[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
HELPING THE DEVELOPING WORLD
FIGHT TERROR FINANCE
=======================================================================
HEARING
BEFORE THE
TASK FORCE TO INVESTIGATE
TERRORISM FINANCING
OF THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTEENTH CONGRESS
SECOND SESSION
__________
MARCH 1, 2016
__________
Printed for the use of the Committee on Financial Services
Serial No. 114-77
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HOUSE COMMITTEE ON FINANCIAL SERVICES
JEB HENSARLING, Texas, Chairman
PATRICK T. McHENRY, North Carolina, MAXINE WATERS, California, Ranking
Vice Chairman Member
PETER T. KING, New York CAROLYN B. MALONEY, New York
EDWARD R. ROYCE, California NYDIA M. VELAZQUEZ, New York
FRANK D. LUCAS, Oklahoma BRAD SHERMAN, California
SCOTT GARRETT, New Jersey GREGORY W. MEEKS, New York
RANDY NEUGEBAUER, Texas MICHAEL E. CAPUANO, Massachusetts
STEVAN PEARCE, New Mexico RUBEN HINOJOSA, Texas
BILL POSEY, Florida WM. LACY CLAY, Missouri
MICHAEL G. FITZPATRICK, STEPHEN F. LYNCH, Massachusetts
Pennsylvania DAVID SCOTT, Georgia
LYNN A. WESTMORELAND, Georgia AL GREEN, Texas
BLAINE LUETKEMEYER, Missouri EMANUEL CLEAVER, Missouri
BILL HUIZENGA, Michigan GWEN MOORE, Wisconsin
SEAN P. DUFFY, Wisconsin KEITH ELLISON, Minnesota
ROBERT HURT, Virginia ED PERLMUTTER, Colorado
STEVE STIVERS, Ohio JAMES A. HIMES, Connecticut
STEPHEN LEE FINCHER, Tennessee JOHN C. CARNEY, Jr., Delaware
MARLIN A. STUTZMAN, Indiana TERRI A. SEWELL, Alabama
MICK MULVANEY, South Carolina BILL FOSTER, Illinois
RANDY HULTGREN, Illinois DANIEL T. KILDEE, Michigan
DENNIS A. ROSS, Florida PATRICK MURPHY, Florida
ROBERT PITTENGER, North Carolina JOHN K. DELANEY, Maryland
ANN WAGNER, Missouri KYRSTEN SINEMA, Arizona
ANDY BARR, Kentucky JOYCE BEATTY, Ohio
KEITH J. ROTHFUS, Pennsylvania DENNY HECK, Washington
LUKE MESSER, Indiana JUAN VARGAS, California
DAVID SCHWEIKERT, Arizona
FRANK GUINTA, New Hampshire
SCOTT TIPTON, Colorado
ROGER WILLIAMS, Texas
BRUCE POLIQUIN, Maine
MIA LOVE, Utah
FRENCH HILL, Arkansas
TOM EMMER, Minnesota
Shannon McGahn, Staff Director
James H. Clinger, Chief Counsel
Task Force to Investigate Terrorism Financing
MICHAEL G. FITZPATRICK, Pennsylvania, Chairman
ROBERT PITTENGER, North Carolina, STEPHEN F. LYNCH, Massachusetts,
Vice Chairman Ranking Member
PETER T. KING, New York BRAD SHERMAN, California
STEVE STIVERS, Ohio GREGORY W. MEEKS, New York
DENNIS A. ROSS, Florida AL GREEN, Texas
ANN WAGNER, Missouri KEITH ELLISON, Minnesota
ANDY BARR, Kentucky JAMES A. HIMES, Connecticut
KEITH J. ROTHFUS, Pennsylvania BILL FOSTER, Illinois
DAVID SCHWEIKERT, Arizona DANIEL T. KILDEE, Michigan
ROGER WILLIAMS, Texas KYRSTEN SINEMA, Arizona
BRUCE POLIQUIN, Maine
FRENCH HILL, Arkansas
C O N T E N T S
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Page
Hearing held on:
March 1, 2016................................................ 1
Appendix:
March 1, 2016................................................ 43
WITNESSES
Tuesday, March 1, 2016
Adams, James W., former Vice President, East Asia and Pacific
Region, World Bank............................................. 10
Kimmitt, Hon. Robert M., Senior International Counsel, WilmerHale 6
Lowery, Hon. Clay, Vice President, Rock Creek Global Advisors;
and Visiting Fellow, Center for Global Development............. 8
Wechsler, William F., Senior Fellow, Center for American Progress 12
APPENDIX
Prepared statements:
Adams, James W............................................... 44
Kimmitt, Hon. Robert M....................................... 47
Lowery, Hon. Clay............................................ 52
Wechsler, William F.......................................... 59
HELPING THE DEVELOPING WORLD
FIGHT TERROR FINANCE
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Tuesday, March 1, 2016
U.S. House of Representatives,
Task Force to Investigate
Terrorism Financing,
Committee on Financial Services,
Washington, D.C.
The task force met, pursuant to notice, at 2:39 p.m., in
room 2128, Rayburn House Office Building, Hon. Michael G.
Fitzpatrick [chairman of the task force] presiding.
Members present: Representatives Fitzpatrick, Pittenger,
Ross, Wagner, Barr, Rothfus, Schweikert, Williams, Poliquin;
Lynch, Sherman, Ellison, Himes, and Sinema.
Ex officio present: Representative Waters.
Chairman Fitzpatrick. The Task Force to Investigate
Terrorism Financing will come to order. The title of today's
task force hearing is, ``Helping the Developing World Fight
Terror Finance.''
Without objection, the Chair is authorized to declare a
recess of the task force at any time.
Also, without objection, members of the full Financial
Services Committee who are not members of the task force may
participate in today's hearing for the purposes of making an
opening statement and questioning the witnesses.
The Chair now recognizes himself for 4 minutes for an
opening statement.
Thank you, everyone, for joining us today for the seventh
hearing in the House Financial Services Committee's Task Force
to Investigate Terrorism Financing. Today's hearing is
entitled, ``Helping the Developing World Fight Terror
Finance.''
I would like to again thank Chairman Hensarling and Ranking
Member Waters, as well as my colleagues here, for their
unwavering support as we continue to investigate the threat of
terror finance.
Our last hearing focused on trade-based money laundering
and the international cooperation which is required to
effectively combat it. The testimony from that hearing revealed
that the developing world is often a target for trade-based
money laundering and other illicit forms of value transfers due
to the lack of effective government institutions.
Throughout the lifetime of this task force, one fact has
remained consistent: Combating terror finance is and must
continue to be an international effort. The countries of
today's world are more interconnected than they have ever been
before, especially when focusing on the financial system and
the global trade system.
With this much integration, the weakest link in the system
becomes the target for exploitation by criminal organizations
and terrorist groups. Many nations in the developing world
simply do not have the financial means or the technical
knowledge to establish institutions to combat these threats.
This puts them in a situation where they are reliant on help
from the international community.
However, there is no central coordinating body mandated to
facilitate anti-money laundering and combating the financing of
terrorism capacity-building efforts on a global level through
training and technical assistance. With no plan to guide the
international community, many countries and NGOs act on their
own.
Within the United States there are several agencies and
offices charged with providing bilateral AML and combating the
financing of terrorism technical assistance. According to the
United States Department of State in a 2015 report to Congress
on money laundering and financial crimes, the United States
provided this type of support to more than 100 countries in
2014. These countries received technical assistance to improve
the quality of their financial intelligence units, customs
enforcement, and law enforcement and prosecutorial
capabilities.
I believe that today's hearing, with this expert panel of
witnesses before us, will help illustrate how the international
community is addressing this issue, how efficient the United
States is when delivering technical assistance, and how
coordination between United States agencies and our
international partners can be improved.
At this time, I would like to recognize this task force's
ranking member, my colleague Mr. Lynch from Massachusetts. He
has been a valuable asset and trusted bipartisan partner from
the start of this investigation.
I now recognize the ranking member of the task force, Mr.
Lynch from Massachusetts, for an opening statement.
Mr. Lynch. Thank you, Mr. Chairman. Thanks for your kind
words.
I want to thank Ranking Member Waters and Chairman
Hensarling, as well as Vice Chairman Pittenger, for holding
today's hearing.
I also want to thank our witnesses for your willingness to
help this task force with its important work.
Today's hearing will focus on how the United States can
strengthen our institutional capacity to combat terrorist
financing in developing nations. It is a special problem, a
unique challenge, I think, for the developing world.
Weak financial institutions in the developing world are
breeding grounds for corruption that can be exploited by
terrorists looking for innovative ways to move funds and to
finance terror. A lack of strong leadership, and ineffective
institutions in developing countries, have fueled the rise of
ISIS and Boko Haram and other terrorist groups.
I am pleased that we are holding this timely hearing to
examine what can be done to combat terrorist financing in the
developing world.
Just last week, the Wall Street Journal reported that cash
is traveling in and out of ISIS-controlled territories on
various routes that run through Turkey and Jordan, among
others. One of these routes starts near Istanbul's Grand Bazaar
and ends in the ISIS-controlled city of Mosul, Iraq. Another
route connects Amman, Jordan, with ISIS-controlled areas in
Iraq's Anbar Province. Yet another route connects southern
Turkey near Gaziantep and Kilis with Raqqah, Syria, ISIS'
administrative capital.
We have to work with Turkey and Jordan to cut off these
funding routes within their borders. We must also be willing to
provide technical assistance to help them shut down the many
companies that recently founded within their borders solely to
move money for ISIS.
In Iraq and Syria, poor leadership, a week economy, and
inadequate infrastructure helped create the political and
social environment that fostered the growth of ISIS. We need a
holistic, long-term approach when determining what an effective
regime to combat terrorism financing will look like in that
region.
According to the United States Department of State, the
support provided to combat money laundering and terrorist
financing to over 100 countries in 2014, both bilaterally and
with other donor nations and international organizations, has
been extremely helpful.
