countries do not spend all their time in the central bank
and the finance ministry but spend a good deal of their time
with officials from parliament, reinforcing those same points.
I would add, although this was not specifically in your
question, a public information campaign is an important part of
informing parliament and helping to encourage them about the
importance of this. I saw that when I was in Zambia just 2
weeks ago. That is a country where anti-money laundering
legislation is important--it is before the parliament, and has
not been passed yet, I met with members of the press and among
the things that I talked about was the importance of passing
such legislation. I confess that I did not meet with the
parliamentarians, but I will take from our discussion today the
note that I will make sure that I do on my next trip.
Chairwoman Kelly. I think that is a good idea. I wonder
also if you have anything in place where you can actually
measure the success of the kind of thing that I understand that
you have been doing, which is sending people out to talk to
these parliaments and the financial officers in the various
countries. Is there any kind of, I don't want to say report
card, but is there some kind of a way, do you have anything in
place to measure step by step because some of these things must
take into account cultural considerations as well as the
financing situation. So if you have that in place, what is it?
And I am not going to ask you to detail it, but I just want to
know if it is there and if it works?
Mr. McDonald. The best thing that I would reference in
answer to your question is the work plan that is developed for
each advisor, for each technical assistance provider, that lays
out at the beginning, and in consultation with counterparts
from that country, and taking into account the cultural issues
that you mentioned, a detailed road map of what is to be
accomplished. And if within that road map there is work on
legislation and dealing with parliaments, that would be
highlighted. And there are monthly reports, monthly reports on
progress towards the meeting of those objectives. Those monthly
reports are made available to other agencies within the U.S.
Government, through the TFWG, and are available to the
Congress.
Chairwoman Kelly. Good. Thank you. Okay.
Mr. Feierstein. Madam Chairwoman, if I could respond also
to the two questions. And in the first one, certainly to mirror
what Larry said in terms of the emphasis that we place on
working with governments overseas, with host governments, to
promote the passage of anti-money laundering and counter
terrorism financing legislation. This is a very high priority
with our embassies overseas that engages the chiefs of mission,
it engages other officers in the embassy on a regular basis to
use their positions to reach out not only to the appropriate
government agencies in those countries but also to work with
parliamentarians. This is certainly part of the performance
responsibilities and goals and objectives that any embassy
would have. And also to use our own bilateral dialogues at
senior levels to continue to pursue that.
I can mention in particular that yesterday, for example, we
had a bilateral discussion with our counterparts from the
Government of Pakistan where passing a money laundering deal is
a very high priority for the U.S. Government. One of Mr.
Sabin's colleagues was there from the Department of Justice,
and we spent a good bit of the afternoon actually talking about
anti-money laundering legislation and how we might move forward
on getting that bill through the Pakistani parliament.
In terms of the second question you asked, whether there is
a report card or not, I would draw your attention to the INCSTR
report, the International Narcotics Control Strategy Report.
The latest edition came up to the Congress in March of 2006 and
it does rate the performance of governments in 16 different
categories, including criminalized drug money laundering,
criminalized beyond drugs, record large transactions, maintains
records over time, reports suspicious transactions, a Financial
Intelligent Unit, a system for identifying and forfeiting
assets, arrangements for asset sharing, cooperates with
international law enforcement, international transportation of
currency, mutual legal assistance, non-bank financial
institutions, disclosure of protection of safe harbor, state's
party to the 1988 UN Convention, criminalized financing of
terrorism, and International Terrorism Financing Convention. So
each country is rated in each of those categories.
Chairwoman Kelly. Mr. Feierstein, I thank you very much for
that information. INCSTR has always been pretty good, my
question was actually addressed to what you are doing within
your own Agency.
Mr. Feierstein. In terms of?
Chairwoman Kelly. In terms of how do you measure your own
success? How do you, and obviously Treasury has a work plan
that they set out for every person who is going out and they
set goals for achievement.