I am pleased with the U.S. leadership in this field, but it
is important for us to consider how to prioritize where this
technical assistance is placed and how to effectively implement
our efforts. If we are providing assistance to countries that
do not want to make real progress to combat terrorist financing
within their borders, our efforts will ultimately be futile.
I look forward to hearing the testimony from our witnesses
so we can examine the most effective models to help the
developing world, and I would like to yield my remaining
minute-and-a-half to the ranking member of the full Financial
Services Committee, Ms. Waters from California.
Ms. Waters. Thank you very much.
I would like to thank our witnesses for joining us here
today, as well as Chairman Fitzpatrick and Ranking Member Lynch
for holding this hearing that recognizes the need for strong
U.S. engagement in the world if we are to solve some of the
most difficult problems we face in a world that is increasingly
interconnected.
Active U.S. global engagement is critical to our own
national security and economic interests. We must remain
vigilant in understanding the depth and dimension of the
threats we face and the challenges we must meet in order to
uncover the identities and intentions of fanatics who are
plotting violence against innocent people.
In a global system, everyone's institutions and practices
are relevant, which is why U.S. efforts to curtail the
financing of terrorism are impeded in many ways by a lack of
institutional capacity in many developing countries. Effective
international efforts will require strong U.S. leadership over
the long term as well as, I believe, an international body with
the mandate and the expertise to coordinate efforts to combat a
problem that, by its very nature, requires a global response.
I thank you, and I yield back the balance of my time.
Chairman Fitzpatrick. I now recognize the vice chairman of
the task force, Mr. Pittenger of North Carolina, for 1 minute.
Mr. Pittenger. Thank you, Mr. Chairman, and Ranking Member
Lynch.
And I certainly thank Chairman Hensarling and Ranking
Member Waters for their leadership, as well.
Thank you for your continued dedication on this important
assignment to track terrorism financing.
Technical assistance is an important concept that attempts
to integrate developing countries into the legitimate network
of global financial institutions. When implemented properly, in
theory technical assistance can open markets in developing
countries, offering new investment opportunities and generating
economic growth.
This hearing is an important step for this task force to
determine the effectiveness of technical assistance in
developing countries, especially with regard to staving off
terrorism financing. It is essential that this task force learn
what works, what doesn't work, and what Congress can do to
improve this initiative.
For example, I am interested in exploring whether or not
technical assistance for economic crimes could be expanded or
merged with resources, including asset forfeitures and other
foreign aid we have provided to so many countries around the
world.
In Turkey, the United States has provided an average $10
million a year for the past decade in foreign aid. This is in
addition to the vast amount of foreign military sales we
provide to Turkey. What if some of these dollars and programs
came tied to combating economic crimes in Turkey and creating
additional accountability regarding terror financing?
Thank you, and I yield back.
Chairman Fitzpatrick. For the time remaining, we recognize
the gentlelady from Arizona, Ms. Sinema, for 1 minute.
Ms. Sinema. Thank you, Chairman Fitzpatrick and Ranking
Member Lynch, Ranking Member Waters, and Mr. Pittenger.
As we continue to work to build our global capacity to
combat terror financing and money laundering, we should
consider and evaluate U.S. policy responses to determine
whether our counter-terrorist financing tools are capable of
diminishing terrorists' ever-evolving source of funds. We must
ensure that our efforts to extend technical assistance and
capacity-building are effective and sufficiently resourced and
that Congress is proactive in providing any new legislative
authorities required.
What are we doing here and internationally to develop and
hone our ability to quickly identify and eliminate key revenue
sources for terrorists? What changes do we need to make in U.S.
policy and law to ensure that we are leading this effort and
have a standardized process, not an ad hoc response to
terrorists as they become a threat?
I look forward to hearing more from our witnesses today
about how we can improve our efforts to prevent the financing
of terrorism in developing countries and around the world.
Thank you, and I yield back.
Chairman Fitzpatrick. We now welcome our witnesses.
Ambassador Robert Kimmitt currently serves as senior
international counsel at WilmerHale. Ambassador Kimmitt has 40
years of experience working at senior levels of the Federal
Government. Most notably, he served as Deputy Secretary of the
United States Treasury from 2005 until 2009.
Prior to joining WilmerHale in 1997, Mr. Kimmitt was also
our ambassador to Germany. He has held several other distinct
titles, including Under Secretary of State for Political
Affairs, General Counsel to the Treasury Department, and
Executive Secretary and General Counsel of the National
Security Council at the White House.
Ambassador Kimmitt received his law degree from Georgetown
University.
Mr. Clay Lowery is vice president at Rock Creek Global
Advisors and is also a visiting follow at the Center for Global
Development. Mr. Lowery brings more than 15 years of experience
to the United States Government, primarily at the United States
Treasury, where he served as Assistant Secretary for
International Affairs. Mr. Lowery was also one of the original
staff of the Millennium Challenge Corporation in 2004, and he
helped drive its formation while serving at the National
Security Council.
Mr. Lowery is a graduate of the University of Virginia and
received a Master's of Science degree from the London School of
Economics and Political Science.
Mr. James Adams is a former vice president for the East
Asia and Pacific Region at the World Bank. Mr. Adams first
joined the World Bank in 1974 and he has held a variety of
positions there, including vice president and head of network,
operations policy, and country services. Before joining the
World Bank, Mr. Adams worked as a loan officer for Merchants
Bank in Syracuse, New York, and with General Agreement on
Tariffs and Trade in Geneva, Switzerland.
Mr. Adams studied at Colgate University and holds an MBA
from Princeton University.
Mr. William Wechsler is a senior fellow at the Center for
American Progress. His most recent position in government was
Deputy Assistant Secretary for Defense for Special Operations
in Combatting Terrorism. Mr. Wechsler previously served as
Deputy Assistant Secretary of Defense for Counternarcotics and
Global Threats, Special Advisor to the Treasury Secretary,
Director for Transnational Threats on the staff of the National
Security Council at the White House, and Special Assistant to
the Chairman of the Joint Chiefs of Staff at the Pentagon.
Mr. Wechsler is a graduate of Cornell University and
received a master's degree from Colombia University's School of
International and Public Affairs.
The witnesses will each now be recognized for 5 minutes to
give an oral presentation of their written testimony. And
without objection, the witnesses' written statements will be
made a part of the record.
Once the witnesses have finished presenting their
testimony, each member of the task force will have 5 minutes to
ask questions of the witnesses.
On your table are three lights: green; yellow; and read.
Yellow means that you have 1 minute remaining. Red obviously
means you are out of time.
With that, Ambassador Kimmitt, you are recognized for 5
minutes.
STATEMENT OF THE HONORABLE ROBERT M. KIMMITT, SENIOR
INTERNATIONAL COUNSEL, WILMERHALE
Mr. Kimmitt. Thank you, Mr. Chairman, Mr. Vice Chairman,
Ranking Member Lynch, and members of the task force. Thank you
for this invitation to appear and, moreover, for your in-depth
look at this important topic.
On a personal note, it is a particular pleasure to appear
before Vice Chairman Pittenger, with whom I welcomed back our
hostages from Iran when they arrived in Landstuhl, Germany, in
January, and also Ranking Member Lynch, with whom I attended
the Munich Security Conference last month.
You have heard from many experts in this field, and my
fellow panelists today will contribute significantly to the
depth of your efforts. I thought that I might make a few
broader observations to start our discussion.
First, ISIS and other enemies who use illicit financial
flows to support terrorism against the United States and its
allies are smart, creative, and adaptable. The world's
financial system, once entered, provides a borderless, near-
seamless opportunity for our enemies to use the system to fund
insidious operations designed to inflict near-and long-term
harm on the United States. We must, therefore, be equally
smart, creative, adaptable, and especially well-coordinated in
protecting that system and defending it against abuses.
Second, in 40 years of working at senior levels of
government, I have learned that the vast majority of high-level
attention to an issue goes into the passage of legislation or
the making of a policy decision. Far less attention is paid by
principals to the crucial task of implementation of laws and
policies, and that is why your bipartisan, detailed look at
terrorism finance is so unusual and so important.
Third, we will succeed in our efforts to impede terrorism
and other illicit financial flows only with a whole-of-
governments approach. I stress ``governments,'' plural.
Let me use the remainder of my brief statement to make some
observations and recommendations on point three, a whole-of-
governments approach.
First, host governments with whom we work to provide
technical assistance and other support in the fight against
illicit finance must be full partners in the effort. If they
believe that the international community is simply and
paternalistically imposing a program on them, that program will
never have sustained success.
And one size does not fit all. Each country program will
have a common core, but will also have unique local features.
That is where technical assistance is so important.
U.S. leadership is vitally necessary but never entirely
sufficient. In addition to working with host countries, we must
also enlist friends, allies, and even competitors like Russia
and China, to join us in this fight.
Where possible, a U.N. Security Council resolution should
be passed to lay the most effective international foundation
for common efforts, since both countries and international
organizations like the World Bank more quickly allocate
priority and resources to U.N.-mandated missions.
Where a U.N. resolution cannot be agreed to, we should look
to negotiate international compacts, as we did in Afghanistan
and Iraq, whereby post-conflict and other fragile countries
receive assistance but only in return for meaningful
commitments on their part including, crucially, assigning
priority to safeguarding their financial systems from abuse.
Third, for the United States to be the leader it must be,
we need to ensure that we work as one government in this
existential fight against terrorists and their financiers.
Our national security today is as much about commerce and
finance as it is about diplomatic and military capabilities,
and each of the critical agencies--State, Treasury, Defense,
Justice, and DHS--must work closely together on an interagency
basis under the direction of the National Security Council and
with the support of the intelligence community.
The interagency meetings at which counterterrorism efforts
are coordinated and effected are not just in the White House
Situation Room and elsewhere in Washington; they also take
place at embassies and military commands around the world.
We need to ensure, then, that not only agencies in
Washington but also their overseas posts have individuals
identified to ensure counterterrorism efforts are a priority
both at home and abroad.
When Clay Lowery and I were colleagues in government, we
increased from 3 to 24 the number of U.S. embassies that had
been assigned Treasury attaches. We also moved Treasury
officers to military commands and brought military officers
into Treasury to support the counter-terrorism finance effort.
One question you should ask as your effort continues is
whether, in developing countries of particular concern,
Treasury has representation at the U.S. embassy in that
country. If not, who in the embassy has the lead on countering
terrorism finance and how often does she or he meet with the
ambassador and country team to ensure both priority attention
and interagency coordination?
One last point: It is very important to have a close
partnership with the private sector in seeking to make this
whole-of-governments approach effective. As we work with U.S.
and overseas financial institutions, let us not forget the law
of unintended consequences. If we so harshly regulate banks
that they withdraw services from post-conflict and other
developing countries that are ideal breeding grounds for
terrorists and their financiers, we will drive the work of
these financiers into the shadows--unregulated and informal
financing networks that are difficult to both track and
disrupt.
We must expect banks to be held to high standards in this
area, but not set the bar so impossibly high that the only
rational business decision is to withdraw. In addition to
feeding the parlous economic conditions that give rise to
terrorists, withdrawal of financial services, sometimes called
de-risking, will make it even harder to succeed in the effort
you are so diligently pursuing to fight terror finance.
Thank you for this opportunity. I look forward to our
conversation.
[The prepared statement of Ambassador Kimmitt can be found
on page 47 of the appendix.]
Chairman Fitzpatrick. Mr. Lowery, you are now recognized
for 5 minutes.
STATEMENT OF THE HONORABLE CLAY LOWERY, VICE PRESIDENT, ROCK
CREEK GLOBAL ADVISORS; AND VISITING FELLOW, CENTER FOR GLOBAL
DEVELOPMENT
Mr. Lowery. Chairman Fitzpatrick, Ranking Member Lynch, and
members of the task force, thank you very much for this
opportunity.
Just to the last point that Ambassador Kimmitt just
mentioned, in 2015 I chaired an international working group for
the Center for Global Development to analyze whether the
implementation and enforcement of anti-money laundering and
countering the financing of terrorism policies was impacting
poor countries. Our conclusion was a clear ``yes,'' and in ways
that unfortunately could undermine the very objectives that
these policies were put in place to prevent in the first place.
A very important policy goal of the United States is to
prevent finance from getting into the hands of bad actors, as
we all know. A different but also very important policy goal of
the United States is to allow finance to flow in the most
efficient and competitive manner possible.
These two legitimate policy objectives have come into
conflict, particularly in poorer countries around the world.
Those most affected are likely to include the families of
migrant workers; small businesses that need access to working
capital or trade finance; and recipients of lifesaving aid in
active-conflict, post-conflict, or post-disaster situations.
Under the current AML/CFT approach, banks are asked to
prevent sanctions violations and assess and mitigate money
laundering and terrorist financing risks, or face penalties.
However, regulators sometimes send mixed signals about how
banks and other entities should manage these types of risks,
and the penalties that we have seen have increased to the point
that maybe taking zero risk may be the best option for these
institutions.
For instance, in the 5-year period from 2010 to 2014, the
number of AML/CFT fines more than doubled while the amount of
these fines went from less than $1 billion in total fines to
over $15 billion.
The imposition of heavy fines on some large banks for
egregious contraventions of AML/CFT and sanctions laws may very
well be legitimate, but it is also clear that both the number
and amount of fines could be chilling on many financial
institutions that are doing their very best to adhere to the
law.
In essence, financial institutions are, as the Ambassador
said, de-risking by ceasing, in a wholesale fashion, to engage
in activities that are seen to be higher-risk, rather than
judging the risks of a client on a case-by-case basis, creating
yet another obstacle for poverty alleviation and economic
growth, especially in poor countries.
While this is not systemic, it is having an effect on
things like remittance flows and correspondent banking
relationships.
Let's just take remittances. On a global basis, remittance
flows to developing countries have risen from being roughly the
same as official development assistance back in 2000 to now
today being 4 times the amount of official development
assistance. Obviously, they are very important.
Yet, despite a high level of commitment by G20 leaders in
2009 as well as substantial developments in payments
technology, remittance costs have barely moved down over the
past 5 years. Why is this?
While data does not allow us to isolate the cause of the
failure as being AML/CFT policies per se, the results from both
surveys and anecdotal evidence suggest that they are definitely
playing a role.
A recent survey by the World Bank has indicated that money
transfer companies--remittance providers--across a large number
of countries are reporting trouble obtaining or retaining bank
account access, largely because they were considered to be
high-risk clients.
The potential consequences of making remittance flows more
difficult and expensive are worthy of our concern. Either
people who depend on these financial flows for their everyday
livelihood will suffer, or we will see more and more of these
funds chased into the shadows of the financial system--in other
words, undermining the very goals that we set for AML/CFT
policy in the first place.
There is no silver bullet to solving this dilemma, but
there are areas where we can improve the situation. Our group
came up with five.
First, as you have mentioned, is to work in poor countries
to assist them with supervision, improving compliance, and
meeting best practice standards. Second, to assess much more
rigorously the impact of AML/CFT and sanctions enforcement on
poor countries.
Third, to generate and distribute much better data; the
data is very bad right now.
Fourth, to clarify and strengthen the risk-based approach
in some of the international standard--best standards.
And fifth, to facilitate the know-your-customer issues and
lower compliance costs.
On a positive development, in just the last few weeks we
have seen international financial officials from the G20, the
Financial Stability Board, the Financial Action Task Force, and
the IMF all taking steps to make progress in these areas.
The United States is a leading player in all of these
groups and is a leading player on the AML/CFT issues, and so I
commend this committee for addressing this issue front-on. And
so I put forward a few suggestions for Congress you can follow
up in my testimony.
In order to help developing countries fight terror finance,
technical assistance is critical. But we also need to
understand the problem better; we need to clarify terms and
rules; and we need to try to lower the cost of compliance.
In these ways, I think we will truly be making--working
with developing countries to help us all meet the different
policy goals and not be in conflict with each other.
Thank you very much.
[The prepared statement of Mr. Lowery can be found on page
52 of the appendix.]
Chairman Fitzpatrick. Thank you.
Mr. Adams, you are recognized for 5 minutes.
STATEMENT OF JAMES W. ADAMS, FORMER VICE PRESIDENT, EAST ASIA
AND PACIFIC REGION, WORLD BANK
Mr. Adams. Chairman Fitzpatrick, Ranking Member Lynch, and
members of the task force, the issue of addressing illicit
financial flows is understandably receiving increased attention
in today's world. The rapid and accelerating growth of
international trade has involved dramatic increases in
financial flows, particularly in developing countries.
As the chairman noted, it is perhaps inevitable that over
time, the global financial system would increasingly become a
target for the full range of criminal and terrorist actors.
Moreover, given their weaker institutional capacities and
systems, it is perhaps inevitable that developing countries,
particularly lower-income developing countries, would become
preferred targets for criminal and terrorist actors.
Gaps in banking supervision capacities and weak technical
skills make these countries attractive targets. Moreover,
governance and corruption issues within government
bureaucracies can often undermine even the efforts of honest
governments in these areas.
From a development standpoint, the standard response to
this situation has been to provide technical assistance--the
provision of technical experts to fill capacity gaps and
providing funds to help developing countries strengthen their
financial systems and address underlying capacity issues.
Indeed, over time technical assistance has typically involved
approximately 15 percent of total donor commitments.
Given the substantial amount of funding involved, I wish I
could argue that the development record of technical assistance
has been sterling; unfortunately, I cannot. While there are
many success stories, the fact is, overall, technical
assistance has not been an area of great success for the
development community.
There are many problems underlying this performance, but a
quick summary of common issues might be helpful. Often, the
recipient government does not provide an appropriate
environment for either expert staff or the long-term capacity
development programs.
Common problems involve resentment of higher salaries of
expert staff, the failure to assign local staff to work with
experts, the absence of comprehensive ministry plans to ensure
that local staff training programs are put in place, and
sometimes the simple refusal to hire the needed expertise.
Donor behavior presents problems as well. Coordination is
problematic. Experts from different countries will compete for
attention of senior officials and give conflicting advice;
project-based funding will frequently end before adequate
capacity is established; key government staff are poached by
donors offering better terms than the government does; and
often donors push for experts that recipient governments do not
feel are required.
Therefore, while I fully agree that a concerted effort on
building expertise and institutional capacity to address the
challenges of illicit financial flows is a priority, I would at
the same time argue that approaching this in a business-as-
usual mode is unlikely to have effective impact.
In a recent presentation I made on technical assistance, I
made an initial attempt to outline some steps that can be taken
to effectively meet this challenge. I began with developing a
number of specific steps that need to be taken by recipient
governments. This effort basically revolves on the need to
ensure that governments are not simply giving lip service to
the issue but instead are firmly committed to achieving real
capacity improvement.
A number of suggestions: an explicit long-range plan that
would set out levels of expertise required and detail the
needed training to ensure local staff would be an important
step that recipient governments could take; an explicit
commitment of the local staff required to both work--to work
with international experts and to eventually replace those
experts; and a budgetary commitment of the local counterpart
resources needed to support all of the activities that are
being done to put in place effective capacity.
At the same time, donors, including the United States, need
to get their acts together. I see a number of important changes
that could be made.
First, a commitment to fully fund recipients' proposed
long-term programs of export support and local training. I
would note that this will often take longer than the typical 5
years of project support that most donors provide.
Second, an agreement among donors on funding a single T.A.
program with the assurance that all donor support would be
subject to the discipline of an agreed program. The historical
practice of each donor developing individual programs should
cease, and ongoing programs could be folded into a unified
program. It is unfortunate that Paris agreements on better aid
coordination have not been a focus of T.A. programs, and the
lack of coordination remains a constraint that could be
addressed through a unified approach.
I think a single donor should be given leadership for this
effort in individual countries. That donor could change across
countries.
I think as scholarship programs and training programs will
be a key resource, these should be consolidated and treated as
a single resource.
I am a believer in the increased use of twinning. The
reference was made to the very good program that Treasury put
in place that I saw in some African countries, and I think
having people who are involved in these issues from developed
countries can be an asset.
And finally, I think some consortium of a limited number of
donor and recipient governments could be established to oversee
this program and make sure it remains effective and has the
impact intended.