Mr. Feierstein. Right.
Chairwoman Kelly. Do you do that?
Mr. Feierstein. Yes, in any agreement that we sign. And, of
course, the State Department itself is not a provider of
technical assistance or training. We do turn to our counterpart
agencies, to our partners, like Department of Justice or the
others, to actually carry through with the training. But in any
agreement that we negotiate in terms of training or technical
assistance that is going to be provided, that does include a
performance indicator, and what it is that we expect to see at
the end of the training or technical assistance and what are
the parameters for measuring success.
Chairwoman Kelly. In the field?
Mr. Feierstein. In the field.
Chairwoman Kelly. Mr. Sabin?
Mr. Sabin. It goes back to your point about the integration
of the different roles and responsibilities. So, as Mr.
McDonald pointed out, the building of goodwill, the ability to
execute in the particular country for that legislation was
preceded by Justice Department lawyers involved in the actual
drafting of the particular legislation. So we understand that
we will provide those skills and experiences to build the
trust, work through the particular issues involved in that
country and that region regarding the appropriate legislation.
And then if called upon to do so by our partners in the
interagency process, assist in the execution under their
direction as appropriate.
Chairwoman Kelly. Thank you. I have a question for you, Mr.
Sabin. I would like to know what contributions the OCDETF has
its fusion center play in identifying the vulnerabilities to
money laundering and enabling the Federal Government to bring
prosecutions, can you identify that for us?
Mr. Sabin. If I understand your question, you are referring
to the Organized Crime Drug Enforcement Task Forces.
Chairwoman Kelly. Yes.
Mr. Sabin. That has the combination of narcotics-generated
information dealt with in terms of a task force approach to
determine and prioritize significant targets, both domestically
and internationally.
Chairwoman Kelly. Well, we know there are a few, there is a
mix, the bad guys and the terrorists sometimes talk to each
other and work with each other.
Mr. Sabin. Absolutely.
Chairwoman Kelly. So that is the basis for my question.
Mr. Sabin. Absolutely, and we have seen that in the post 9/
11 world, the ability to not only act as independent cells but
in the decentralized aspects and the desire to fund in this
evolving nature of al Qaeda or other foreign terrorists
organizations, how they piggyback upon traditional criminal
enterprises, and how they use infant formula or cigarette
smuggling or narcotics trafficking and those kinds of
endeavors, both in the United States and with our partners
abroad. I had the chance to appear before the Organization of
American States with the lead investigating magistrate from
Spain, Magistrate Garzon, to talk upon that precise issue. It
is a very significant issue, not only within this hemisphere,
but around the world. And how that is fueled by the Organized
Crime Drug Enforcement Task Force is to ensure those particular
metrics, who is the defendant, what are the links, how are the
associational activities occurring, how can you in order to
have a comprehensive disruption strategy not only go after a
particular individual for putting that person behind bars but
to go for the entire flow of the money chain.
Chairwoman Kelly. Thank you. Mr. Scott.
Mr. Scott. Thank you, Madam Chairwoman. Let me start off
with a series of questions dealing with really the
infrastructure and the need for you all to have some kind of
infrastructure working together. My first point is, I want to
start with both the State Department and the Treasury
Department, Mr. McDonald and Mr. Feierstein, given the GAO's
conclusion that the U.S. Government lacks a unified picture of
available budget resources that State and Treasury can allocate
for training and technical assistance to foreign countries,
what steps are Treasury and State taking toward gaining a
systematic understanding of the available resources?
Mr. Feierstein. Sir, that is a very good question. And I
would say at the time that the GAO did their report, that was
probably an accurate characterization of the state of affairs.
Since then, however, I can say that under the auspices of the
Technical Assistance Subgroup, in other words, the group that
the TFWG reports to, we have been engaged in an interagency
effort to build a comprehensive database of all of the training
that the U.S. Government has provided and is providing around
the world so that when we have completed that process, which is
not complete yet, we should be able to respond very clearly and
it will be a living document that all of the agencies
participating in the interagency process can use in order to
develop their own training plans and to identify areas where
perhaps more work can be done and needs to be done.