In conclusion, I would note that none of these actions are
that hard, but unless a changed approach is taken, I remain
skeptical that an important impact can be had on this issue.
I think that the issue of building capacity to deal with
terrorist financing, in fact, will offer a unique opportunity
to attempt a different approach to technical assistance. It has
the advantage that it is important to both donor and recipient
governments. No country can afford to be locked out of the
global financial system.
In addition, considerable capacity exists in developing
country governments and banks to help deal with this issue, and
the costs of addressing this issue pales in comparison with the
risks of not addressing it.
Thank you.
[The prepared statement of Mr. Adams can be found on page
44 of the appendix.]
Chairman Fitzpatrick. Thank you, Mr. Adams.
Mr. Wechsler, you are now recognized for 5 minutes.
STATEMENT OF WILLIAM F. WECHSLER, SENIOR FELLOW, CENTER FOR
AMERICAN PROGRESS
Mr. Wechsler. Thank you very much, Chairman Fitzpatrick,
Vice Chairman Pittenger, and Ranking Member Lynch. Thank you
for holding this hearing and for inviting me.
Very quickly, I have looked at these issues for multiple
agencies across multiple Administrations and I wanted to offer
four lessons that I have learned about building partnership
capacity, both in terms of dealing with terrorist financing and
more widely in combating terrorism. Then, I wanted to conclude
with just two recommendations, one tactical and one strategic,
for you.
First of all, repeating what some of my colleagues have
said, virtually nothing can be achieved unless the host country
itself is fully committed to reform and fully committed to
working with the United States to achieve that reform. If that
doesn't happen, it is a recipe for wasting taxpayer resources
at best, and strategic failure at worst.
Second, specific programs to build partnership capacity to
combat terrorist financing should be integrated into a wider
strategy to build associated capabilities. It does relatively
little good to draft model anti-money laundering laws and
regulations if the host country has little ability to enforce
those laws.
Helping to build another country's police force isn't as
useful if there is no effective judiciary. And even if there
are judges willing to convict terrorists and their financiers,
then there needs to be prisons to keep them.
All of these discrete but interrelated and interdependent
elements seem to be woven together. But unfortunately, while
there is no shortage of other donor countries that are willing
to send a few lawyers over for a few trips to write model
legislation or model regulations, there are much fewer that are
willing to help a country build prisons, and that is a
systematic problem.
Third, foreign assistance is most effective when it is
targeted narrowly but executed broadly. Let me explain what I
mean by that.
``Targeted narrowly'' means focusing on building small,
elite teams, whether it is military or law enforcement or
regulators, that you can really trust. ``Executed broadly''
means that when you have those teams, you are helping them from
soup to nuts. You are training them; you are equipping them;
you are advising them; you are assisting them; and you are even
accompanying them in their work that they are doing on a daily
basis.
I have found that if you are doing a full range of those
types of assistance, then your partners most rapidly build up
their own learning curves. When you instead try to do things at
a very shallow level but with an ambitious scale, that is when
we end up wasting a lot of money.
Fourth and perhaps most importantly, the entire process of
building partnership capacity holistically works best in the
American system when it is led by an especially capable
ambassador in the field with a good country team. The country
team needs to be made up of all the different agencies and
departments, as Secretary Kimmitt was mentioning before.
In the military, we always insisted upon the unity of
command. A good, strong ambassador brings that unity of command
to the civilian side of the work that is being done. People in
Washington can then focus on supporting that strategy with the
necessary resources, including coordinating international donor
conferences.
But unfortunately, we don't always have the benefit of such
strong ambassadors. And when that happens, the task of
developing the assistance strategy falls back to inside the
beltway, which is rarely, in my experience, a recipe for
success.
Let me then talk about the two recommendations I have based
on those findings.
First and foremost, the Congress--you have already
provided, I believe, virtually all of the fundamental legal
authorities required for the Executive Branch to provide
technical assistance and other capacity-building to combat
terrorist financing. Budgets for such assistance, however, both
at the State Department and other operational agencies, should
be increased.
And equally if not more important, the personnel in key
agencies, such as Treasury, needs to be expanded, particularly,
as Secretary Kimmitt said, in the field in the embassies. That
is where the work needs to get done, and we don't have enough
people out forward.
The last recommendation I want to say is that there is one
additional way in which our coordination of terrorist financing
efforts might be improved. In the George H.W. Bush
Administration, the United States led the way by creating
FinCEN; and then during the Clinton Administration, we led the
way through FATF to export that idea of FinCEN to other
countries by encouraging them to create financial intelligence
units and creating an international organization, or the Egmont
Group, to coordinate amongst those units. That was a wonderful
success of exporting a good idea from the United States abroad.
The last two Administrations have had another good idea,
and that was to create the Office of Intelligence and Analysis
inside the Treasury Department to help all of our sanctions
work. That was done under George W. Bush, and under the Obama
Administration that the assistant Secretary has also become the
national intelligence manager for the director for national
intelligence.
We still, to my knowledge, are the only country in the
world that has an element of the intelligence community inside
its financial ministry. I know from my experience in the United
States how incredibly important that is to the warfighter in
the field, and to our entire sanctions process.
If we could use a similar process as we did during the
1990s to export this good idea from the United States and
encourage at least our G7 partners to develop similar if not
exactly identical organizations within and coordinated with
their financial ministries, I think we would all be better off.
Thank you very much.
[The prepared statement of Mr. Wechsler can be found on
page 59 of the appendix.]
Chairman Fitzpatrick. Thank you, Mr. Wechsler.
I now recognize myself for 5 minutes for the purpose of
asking questions.
Ambassador Kimmitt, who determines whether an embassy is
assigned, from the Department of Treasury, an attache? How is
that decision made?
Mr. Kimmitt. It originates in the Treasury, Mr. Chairman,
and becomes part of the internal personnel process, the
internal budget process. It eventually has to be approved
through the Office of Management and Budget.
But then to put any non-State Department officer into any
embassy in the world, it has to go through a process where
acceptance of that representative is cleared by the State
Department. And then if there is a difference, say between
Treasury and State, which is rare but it has happened, it is
resolved by the National Security Council.
Chairman Fitzpatrick. So would there be certain situations
or conditions where a Treasury attache or a counter finance
terror expert from the Department of Treasury would actually be
required for an embassy, or is it a case-by-case basis and a
subjective matter?
Mr. Kimmitt. It is really a case-by-case basis. When I
first worked at the Treasury back in the second Reagan
Administration, we had 36 attaches around the world. By the
time I came back in the summer of 2005, that had gone down to
three embassies: Tokyo; Baghdad; and Kabul.
With Clay's help, and the help of Stuart Levey and his
team, we built that back up to 24 nations. In some nations,
they needed more fiscal and monetary assistance; in others, it
was counterterrorism. Clay and Stuart had to split the budget
depending on which persons went out.
But it was an initiative we took, strongly supported by
OMB, the President, and the State Department. I think, again,
as I said, I would look at the countries of concern and ask who
is making sure that the issues of concern to you are well-
represented around that interagency table that is the
ambassador's conference table.
It could be a full-time Treasury attache; it could be a
Treasury attache with regional responsibilities; it could be a
technical assistance person; it could also be people from other
departments or agencies. I just want to make sure the function
is covered, that someone is going in on a daily basis to talk
to the principal AML people in that government, but also talk
to them about fiscal and the range of other issues that are
quite important.
I would note one thing: We are an exception in the United
States in that our Treasury Secretary used to be, but for
almost 100 years has not been, responsible for the U.S. budget.
Almost every other finance minister around the world is also
his or her country's budget director.
So if you want these people to support programs, whether it
is education spending, defense spending, or AML spending, it is
good to be in touch with that finance ministry on an ongoing
basis. I find that works best when a Treasury person is doing
that.
Chairman Fitzpatrick. When you were Ambassador to Germany,
you did have a Treasury attache or did not?
Mr. Kimmitt. I did. The embassy was in Bonn at the time. We
had our Treasury attache in Frankfurt because that is where
both the Bundesbank was and also the heart of the financial
community. That is true elsewhere in the world.
If I recall, Clay, we didn't have the Treasury attache in
Brasilia. In Brazil, we had that person in Sao Paolo.
So you try to follow the money, but you want that person to
be in touch with the government and also the private sector.
Chairman Fitzpatrick. Could you rattle off a couple of
countries that do not currently have a Treasury representative
at the embassy that should have one?
Mr. Kimmitt. Mr. Chairman, I talked to Treasury before this
hearing; I did not ask that specific question. My understanding
is that it is still roughly the same number of countries that
we had. I think there have been some changes.
Clay, I don't know if you know it, but I don't have that
list, sir.
Chairman Fitzpatrick. Perhaps Representative Wagner might
want to weigh in on this at some point in time, given her
personal experience at the Department of State. But could you
suggest why such an important department such as the Treasury
is not universally represented at every embassy?
Mr. Kimmitt. I would say that Treasury is an agency that
only over the past 10 to 15 years has become integrally
involved in the work of the National Security Council. My own
view is the Treasury should be made a statutory member of the
National Security Council, along with State and Defense. Right
now, it is an invited member of NSC meetings.
We had not really developed the interagency culture at the
Treasury Department. It was rare to find people like Clay
Lowery, who had served at Treasury, then the NSC, then came
back to Treasury. So I would say that Treasury itself was not
that engaged and really didn't have a cadre who could have
played as effective a role overseas as they do now.
I think we have moved into an era where sovereign interest
rates are as important as nuclear throw-weights. And because of
that, we need at that interagency table, whether it be in
Washington, a military command, or in key embassies, people who
represent that economic and financial component.
The State Department does it well, but I think that most of
the relationships that they have at embassies would be with the
economic and financial team working in foreign ministries and
some other institutions. I think to be in persistently the
finance ministries, central banks, and elsewhere, it is
important to have someone who understands the way the Treasury
operates.
Chairman Fitzpatrick. Thank you for that.
I now recognize Ranking Member Lynch for 5 minutes.
Mr. Lynch. Thank you.
Why don't we just stay right on that?
I know that initially I was elected, basically the
Democratic primary on September 11, 2001, the day of the
attacks, I came onboard as the Democratic nominee, and we
didn't have much of a race after that. But the first thing we
started to do with the anti-terrorist financing was travel to
the Middle East.
And at that time we had a gentleman by the name of Joe
Parker, who was with Treasury, and he was helping us at the
ground level. We would actually have to go in--I will use
Jordan and Afghanistan were good examples. They didn't have
anti-money laundering legislation as part of their legal
framework.
So we had to work with King Abdullah and also with their
central bank, and they did an extraordinary session of the
legislature, which they called, and they adopted AML standards.
And then from there we established an FIU, and then from there
we started working on some of their issues.
They were very welcoming, however. They were exceptional. I
think that is a good example of how--and they are a big banking
center.
That model worked very well where you had a reasonably
reliable institution there, in terms of finance.
In some of these countries we are dealing with in Africa,
however, it is a whole different ballgame. And by the way, Joe
Parker was our man in Jordan; he was our man in Afghanistan; he
was our man in Morocco. So they were doing that North Africa,
was is it, MENAFATF, I think--Middle East-North Africa
Financial Task Force. So he was jumping around. I guess they
did a regional response there.
And we were sorely short of people. Treasury has tried very
hard to make sure there is coverage there, but I just think the
personnel and the demands on them from a budgetary standpoint
are a strain on them, and maybe we need to provide them with
more resources so they can actually step up and do this in
every single country.
But even 2 weeks ago when we went to the Syrian border we
did Jordan, Lebanon, and Turkey. They were sharing Treasury
personnel, in some cases. And in some cases, I believe it was
in Beirut, they had nobody there. When we asked for a Treasury
representative for looking at this problem, because we have
terrorist financing going across the border there as well, they
had nobody assigned to the embassy at that moment.
So it is something we really do need to look at.
But one of the things we are trying to look at here is the
developing world, and Africa in particular, where there is no
reliable government there. There aren't really laws on the
books that would allow us to prohibit this and, secondly, to
enforce laws against money laundering and also terrorist
financing. So we have to really start from a basic, basic level
of responsibility there.
One of the examples I think that is a stark example is
Somalia, where--the usual formula that we use is we explain to
countries that, ``If you want to be part of the legitimate
financial system, you have to step up. You have to adopt these
laws. You have to act like a legitimate government.'' And a lot
of them respond to that incentive.
They are not responding in Somalia. So as a result, all the
legitimate banks are afraid of reputational risk, so they have
bailed out. Everybody is gone. Even the few rudimentary money
transfer organizations that used to be there are no longer in
Somalia.
And our limitation, we have to fly in and we stay at the
airport. Recently, we are able to travel around a little bit,
but it is a lawless failed state. So there are some hawalas and
things like that in there, but we have no control over that.
So what do we do in that case? I know it is a long
question, but what do we do in the Somalia instance? How do we
respond to that?
Mr. Lowery. So, there is a lot in there. A few thoughts.
One is we have to also figure out how do you multi-
lateralize the technical assistance aspects. It cannot just be
the United States. We can't do it all.
And so there are other countries that can offer assistance
along the lines you were saying that Joe--I don't know Joe,
but--
Mr. Lynch. Parker.
Mr. Lowery. --was offering. The IMF is starting to look at
these issues a little more carefully. They work a lot with
central banks. The World Bank and the African Development Bank,
they could also be of assistance, as well as some of the
bilateral donors.
In a place like Somalia, Somalia is a problem for some of
the reasons that I was saying in my testimony. You make a very
good point: In post-conflict environments like Somalia, where
you have very, very, very weak governments, it kind of goes to
Mr. Wechsler's point, which is you don't--it is hard to find a
government that is able to build up the type of supervisory
efforts that you need in order to look at how remittance flows
are coming across the border and so that there are know-your-
customer rules being done not just at the supervisory level but
by the individual institutions themselves.
I think that the international financial institutions, at
the urging of the United States, can assist, but it is much
harder, and you are very right, on--in post-conflict
environments.
Mr. Kimmitt. I would add just one thing, if I may, because
it goes to Will's point: At least from the U.S. Government
perspective, it starts with a really good ambassador and a
really good country team. And the tougher the environment, the
more important it is that that ambassador has an interagency
focus in her or his discharge of duties.
I would look, for example, at the letter that each
ambassador gets from the President of the United States laying
out what his or her responsibilities are at post, because that
person is the President's representative. Does it mention these
kinds of issues? If not, then does it have the right priority
in our government?
When our ambassadors have their 2-week preparatory course,
sometimes called a charm course, does anybody from Treasury go
over and present to them or are the ambassadors expected to
ride the circuit and talk to people? By the way, do we do the
same thing in our Capstone program, which is where we train our
general officers? I really don't think we do.
And so the earlier we can get people into the interagency
environment and the more that we recognize that the role of an
ambassador today is more analogous to that of the national
security advisor--that is, coordinating this interagency
group--the more likely it is, then, that he or she will
designate someone on the staff to say, ``We have to keep up
with this.'' And maybe it is an OTA person, like Congressman
Pittenger said, who works first and foremost to see if we can
get a decent economy that takes away opportunity for
terrorists. But until we get that far, let's at least stop the
flow of bad funding.
But it really, I think, has to start with a terrific
country team backed up by the appropriate priorities here.
Chairman Fitzpatrick. The gentleman's time has expired.
Mr. Pittenger is recognized for 5 minutes.
Mr. Pittenger. Thank you, Mr. Chairman.
I would just like to ask, do you believe that these special
assistance efforts should be tied to foreign aid that we give
these countries?
Mr. Adams. Speaking from the multilateral side, I think on
a technical assistance issue like this tie-in would not be very
productive. But I think the point that has been made
consistently about ensuring that the governments are committed
to doing something about it is the key determining variable.
I would also say, to build on Mr. Lowery's point, that
there is broad interest in this across the donor community. So
in terms of mobilizing resources, one would not only, in most
countries, be looking simply at the United States, but looking
across the donor community to put in place and to support a
program.
If I could, just to come back to Mr. Lynch's point, I think
if you look at Africa and central banks in Africa, it is true
there are weaknesses, but there is a world of difference from
when I started working on Africa 40 years ago. And I think the
capacity and the commitment of governments to commit to a
better financial system, to commit to central banks that are
independent and work across Africa, is beginning to make
progress.
In a case like Somalia, where there isn't basic security
but--I think the fact is we are still struggling with
mechanisms. And in fact, this week in the bank, this fragile
state we--where people working on fragile state are gathering
together to try to figure out mechanisms to provide support in
situations where basic security doesn't exist. And I think
those are challenges which really still complicate and make
very difficult the donor community activities.
Mr. Pittenger. Should we be targeting our resources toward
countries that maintain poor FATF ratings? Countries that have
poor FATF ratings, should we be targeting our resources toward
these countries?
Mr. Kimmitt. Well, I think we should. And again, I think I
would make raising that FATF rating obviously the
responsibility of the host government, but I would hope that
every ambassador and every country desk officer here in the
States has that on their to-do list as something that is a
priority for us.
Right now, I am not sure that it would be quite as high as
some of the other political or security objectives, even though
I think it is a classic security objective.
Mr. Pittenger. Does Treasury have FATF ratings on their
radar screen when they are implementing this technical
assistance?
Mr. Kimmitt. I don't know that. Again, I have been gone now
7 years. I was kept, as Deputy Secretary, very closely briefed
by Stuart Levey, Danny Glaser, and their team on the FATF
process, the FATF ratings. When I would meet with visiting
people, largely from finance ministries and central banks, we
would talk about that.
I am sure it is current in the TFI Office, Terrorism and
Financial Intelligence Office. As to Treasury more broadly, I
don't know, Mr. Pittenger.
Mr. Pittenger. There is always a ``pay for'' in these
efforts. As we look at a means to pay, are asset forfeitures a
means that we could go to? Are there any restrictions or
reasons why that could not be a resource for paying for
implementing this?
Mr. Kimmitt. I am sorry, I just don't know. I know that
there has been a lot of legislation considered, some passed
recently, that have allowed certain classes of people to get at
certain asset forfeitures. Mostly, they were people who are
prisoners or families of people who are killed in terrorist
attacks.
For this specific purpose, I just don't know what the
authority would be. I think it is certainly something that
would bear exploring because, frankly, I think sometimes we are
better at seizing assets and penalizing banks than we are at
getting to the root cause of what the problem is, as Mr. Lowery
also said in his testimony.
Mr. Pittenger. In my discussions with President el-Sisi,
for example, I found that he was very eager to be in compliant
with our efforts in tracking the money, but he certainly lacked
the resources to facilitate what would need to get done. He has
extraordinary concerns throughout his country.
How do you believe that we should be assessing and
targeting how we fund and support these efforts for countries
like Egypt? How much of a priority should that be for us?
Mr. Wechsler. I think it should be a very high priority. I
think the key question is not only, as you suggested, where are
the gaps between what the requirements are under the FATF rules
and where their actual regime is, but going back to a comment
that many of us have made, what is their willingness, their
commitment to true reform? And where you have those two things
meeting, then we should be very much involved in helping them
get where they need to get.
The challenge often is is when there is a gap and when the
host country is not very committed, then we are in a challenge.
And sometimes we want it more than they do, and that is a
recipe for failure.
Mr. Pittenger. In this instance, what I sense was somebody
who wanted to be fully engaged but we were not there on their
behalf.
Thank you. I yield back.
Chairman Fitzpatrick. The gentleman's time has expired.
The gentleman from Florida, Mr. Ross, is recognized for 5
minutes.
Mr. Ross. Thank you, Mr. Chairman.
And thank you, gentlemen, for being here.
I think it is important that as this task force continues
its discovery, that we not only learn what is the best
multilateral way to engage in cooperation with the countries
that we are seeking cooperation and to provide technical
assistance; I am reminded that in our joint combined efforts in
the military to fight terrorism we perform a lot of
intelligence, a lot of surveillance, and a lot of
reconnaissance, and we share this.