Mr. Scott. What is your take on the available resources,
would you say we have sufficient available resources once you
have this unified picture?
Mr. Feierstein. Sir, I think that certainly the more
resources that we have, the more that we can do. And we are, I
think, becoming more efficient and effective in our ability to
use the resources. When we first embarked on this effort in
late 2001, 2002, I think that there was a period of time where
we were just developing training programs, just going out and
doing the assessments. As we move along, our ability to move
more quickly has improved and our ability to utilize the
resources has improved. So I think we anticipate--for the State
Department of course, the Treasury Department also has its own
source of funding, but for the State Department we use two
categories of funding really for counter terrorism financing.
We use the NADR accounts, the non-proliferation, anti-
terrorism, de-mining and related programs accounts, and then we
use the INLEA, the International Narcotics and Law Enforcement
Accounts. Between those two, we anticipate that we will
obligate about $10 million this year, fiscal year 2006, for
programs related to counter-terrorism financing. We anticipate
or we have requested the Congress, again with between those two
accounts, for an increase to about $13 million next year. And
we do believe that we could use those funds.
Mr. Scott. Great. I am trying to get as many questions as I
can in my limited time. To Mr. McDonald from Treasury, in your
testimony you stated that you accept the State Department's
lead in this endeavor. Does this extend to the delivery of
technical assistance to countries that are not on the TFWG
priority list where we do have efforts in progress?
Mr. McDonald. There is a difference--in fact the GAO
comptroller referred to different kinds of leadership, and I
think that is an appropriate distinction to make here. In the
TFWG area, the interagency process that we are talking about
here, there is a level of leadership and a kind of leadership
that goes beyond the norm. But I would not use the term--I
would find a different term for the relationship that we have
with respect to countries that are not part of the TFWG
process. We coordinate closely with the State Department, both
here in Washington and certainly at embassies. I do not think I
would the term the ``lead'' with respect to those countries
that are not part of the TFWG process. But I would hasten to
add that when I speak of coordination, I do not mean
``coordination-lite.'' I mentioned earlier that I went to
Zambia to talk about Treasury activities in Zambia, I would not
have been able to go to Zambia if I had not consulted already
with the State Department and with the embassy to explain the
purposes of my trip, get country clearance. And, indeed, when I
arrived in the country, the Ambassador accompanied me to many
of my meetings. So even though I would not use the term
``lead,'' and I do not think the Ambassador herself would have
used the term the ``lead,'' in terms of my trip there, we were
linked up arm-in-arm at every stop during the trip.
Mr. Scott. Well, let me ask you this, I know my time is
getting short but I have a number of questions here. I am very
concerned that you seem to reject the GAO's, their
recommendations for a strategic plan. I think you said that you
probably would accept that but not to the non-priority
countries. An example of why I think that you need a strategic
plan and you need a shared plan and you need that Memorandum of
Understanding and agreement with each other is because all of
your agencies are so interlocking in this pursuit. And nowhere
is this better dramatized than during my recent visit to
Afghanistan and Pakistan, particularly, and also Bulgaria. And
the reason I mention that if you know geographically what I am
talking about, that is an extraordinary entry point, border
point, for the process and the transportation of the number one
product from that region, which is the poppy, which is the
heroin, which is the morphine, which is the drug traffic. In my
conversations there with each official, and knowing of our
interest in this issue on terrorist financing, I raised
questions and issues with these and one of which was in terms
of our country, did they feel we are doing enough, was that
effort coordinated? And we get a thumbs down, especially in the
Bulgaria region where so much of the traffic comes through. And
your comment, Mr. Sabin, I tend to sympathize with you more
than anybody else, and I think I am sympathizing right, I think
your objection to this Memorandum of Understanding is that you
are not included. I cannot understand for the life of me why
you are not included at an equal level, at an equal
participatory level with Treasury and with State. And if there
is one recommendation that ought to come out of this hearing,
it should be that you lifted up and your Agency involved in
this. Because so much of this terrorist financing is criminal.