But it also comes down to when it is time to take action,
nothing is done. In fact, many of our sorties that fly over in
the Middle East come back without executing their ordinances.
Ambassador, I was over in Qatar last month and I met with
Ambassador Dana Smith, whom I think is doing a wonderful job
over there, by the way. She was bragging about how there was a
Treasury attache who was there with her specifically for
counter-terrorism financing.
My question is, what do these attaches do? Do they just do
strictly technical assistance?
Mr. Kimmitt. If they are a Treasury attache, they represent
the Treasury Department broadly, as would a Defense attache. We
also have attaches from other departments and agencies,
including Agriculture and elsewhere.
A technical assistance person would have a narrower focus.
Mr. Ross. Okay.
Mr. Kimmitt. They are sometimes called an attache.
When Clay and I were together in government, the person
that we had in the Persian Gulf, I think was in Abu Dhabi, so
if they have moved someone to Qatar now, I think that is great.
Qatar is very important.
Mr. Ross. Yes, it is.
Mr. Kimmitt. And if they are an attache, they would be
doing everything from the AML work that you asked about, but
also some of the economic work that Congressman Pittenger
mentioned.
Mr. Ross. Are they empowered only when asked--when only
asked upon by the host country, or do they volunteer to provide
certain assistance and guidance and advice, or--
Mr. Kimmitt. Yes. That is a great question because I think
we want our forward deployed diplomats to be as proactive as
our forward deployed forces, right?
Mr. Ross. As aggressive as we possibly can.
And I agree with you, Ambassador, and I think what you and
Mr. Wechsler have said, that it really flows from the nature of
the ambassador how aggressive they can be and how aggressive
their team can be.
And, Mr. Wechsler, you hit on something that I think is so
very important, and I think we are kind of skirting around it
here, and I think the ranking member talked about this, which
is how do we incentivize these host countries to enforce? You
talk about in your testimony maybe we have more judges, maybe
we have more prisons. But what is their incentive to want to
enforce once we put them on notice of anti-money laundering or
trying to combat terrorism funding?
Mr. Wechsler. There are two ways: from the top down and
from the bottom up. From the top down it is all the normal
diplomatic ways that we try to encourage changes in policy. But
the other way that I was encouraging you also to think about
that gets less attention is from the bottom up. And what I have
found across multiple agencies, whether it is military, law
enforcement, or other civilian agencies, is when we work on
building a very small team of that host country--
Mr. Ross. So they buy in.
Mr. Wechsler. So they buy in. And we are working on a day-
to-day basis. The person doesn't have regional responsibility
so that they are flying in every other week and trying to check
up on them, but they are there sitting with them in their
offices every single day to really build up the common goals of
the organization.
And you find out that organization can be a better way to
achieve U.S. counterterrorism objectives than--
Mr. Ross. Do you think we could do that in Somalia?
Mr. Wechsler. Yes. We do that on the military side in
Somalia quite effectively. And as difficult as Somalia has
been, let's all remember where we thought it was going to be in
2006. We thought it was going to be where Syria is now, with
lots of external threats.
In Somalia, we have tens of thousands of African Union
troops being supported by Americans. We have spent scores of
millions of dollars to get to where we are now. One of the
questions is, perhaps, can a very small proportion of that
money be spent to help fix the remittance issue as well?
Mr. Ross. And that is the incentive, I think, that we are
skirting around, is it is going to take some foreign aid to
incentivize them to cooperate with us.
How do we--yes, sir. Go ahead, Mr. Lowery.
Mr. Lowery. And I was just going to say there is a
different--there is one other incentive besides the ones the
two of you were just discussing, which is almost like a market
incentive, which is that if you have good policies in place for
AML/CFT, for knowing your customer, for supervision in those
areas, that could at least have--not--maybe it won't be the
biggest banks in the world, but it will be the Western Unions
of this world will start actually--
Mr. Ross. Right. We want to make sure that, yes, we are not
overburdening--
Mr. Lowery. And then that will be a good thing for the
people of that country, and so that is--
Mr. Ross. At least economic development.
Mr. Lowery. --incentive for politicians.
Mr. Ross. Thank you. I see my time has expired. I will
yield back.
Chairman Fitzpatrick. The gentlelady from Missouri, Mrs.
Wagner, is recognized for 5 minutes.
Mrs. Wagner. Thank you very much, Mr. Chairman.
And I would like to thank the panel for coming today and
appearing to discuss the important issue of stopping terrorist
financing in the developing world.
I also had the great privilege of serving my country as a
United States Ambassador in the more developed world of Western
Europe. But a place like Luxembourg has such incredible
financial institutions and banking, I can tell you we stopped a
good deal of terrorist financing from working its way through
the banks and institutions of Luxembourg.
And Ambassador Kimmitt is quite right, as is Mr. Wechsler,
from the standpoint of the outcome of your work is only as good
as your ambassador and the team that you have moving forward.
I felt, Mr. Chairman, because you asked the question, that
I did not have a Treasury attache at post but I did call upon
them on a case-by-case basis. They would come out if it was
something that needed an extra boost.
But really, at the end of the day, it is like everything in
life: It is about building relationships.
If I, as a United States Ambassador, could go to that
finance minister--there may be certain intelligence that I was
aware of, but without compromising any of that intelligence,
after a number of months I was able to build up such a rapport
and relationship with the government, with the prime minister,
and in particular the finance ministry, and to say: I need--the
world, our country, needs these actual assets or bank--these
things closed or shut down, these institutions, these
particular accounts, these folks. And they would do it 99
percent of the time really based upon the relationship that we
had built and our bond that we had through NATO and other
experiences.
So if you would like to comment, Mr. Kimmitt, please do. I
have some other questions about the developing world.
Mr. Kimmitt. I would just say one thing. Like you, I was a
political ambassador. I spent most of my time in government. I
had been in the Army. But I went out as a political appointee
of President George H.W. Bush, and we have had this real debate
about, is it good to send political appointees out?
We are the only country that does it. One-third of our
ambassadors are political; two-thirds are career foreign
service officers.
I think that is a tremendous strength for the United States
because when you get into countries like Luxembourg, Sweden,
Singapore, and Switzerland, who punch disproportionately above
their weight in the financial services community, to have
people from the private sector who have just sort of an ease of
relationship with the finance ministers, central bank
governance, and so forth, is very important.
That is tough to train late in life for a career foreign
service officer no matter how good he or she is. Our political
appointees do a much better job of covering Treasury's
interests.
Mrs. Wagner. I think you are absolutely right.
Now, as we have seen with ISIS, terrorist groups are
thriving in the developing countries and failed nation-states.
In fact, according to the IMF, larger GDP levels and higher
quality of domestic, economic, and legal institutions are
associated with greater compliance with anti-money laundering
efforts and combating the financing of terrorism.
That is why I think the technical assistance that is
offered by the United States and other developed countries is
so essential to help identify and stop terrorist financing in
these what I would call priority countries, and why it is
important that we fully coordinate those efforts in order to
maximize the effect.
In my little time that I have left, Ambassador Kimmitt, or
perhaps Mr. Lowery, whomever, I wanted to ask about the U.S.
Terrorist Financing Working Group, which has played a primary
role in this interagency coordination of providing counter-
terrorism financing technical assistance internationally.
According to reports by the GAO, the working group has not
convened recently. And in the absence of this working group,
how is U.S. counter-terrorist financing technical assistance to
foreign countries being coordinated, if at all?
Mr. Kimmitt?
Mr. Lowery?
Mr. Kimmitt. I will have to defer to the government to
answer the question of why it has not met. My impression,
though, is that there is still a very active dialogue and
interagency process in Washington around terrorist finance. I
don't think it translates as well to the field, as I said, but
on this working group, I do not have that statistic.
Mr. Lowery. I don't have the statistic either, but I can
say this: The technical assistance in this area, coordination
among the different--is not great, and--within the U.S.
Government. And that is something that can be improved upon,
and I think that people in the U.S. Government, Treasury and
State, it would be good to reach out and talk with them about
it: How do you improve upon this process?
Mrs. Wagner. Thank you, Mr. Lowery.
If I can just reclaim--and with a little bit of the Chair's
indulgence, they have been suspended since July 2015, and that
is a great concern to me. And I am wondering if it doesn't have
to do with a little bit of a power struggle between Treasury
and State. And I am wondering who would serve as a better
leadership role in the future, in coordinating these bodies and
groups and on this particular working group? Would it be the
State Department or would it be Treasury?
Mr. Lowery, in your experience?
Mr. Lowery. I think that it is probably a combination of
the two, and if it is not working well enough, especially if
people in Congress are unhappy, then that is where sometimes
the National Security Council can start taking more of a
leadership role, as well.
Mrs. Wagner. Any other quick thoughts on that before I
yield back what zero time I have?
Mr. Adams. And my experience is that the expertise at
Treasury is absolutely essential to have a constructive
technical dialogue.
Mrs. Wagner. I believe it is also.
Thank you. I yield back. I thank you for your indulgence,
Mr. Chairman.
Chairman Fitzpatrick. The gentlewoman yields back the
balance of her time.
The gentleman from California, Mr. Sherman, is recognized
for 5 minutes.
Mr. Sherman. Thank you.
How much money has been seized through the legal process
since 9/11 by our government and by other governments because
it is terrorist financing? Does anybody here know?
Is there a program in--if assets are seized do they become
part of--do they go to the general fund, or do they support
continued anti-terrorist financing activities? Does anyone--
Mr--
Mr. Kimmitt. I had focused, as Clay Lowery had, more on the
fines that have been issued, Mr. Sherman, I--
Mr. Sherman. Okay.
Mr. Kimmitt. And those do go in the general fund so they
can be put into other specific purposes. On asset forfeiture or
seizures, I am sorry I don't know the answer to that.
Mr. Sherman. Okay. What is the total financing available to
those entities in State and in Treasury that are primarily
focused on stopping terrorist financing?
Mr. Kimmitt. Again, I think somebody from government would
have to answer that. I will be candid with you: When I talked
to a few people in government to let them know that I was
coming up, and just try to refresh myself, I think they were a
bit surprised that they had not yet been called up, and maybe
that is going to be later in your process. But I think
questions like that, with, again, particularly budget detail, I
think are best left to the departments.
Mr. Wechsler. I believe that a significant proportion of
the funds that are used for technical assistance flow through
the State Department's international narcotics and law
enforcement account. There is also a little bit through the
State Department counterterrorism account, I believe.
I don't have the exact number, but I would be surprised to
a great degree if it was over $20 million to $30 million a year
for the whole world. In fact, I am pretty sure that there are
only four people in the State Department INL Bureau who work
full-time on managing those resources throughout the world.
Mr. Sherman. With that, I yield back.
Chairman Fitzpatrick. I now recognize the gentleman from
Kentucky, Mr. Barr.
Mr. Barr. Thank you, Mr. Chairman, and thank you for your
leadership in this important task force.
And to the witnesses, thanks for your testimony here today.
A recurring theme from many of you has been the need for
these host countries to buy in, to be fully willing
participants in combating the financing of terrorism
activities. And without that buy-in, you are not going to have
an effective means of limiting access to financing and curb
access to the financial system.
My question is, is the United States Government doing a
good job assessing which countries are fully engaged and
committed to countering financing of terrorism, versus those
that are not fully committed?
I will start with Ambassador Kimmitt.
Mr. Kimmitt. I think we are doing a good job of that
assessment. I am not sure that we do as good a job following up
on an assessment that said someone needs help.
I think the way that we talked about it before, what are
the incentives for them to get right in this area--I think you
have heard some interesting things today, including foreign
assistance, but importantly, bringing private sector
investment, because at the end of the day that will never
happen if someone thinks they are coming into a money
laundering cesspool.
Mr. Barr. And I would love to hear from the others, but the
reason why I asked the question is because a recurring theme
back home in Kentucky among my constituents is, why are we
engaged in the practice of appropriating funds for foreign aid
to countries that hate us? And this kind of falls in that
category.
Are we not adequately assessing our foreign aid budget and
whether or not we are effectively deploying those resources to
countries that are truly committed to helping us combat
terrorism, versus countries that, frankly, are the
beneficiaries of our foreign aid and are not truly helping us?
Mr. Wechsler. If I could suggest, I generally think we do
an okay job of that assessment. I think that there are two
challenges for that, though, which may explain why sometimes we
may fail.
Sometimes the country in question the overall U.S. policy
has made a great commitment to, whether it is Afghanistan and
Iraq, in so many different ways. And then there is a lot of
pressure to, ``Let's see if we can work with them on this
way.''
The other thing is--and this is what I would suggest
before--is you can be working with a small unit of people
inside the country who are actually very cooperative with the
United States even while the wider policy and the wider
population does hate us or isn't very cooperative. That doesn't
mean that you stop working with that group if you are really
achieving counterterrorism objectives with that group. And that
is what I would suggest you focus on.
Mr. Barr. Fair point. And is the U.S. embassy in that
country in the best position to make that assessment for us?
Mr. Wechsler. Yes. If you have a good ambassador who is
really running the country team that is fully staffed, you
should be deferring to that ambassador about really
understanding where you can find those partners. And sometimes
you have people who are on the ground for a long period of time
before they are able to find that partner in the right agency,
that one unit, that right element that you can work with.
Mr. Adams. Yes. Just to broaden it, I am obviously coming
at it from a more global perspective from the bank side, but
one of the special assets you have in this area is access to
the global banking system is absolutely critical in today's
world. And to the extent the issue is linked to that, you will
have in countries, regardless of where they stand politically
or regardless of what economic system they are pursuing more
broadly, certainly recognize the importance of keeping clean
with respect to the banking system and trying to put in place
the improvements to make sure that their banking system doesn't
become a target of the United States, the G7, or more broadly.
So in one sense you do have, not only at the smaller
technical level, which I certainly agree with, but even at the
broader political level there is certainly a recognition today
of the importance of maintaining and improving banking systems.
Mr. Barr. In my remaining time, when I was over in Jordan
back in October and with our embassy personnel, one of the
points that was made, and from the government in Jordan, was
that as important as it is in combating terrorism, killing and
capturing terrorists, we have to counter the narrative of
radicalization. The testimony is interesting to me about how
overzealous enforcement of AML and CFT policies could have the
counterproductive effective of facilitating or impeding
economic development, which could facilitate radicalization
among the population.
Any amplification of that testimony?
Mr. Lowery. Yes, that was, I think, largely my testimony.
The worry is that we are in countries--maybe not Jordan, maybe
Jordan, but I have seen in other countries in Africa, in the
Caribbean, and other places, where some of the policies that we
are following have in some respects chased some of our more
formal financial institutions out of those countries because of
the fear that they are going to incur some fine or they are
going to incur reputational risk.
And so I think that in and of itself could actually lead to
the very problem, one, that that finance is going to go towards
very opaque sources where we will not be able to see what is
going on; and two, that this--kind of more as you were getting
towards--this radicalization where they are like, ``The United
States is just cutting us off.'' It is something that we have
to think about and be very careful about.
And I think that people are starting to get it, but it has
taken a while before we acknowledge that we actually have
created our--a little bit of our own problem.
Mr. Wechsler. Sir, if I could just add very quickly, in the
1990s, as Al Qaeda was growing, their center of gravity--a
military term for the element that allows them to achieve their
strategic aims--was their financing. That is what turned them
from a small group of people who were whistling in the darkness
to people who could commit 9/11--their financing capabilities.
The center of gravity for the Islamic State is its
narrative, is its ideological narrative that it gives
throughout the world. And we as a government, we as an
international community, have done a very poor job of combating
that narrative.
Chairman Fitzpatrick. The gentleman's time has expired.
Mr. Barr. Thank you.
Chairman Fitzpatrick. The gentleman from Pennsylvania, Mr.
Rothfus, is recognized for 5 minutes.
Mr. Rothfus. Thank you, Mr. Chairman.
And I thank our panel for being here today.
I just want to get a little more education about assets
that we have out in the field.
Ambassador Kimmitt, I believe you testified that we now
have 24 Treasury attaches at various embassies around the
world, up from 3 since 2005?
Mr. Kimmitt. It had gone from 3 to 24 from 2005 to 2009. I
understand that it is about that number today, but I don't have
that exact number, sir.
Mr. Rothfus. Any idea how many more embassies should have
that kind of staffing that do not?
Mr. Kimmitt. Again, when I look back to my first tour at
Treasury, which was 20 years before that, we had people out in
36 countries at a time when we didn't have the concerns about
money laundering, terrorist finance, and so forth. So my guess
is we probably need to increase by about 50 percent the number
of attaches we have.
But I will also tell you, Treasury is a very small agency
with a very small budget, except for the IRS. You look at the
Treasury budget and think it is big, but 80 percent of it is
the IRS.
And we also, again, do not have people who have been on
that career track to go out to post and then come back to the
United States. I think this needs to be just part of Treasury
becoming more a part of the interagency and national security
community.
But my guess is--and again, I don't have that list, and
would defer to the government on that--that they could probably
find another 10 to 12 pretty quickly.
Mr. Rothfus. Would you have ideas of what countries we
might want to staff up in?
Mr. Kimmitt. Yes. I would certainly have the ideas if I saw
the current list. And again, when I think of the countries that
Clay and I and Stuart Levey worked on, one of the ones we came
up to immediately was Pakistan. I was going to NSC meetings
every week on Pakistan where we talked about the tough security
situation, tough political situation.
This all came from the fact that there was no economic
opportunity, that illicit funds were flowing all over, that
there were parts of the country in the upper northwest that
were off-limits. So we put an attache into Islamabad. A tough
post, but I couldn't see how Treasury could not have its
interests represented there.
I would have to, again, look at the list today and come--
Mr. Rothfus. Do you know if there are any attaches
currently staffed in countries that have no real interest in
stopping illegal money flows?
Anybody?
Mr. Kimmitt. Not to my knowledge.
Mr. Rothfus. Have we ever abandoned efforts in any
countries after coming to the conclusion that a country had no
interest in stopping illegal money flows? Are there countries
out there that just--we attempted to get in there and educate
them about the importance of this and they just did not show an
interest in cooperating?
Mr. Lowery. Part of it is whether--if it is a technical
assistance effort specifically, the attaches can help on that
area, but the technical assistance is kind of much more focused
on that exact issue.
I can't think of any off the top of my head, but I do
remember that there were countries where we were thinking,
``Boy, we should probably do some technical assistance there,''
and when we talked to the country, they were like, ``Yes, we
need help in other areas, but this is not an area that we
really would like to prioritize.''
And so we did focus on kind of some of the points that
others have made about the areas where we thought we were
really going to make a difference.
To remember those countries, it was close to 10 years ago,
so it is a little hard.
Mr. Rothfus. Is anybody aware of any countries today that
we really need to be in there providing technical assistance?
Mr. Wechsler?
Mr. Wechsler. Yes. I would suggest you start by looking at
the list of the countries where the greatest number of foreign
fighters towards the Islamic State originate from, and then ask
yourself, ``Are there Treasury attaches who are working with
those countries?''
If people are moving, money is also moving; other types of
facilitation networks are at place there, and we need to bring
the full range of U.S. Government capabilities, from the
military to the intelligence to law enforcement to financial
efforts, to combat those facilitation networks.
Mr. Rothfus. Mr. Lowery, the Financial Action Task Force
has issued guidance to help public authorities and the private
sector apply a risk-based approach to implementing CFT
measures. Critics argue that instead of managing these risks,
many financial institutions are seeking to avoid risk entirely
by eliminating business lines.
Some say this has led to the closing of correspondent
banking relationship and the exclusion of many low- and middle-
income countries from the formal financial sector. Do you agree
with that?
Mr. Lowery. Absolutely. It is a big problem. And I know
that the Financial Action Task Force is trying to clarify some
of the terms, but that is exactly one of the big problems out
there.
Mr. Rothfus. Any suggestions on how regulatory authorities
and financial institutions can balance robust CFT measures and
financial inclusion efforts?