So much of it is coming right there out of Afghanistan. We
talked with the generals and commanders in Afghanistan. We were
talking about it with President Karzai in Kabul as we were
meeting, and he said that is the number one problem. And when
we talked with the generals and commanders on the ground in
Afghanistan, they have a problem with al Qaeda, they have a
problem with the Taliban, but their biggest problem is with the
drug lords. And there is an interrelationship, they do not care
how this money or where it goes, and so much of it, illicit
money, coming out of the heroin trade and coming out of that
region is used for terrorist financing. And I think that that
is why we need to have a closer working relationship with the
three of you.
And I would like to, in my final point here, get from you
why you are so obstinate about the recommendations about the
GAO who clearly to me seems to be the referee in this and the
person who is trying to give us the direction we need. We need
glue between the three of you and that glue is not there. And
the American people deserve that glue to be there and we are
not going to make it, we are not going to be successful if we
do not have some kind of understanding, some kind of agreement.
So I just wanted to get your reaction to what I have said. And,
number one, basically what will it take for you all to
understand we need that Memorandum of Understanding and
agreement and certainly with the strategic planning and the
recommendations that the GAO has made?
Mr. Sabin. I will start since it is a rare occasion when I
can get a Congressman to agree with me.
Mr. Scott. Well, I certainly agree with you on this because
I have been over there and I know about the criminal activity
and I know what is happening over in that region and how it is
getting right into the terrorists' hands.
Mr. Sabin. I appreciate your comments and I appreciate the
goal that we need to rise to the occasion to get this right for
the American people. And I think everyone here, both at the
table and the people that we are speaking for who are doing the
work day in and day out, share that mission and share that
goal.
In terms of getting it right in terms of the specifics, I
would say that the inclusion of all the sister agencies, the
ones here and even Homeland Security, which is not, to make
sure that we have it integrated. One of the fundamental points
in the GAO report was to make sure that it is integrated. We
would respectfully submit that we have a strategy in place. Is
it evolving? Absolutely. Are we working to make sure that it is
clearer, that roles and responsibilities and duties and
responsibilities are understood so that it does not play out to
negative consequences at the fundamental features of another
country. Because when they are asking for our assistance, they
are saying, okay, the U.S. Government, come here and share with
us your expertise, your skills, and when we do not provide the
highest and best or we do it because of the initial points that
folks are making because of ``turf battles,'' I think we all
suffer, and we would suffer for a long-term basis. So I think
we believe that we have strategic plans in place, that we are
working to make them better and sharper and more focused, that
would define the roles and responsibilities of each of the
individual agencies, and that to enter into sort of a formulaic
Memorandum of Understanding is not the mechanism to achieve
that goal. That we need to in our strategic planning define
those roles and responsibilities, I think we have articulated
that here today and will continue to do so in order to achieve
what you suggested we should be achieving.
Mr. Scott. What would it hurt to have a Memorandum of
Agreement, of Understanding between the three of you? I
cannot--where is the rub on this? Why would the GAO make that
their primary recommendation to improve our ability to access
information on terrorist financing and you all reject it,
saying what you have is there? Something is not clicking here.
Mr. Sabin. Just to the finish the point, that goes back to
their recommendation does not address Justice. So to take your
premise--
Mr. Scott. Well, if they put Justice in it, would you be
all right?
Mr. Sabin. Well, but take it to the next step, would you
include Homeland Security?
Chairwoman Kelly. If the gentleman will yield?
Mr. Scott. Yes.
Chairwoman Kelly. In TFWG, Justice is included and so is
Homeland Security, and other participants are the National
Security Council, the CIA, the FDIC, and the Federal Reserve
Board. Perhaps all of those Agencies should be included in an
MOU. I think that is what you are talking about, is that Mr.
Scott?
Mr. Scott. Yes, it definitely is.
Mr. Sabin. And then our point is that interagency process
is in place, that it is evolving but we do have that structure
and that folks have their duties and responsibilities as
articulated in the Terrorist Financing Working Group or the
next level in the TASG.
Chairwoman Kelly. Again, Mr. Scott, if you do not mind if
I--
Mr. Scott. Please do.
Chairwoman Kelly. I suspect the evidence here is the
frustration we all feel because it is not clear, it is not
clear to us in Congress, it is not clear in the Senate and it
is not clear here in the House, that it is structured, that
there is working, that there is some kind of cooperation
because the letters and responses we get say it is under study
or we are discussing it. We do not see a clear structure and,
clearly, that is exactly what the GAO was saying to us in their
report. I do not know, Mr. Scott, if that characterizes what
you are talking about but I believe that that is what we are
all trying to do here, is find out if it exists, who is
involved, what definition each person has, and if each Agency
actually understands what they are supposed to be doing, and
how it is working, whether this cooperation is working because
we hear stories of the fact that there are still all the
territorial fights going on. Go ahead, Mr. Scott, I am sorry, I
yield back.
Mr. Scott. Yes, that is fine, I really appreciate it, Madam
Chairwoman, that we are both saying the same thing and we have
to get an answer to this. The American people are demanding
that we get an answer to this. It is not working, it has to be
fixed and we have to find out what this objection is. If you
all cannot do it, then maybe we in Congress will have to, by
Congressional act, force you to have a simple Memorandum of
Understanding. It is as plain as the nose on my face, and just
judging from our testimony here, that you should have a
Memorandum of Understanding and agreement with what each is to
do. Yours is an extraordinary mission, it is to provide
technical assistance to foreign countries in terms of counter-
terrorist activities for terrorist financing. And each of you
have a role to play. It is important that you be on the same
page. And all we are saying is, let's get the page. It is as
plain as that. And I believe that this committee is going to
get to the point, frustrated enough to the point, that we may
have to introduce legislation for you to have to do that. That
is what is going to help us. That is what is going to make sure
that over in that region of the world where the money is coming
from, if I am sitting up here and I have to go way to
Afghanistan and Pakistan and Bulgaria and that whole region,
that is where a great deal of the money is coming from. And our
young men and women in uniform, doing a magnificent job over
there, and they will tell you their biggest fight is against
the war lords and the drug lords that is happening in that
country. And President Karzai said the same thing. The
officials in Bulgaria have indicated that their check point,
that they don't even have a working relationship with the
Treasury Department, with the State Department, let alone
Justice. So we are woefully neglecting this. That Memorandum of
Understanding, that report that is required to be given to the
Congress is all that the GAO report is asking for. It is
sensitive information. There is so much of what I want to say
and ask for but I know C-Span goes everywhere and the
terrorists will watch C-Span as well. And we do not want to
give the enemy and terrorists as much information as they may
need to counter what we are doing. But, the American people are
demanding that we get the information one way or another. And I
think that a Memorandum of Understanding is not too much to ask
for, and I am on record as advocating that. I think that the
GAO report is absolutely right, and I think we should follow
those recommendations. For them to give the recommendations and
you all to stonewall it, is not in the best interest of what we
are trying to do.
Chairwoman Kelly. Thank you, Mr. Scott. Mrs. Wasserman-
Schultz.
Mrs. Wasserman-Schultz. Thank you, Madam Chairwoman. This
question is for Mr. Sabin. Could you describe how the use of
contractors by Treasury in the drafting of legislation in non-
priority countries has created problems because I know that
Justice feels strongly that is an issue? And can you also tell
us what steps have been taken, if any, to remedy that problem?
Mr. Sabin. We are working with Treasury effectively and
efficiently. There have been issues in the past regarding
contractors, but there are a number of people, as Mr. Scott and
others have mentioned, who are passionate about contributing to
the mission. And, as Mr. McDonald indicated, there are
resources available in Treasury that can complement the Justice
Department and other Agency's allocation of resources. In
Justice Department's core areas, dealing with legislative
drafting, assistance for judges and prosecutors, that is where
our lane is and our primary focus. There have been instances in
the past where because of miscommunication or other issues, we
were not putting our best foot forward. I think we have
addressed that. I think we understand where we need to be and
that the Government is united in going forward to make sure
that in those areas, there is not a misstep and that we are
doing the best that we can do for our foreign partners in terms
of training their judges, training their prosecutors, and
drafting appropriate legislation for terrorist financing or
money laundering.
Mrs. Wasserman-Schultz. Mr. Sabin, do not take this the
wrong way but that is a little vague. Could you be more
specific as to what steps are being taken to resolve the
conflict?
Mr. Sabin. Well, in terms of the Terrorist Financing
Working Group, the individual countries that are requesting
assistance, coming from the particular financial assessment
reports that have been done by the country team that
investigates what the needs are or the gaps are, we need a
specific financial regulatory mechanism, a know your customer
law, whatever the particular legislative need or gap that
exists. So you sit down at the Terrorist Financing Working
Group and say, ``Okay, Justice, this is an area, a country that
needs the assistance, do you have the appropriate resources,
either in your Asset Forfeiture Money Laundering Section or
your Office of Professional Development and Assistance in
Training, where you can put a resident legal advisor in that
particular country or some other mechanism, both in terms of
your skills and experiences or your human capital to have them
in place.'' If Justice can serve that need, we will then go
advise the other members of the Terrorist Financing Working
Group that we are deploying and make appropriate arrangements
to share what we are experiencing once we have deployed,
whether that is short term or long term. So that there is an
assessment of who is going to be held accountable, what the
specific needs are, how long that needs to be implemented or
deployed, and then how you will measure and track the success
of the specific country. And we go through each of the
different countries with that kind of analysis and coordination
with Treasury. We cannot be everywhere at all times so we
respect and understand the value that the Treasury contractors
or other agencies provide and welcome that as long as there is
appropriate coordination at the outset so that we are giving
the best assistance that we can.
Mrs. Wasserman-Schultz. So the quarrel over contractors or
no contractors has essentially been resolved and you are
looking at it on a case-by-case basis?
Mr. Sabin. I believe that it has been resolved. Will it be
perfect for every matter going forward? I cannot promise you
that. But I think that from our perspectives sitting here
today, we understand our roles, we understand our particular
lane, and hopefully that there will not be any issues in the
future.
Mrs. Wasserman-Schultz. Thank you. My other question is for
Treasury. According to the GAO report, Treasury rejected GAO's
recommendation that your Department provide more complete
information on the nature and extent asset blocking in the
United States in your annual report to Congress. And, in fact,
the GAO report states that Treasury wants to discontinue the
requirement that Treasury produce that annual report all
together. Why does Treasury think that it should not be
required to report to Congress?
Mr. McDonald. I made it a point to touch base with my
colleagues in the Office of Foreign Assets Control before I
came up here today because since I am not an official from OFAC
and do not really have a mandate in that area, I wanted at
least to be able to provide as much information as I could
about the current status of the issue that you raise. And I am
advised by OFAC that the TAR, which is the vehicle for
providing the information that you are referring to, is in the
clearance process and is expected to be submitted to Congress
this month. So I think that is in the next 24 days, if my math
is correct. And that is as much as I know about it as of today,
but I will be happy to take your question back with me and get
more from them if you would like.
Mrs. Wasserman-Schultz. Thank you. Madam Chairwoman, I
realize my time has expired but I think that is a really
important piece of information.
Chairwoman Kelly. And the committee officially requests a
response to that question. Mr. McDonald, would you like to
continue?
Mr. McDonald. May I share an anecdote that relates to the
question that you raised earlier, Congresswoman, and that
others have raised about how these kind of things can happen
that an advisor might not respect or might overstep the
boundaries of what he or she is supposed to do in a country and
wander into the lane that is appropriately reserved for another
Agency. When I was an advisor in Albania, I was from time to
time asked to provide information on things that I knew
something about actually, but I did not have a mandate to
provide. My counterparts from that country, who did not
understand really the structures of our Government, and whose
own government did not have such formalized structures, found
it very difficult to understand why, if I knew something, I
couldn't go ahead and just tell them. The answer is that, and
this was not an answer that they enjoyed hearing, was that I
have to be disciplined, I have to respect their own needs, and
their desires for information as quickly as possible, that I
have to respect the mandate under which I am operating in that
country. And I offer that anecdote as a way of indicating that
sometimes the difficulties that we are talking about today
arise out of the most positive of motivations, the motivation
from a country to get information as quickly as possible, as
efficiently as possible. The motivation for an advisor who is
on the ground and has established a working relationship with
those counterparts is to be helpful, but the right answer and
the right thing is to respect the lines of authority. We are
going to do that, but I offer that just as a real life on the
ground example of how sometimes these things can happen.
Mrs. Wasserman-Schultz. Madam Chairwoman, I would just
conclude by saying that if there was a better working
relationship between the three Departments, then you probably
would not run into problems like that. That is what Memorandums
of Understanding are for.
Chairwoman Kelly. Let's hope. Ms. Moore.
Ms. Moore. Well, good afternoon, thank you so much, Ms.
Kelly, for calling this meeting. It certainly is responsive to
the minority party to follow-up with this hearing. I wanted to
follow up on things that have already been mentioned but give a
very specific example, and I would like to ask Treasury and
Justice about terrorist financing, about freezing the assets of
the Muslim community. And, Madam Chairwoman, I would like to
enter into the record an article from The Washington Post
called, ``The Crime of Being a Muslim Charity,'' without
objection?
Chairwoman Kelly. So moved.
Ms. Moore. Thank you. And my constituents are concerned
that of the dozen or so charities that have been frozen, they
would like to know how many of these employees, board members,
or officers of these charities has Treasury convicted of aiding
terrorists and what specific steps have you taken to sort out
those funds that are terrorist financing and those that are
simply part of their Zakat, which is like our tithing, that
they are required to do as one of the pillars of their
religion. And to really release those funds toward the Tsunami
and Katrina and certain other activities where they really have
wanted to contribute?
Chairwoman Kelly. Mr. McDonald, this is not a closed
informational hearing, I just wanted to remind you of that.
Mr. McDonald. Thank you. Here, again, I am going to have to
take your question, and I will take your question immediately
back to my colleagues in TFI. I do recall, again from Under
Secretary Levey's testimony earlier this week before another
body on the Hill, he referred to and gave some information
about the process of freezing assets of charities. I work
everyday with my counterparts in TFI, Deputy Assistant
Secretary Glaser, Assistant Secretary O'Brien, and others, and
I will bring your question to them with dispatch.
Ms. Moore. Well, thank you. And I just want to pursue a
line of questioning that my other colleagues have pursued as it
relates to this Memorandum of Understanding. With all respect
to your internal process and internal agreements, GAO, which is
a respected organization for their audits, has indicated that
your internal agreements are ad hoc, they are mutable, they are
non-transparent, and I have heard you, Mr. Sabin, indicate that
this process is evolving. Well, what would be the harm in
having a Memorandum of Understanding as a baseline
understanding so that we would have committed in writing a
starting point and recognizing the evolution of the Memorandum
of Understanding, why not take on seriously GAO's
recommendation to have this document at least as a starting
point?
Mr. Sabin. To take the GAO recommendation on its face, as
suggested, would not include the Justice Department in that
Memorandum of Understanding. The recommendation that came with
their draft report, Justice said why are not we included even
though we do not receive funding, we submitted that to GAO
specifically and they rejected that. So to take your question
at its face, they would not include Justice in that Memorandum
of Understanding as presently drafted. So our request in that
regard was not adopted. But we do agree that there should be a
baseline understanding of duties and responsibilities, and we
provided that information to the GAO. They did not think that
was sufficient. We are mindful of that. And, as we indicated,
are working to either clarify it here or as we go forward to
make it as accurate as possible for both the folks at the
headquarters level and in the field around the world about what
our duties and responsibilities are.
In terms of your question about investigations and
prosecutions, we would be happy to provide you information on
individuals like Abraham Alamoudi, who was head of the American
Muslim Council, involved in raising of funds, who was charged
with criminal offenses, pled guilty and was sentenced to 22
years incarceration and is currently cooperating with law
enforcement personnel. I would refer you to the Dallas Holy
Land Foundation, I cannot talk about it specifically because it
is an indicted matter, but a grand jury has passed on a true
bill of indictment regarding those individuals and a number of
those individuals have previously been convicted of other
offenses in the Infocom trial that was conducted down in Dallas
last year. I would refer you to Chicago with Mr. Arnout who was
convicted of racketeering charges and was sentenced to a
considerable sentence in the northern district of Illinois. I
can provide you other cases not only in domestic United States
prosecutions, but with our foreign counterparts where we have
either shared information on an informal or formal basis,
provided cooperating individuals to testify in their terrorist
financing prosecutions, so our cooperators not only fueling the
intelligence cycle so that information is fully shared
domestically but on an international realm.
Ms. Moore. Can I just follow up because I realize my time
has expired, Ms. Kelly. Can you also include in that report,
and congratulations on tracking down this terrorist financing,
but could you also include in that report what efforts or what
mechanisms are in place to divert those funds to the
appropriate places where people claimed that they wanted the
financing to go? My constituents have said that they have
wanted it to go towards the Tsunami and Hurricane Katrina, and
we sure need the extra bucks, so can you tell me about how we
can unfreeze those assets so that they can reach the
appropriate and intended charities?
Mr. Sabin. The charity question is one that in the
interagency process we are working to effectively address
because you do not want the ideals of the American people that
are contributing their monies for humanitarian goals to be
abused by a particular entity or a specific individual, so it
would be a fraud on the donor with respect to that particular
mechanism.
Ms. Moore. Exactly.
Mr. Sabin. And that is an area where we are really trying
to ensure that we have not fraudulent practices and on top of
that those fraudulent practices allowing for the flow of monies
to terrorist organizations so that is a key priority, not only
of the Justice Department but all colleagues in the interagency
process. And we would be happy to work with our counterparts
not only on the blocking aspect but the ability to investigate
and effectively prosecute.
Chairwoman Kelly. Thank you very much, Ms. Moore.
Ms. Moore. And unfreezing. Thank you so much, Ms. Kelly.
Chairwoman Kelly. I might point out that part of the
problem, as I understand the answer to your question, I do not
know that anyone has an accurate accounting of what has been
given where, and I think that may be part of the problem that
they have with it. But I appreciate the line of questioning. I
appreciate the fact that you came to the committee to
participate. And I very much appreciate the patience and the
cooperation of the people who are here on the panel, this panel
of witnesses. The Chair notes that some members may have
additional questions for the panel and they may wish to submit
those in writing. So without objection, the hearing record is
going to remain open for 30 days for members to submit written
questions to these witnesses and place their responses in the
record.
Again, we thank you for your patience and your answers.
This hearing is adjourned.
[Whereupon, at 1:15 p.m., the subcommittee was adjourned.]
A P P E N D I X
April 6, 2006
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