Mr. Lowery. Yes. A few thoughts. First, a lot of the
information that we have right now is on survey data and
anecdotal information. I think that there is a lot better data
that can be had, and so therefore we can look at the impacts
much more carefully using data and not just stories.
Second, I think clarifying the rules so that financial
institutions have a better idea of what is going to be expected
of them, where are the lines to be crossed or not to be
crossed, will be very helpful.
And then third, working in the countries themselves, on
some of the technical assistance efforts that we have been
discussing before. I think a robust, comprehensive effort in
those areas could make some improvements, but it is going to be
a long slog.
Mr. Rothfus. I thank the panel.
Thank you, Mr. Chairman. I yield back.
Chairman Fitzpatrick. The gentleman from Texas, Mr.
Williams, is recognized for 5 minutes.
Mr. Williams. Thank you, Mr. Chairman.
And thanks to all of you for your service, and thank you
for being here today. I appreciate it.
I wanted to briefly key on some remarks that I think are
important to revisit.
Mr. Wechsler, you stated in your testimony that virtually
nothing can be achieved unless the host country itself is truly
committed to reform and sincerely interested in working with
the United States to reform themselves. Now I would say, like
most of us in this room, certainly none of us want to waste
taxpayer money on ventures that won't and often don't yield
meaningful results.
So how receptive are developing countries to recognizing
terrorist financing as a priority concern and accepting
assistance from the United States and other G20 countries to
identify and address issues in their nation?
Mr. Wechsler. By and large, since 9/11 the vast majority of
countries out there that I am aware of do recognize this as a
problem and are interested in improving their efforts about
this--not only because they want to help the international
community, because they want to protect their own countries
from these threats in the first place.
The second question is, do they want that assistance from
the United States? That will differ country by country. But by
and large, there is a pretty good international consensus that
this is a problem that needs to be solved.
Mr. Williams. How well are internal efforts by agencies
like Treasury and State coordinated within the United States
and with other donors?
Mr. Wechsler. What I believe is where we have a good
ambassador who does this very--who can really lead this, it can
be done very well. They can have a holistic plan for their
country; they can understand where all the different pieces are
in the different agencies; they can pull it all together, and
then the job of Washington is resources that for them. They can
also coordinate with other ambassadors in the field about their
other donor programs.
The places where I have seen it not work are the places
where that key position is either unfilled or is filled by
somebody who is either unwilling or incapable of really playing
that role. Then it tends to be--the risk goes up for lack of
coordination.
Mr. Williams. Ambassador, in your testimony you talked
about host governments to whom we provide technical assistance
needing to be full partners in the effort and that programs
should be--not be imposed on them but in an equal partnership
that takes into account unique local features.
I personally believe that most of the time when a Federal
program is one-size-fits-all, it usually is doomed from the
beginning. So can you tell us why technical assistance is not
one-size-fits-all?
Mr. Kimmitt. I think there are some elements, whether it is
economic growth or counter-terrorist finance, that are some
basic technical assistance skills. But you find, in the case of
anti-money laundering efforts, in some countries it is the
finance ministry that is in charge, in some, it is the central
bank, and in some, it is the interior ministry. As you know,
interior ministries in countries overseas don't take care of
national parks; they are really like our Justice Department and
FBI.
Some other places where you have the military in an
important position, they sometimes will take it more seriously
because they have to fight the effects.
So I think you have to have the core competency, but then
you have to have the flexibility to adapt the program to who is
the person in that foreign government most likely to help you
carry that coordinated message. And I find as I look from
country to country, it is a different person each time. A good
ambassador, a good country team will figure that out and really
devote the resources in that direction.
Mr. Williams. At the end of your testimony, you discuss the
importance of having a close relationship with the private
sector. I am a big private sector guy.
I agree that sometimes we don't always think about rules or
policies that we have put in place and their direct impact on
our own American businesses, so how do you suggest we partner
with the private sector to safeguard the global financial
system?
Mr. Lowery. I think it is a great question. I think if you
look at some of the private sector actors in these areas,
particularly companies like Western Union and some of their
competitors, there are more concerns about know-your-customer
rules than almost any other entity on the face of the Earth
because they don't want to get into a bad situation.
So if we can work with them, they can--they will actually
do best practices. They actually do their own technical
assistance in very poor countries because they want to make
sure that the entities where they are transmitting their money
also know their customers and do the types of work that we need
done in AML/CFT.
So I think that there are areas where we could be working
with the private sector, whether--it doesn't have to be Western
Union, but with the formal financial institutions that are
trying--that are sending money in large ways overseas. And I
think that--because they are going to be very concerned about,
how do we do technical assistance at the country level.
I think that is something where the private sector can be
just as helpful as the public sector.
Mr. Williams. Thank you very much.
And, Mr. Chairman, I yield back.
Chairman Fitzpatrick. The gentleman from Maine, Mr.
Poliquin, is now recognized.
Mr. Poliquin. Thank you very much, Mr. Chairman. I
appreciate it.
And I thank you all very much for coming here today as we
try to help figure out how to stop funding for terrorist
organizations around the world.
Gentlemen, we all know that what families around the world
want more than anything is opportunity for their kids, right--
and safety and security. Now, I am sure this is just as
powerful a force in developing countries as it is in our own
developed country. I would argue with you probably more so.
Now, when countries develop and there are opportunities for
the next generations, there of course is less of a propensity
to gravitate toward illicit behavior, and in particular, it is
more difficult for terrorist organizations to take hold.
You have a wealth of experience here at the table.
Mr. Kimmitt, I would like to start with you, if you don't
mind, sir. Can you educate us on two or three common mistakes
that developed countries like the United States have made in
trying to assist developing countries that lend itself into
difficult situations with respect to terrorism taking hold and
maybe inadvertently causing those terrorist organizations to
grow?
Mr. Kimmitt. First of all, I would say you are exactly
right. The best way to stem the advance of terrorist activities
is to foster economic growth.
Mr. Poliquin. Right.
Mr. Kimmitt. I think very often in the past we have given
money just for the sake of giving money. I think we have been
very paternalistic and just told people, ``This is the way
things have to go. We have an AID program. Follow our rules and
all will be well.''
I think we turned that around with the Millennium Challenge
Corporation, where we really graded countries on their ability
to use larger amounts of aid to the good effect for their
people.
Mr. Poliquin. Mr. Kimmitt, can I interrupt you there for
just a moment, because let's drill down a little bit deeper, if
I may.
So you are talking about organizations like--I know you
didn't mention them, but the World Bank, or the IMF, or ADB, or
what have you--organizations that United States taxpayers fund
to provide aid to countries that are developing so they can
foster freedom, and better lives, and so forth and so on.
What I heard you say, I think, is that our country and
others that fund these donor organizations have not always held
developing countries accountable for behavior that would do
everything it can to prevent terrorist activities from taking
hold.
Could you be more specific, sir, on how we can encourage,
incent, hold accountable these donor organizations that we
fund, as taxpayers, to make sure that doesn't happen?
Mr. Kimmitt. Focused on terrorist financing--
Mr. Poliquin. Absolutely.
Mr. Kimmitt. --in particular?
Mr. Poliquin. Yes, sir.
Mr. Kimmitt. The question came up earlier, do we condition
aid on how a country is doing on terrorist financing?
Mr. Poliquin. Why wouldn't we?
Mr. Kimmitt. I think that the important thing is whether
that is a factor that was taken into account in making the
allocation decision and for you to make your budget decisions.
Conditionality, I--
Mr. Poliquin. The taxpayers are funding these
organizations, so we have the appropriations authority, if you
will, before they can extend any credit to these--why in the
heck wouldn't we make it a function of receiving aid?
Mr. Kimmitt. I don't think it would be an irrational
decision on our part--
Mr. Poliquin. Okay, then we are going to--
Mr. Kimmitt. --about providing aid to a country that is not
going to take the employment of that aid seriously in counter-
terrorist--
Mr. Poliquin. Okay. What benchmarks have you seen, Mr.
Kimmitt, if I may--we only have a minute left--what benchmarks
have you seen where this behavior has worked that we can use as
a committee going forward to make sure we get this right?
Mr. Kimmitt. I don't know what the situation is today, but
one of the toughest situations that Clay and I worked on in
2007 and 2008 was trying to find ways to get money into the
West Bank. And that was something controlled by the Israelis,
and one of the real hesitations the Israelis had was how
serious the Palestinian Monetary Authority, the PMA, was about
counter-terrorist finance. And they understood--the Palestinian
Authority at the time--that without getting serious on that
subject, they were not going to be able to get the money they
needed to keep that going.
That was probably as sensitive an area as possible, a
trilateral discussion among Israel, the United States, and the
PMA. I hope we are providing that kind of rigor any time we
look at providing taxpayer dollars or encourage other friends
and allies like Israel to take actions to move money in a
certain direction.
Mr. Poliquin. Thank you, Mr. Chairman. I know I am out of
time, but if I may, it seems to me it doesn't make a lot of
sense for the taxpayers to be involved in the funding of
organizations that inadvertently foster terrorism that comes
back to bite us.
And so I think we are in agreement on that, Mr. Kimmitt.
And I know there is a lot more we can learn on how to do this
better and how to hold these donor organizations accountable
for fostering peace and stability and opportunity without
terrorism around the world.
Thank you, Mr. Chairman. I appreciate it.
Chairman Fitzpatrick. We will now have an additional round
of questions, and I recognize Mr. Barr of Kentucky for 5
minutes.
Mr. Barr. Thank you.
Mr. Lowery or any panelist who might have any insight in
this with experience in money laundering matters, are you aware
or have you heard of any unlawful schemes where educational
groups are funneling Federal dollars through their nonprofit
organizations into so-called religious movements?
Mr. Lowery. I have heard of it, but I don't know a lot
about it. I have seen allegations that there are companies in
the United States where they are doing educational services and
they are receiving some grants, and some of the money is being
siphoned off. Obviously, if anything like that is happening in
a negative way, they should be looked into very carefully and
investigated.
Mr. Barr. And you have a background at Treasury. Would
Treasury have jurisdiction or have oversight over that? What
Federal agency would be in a position to best monitor that or
take a look at that issue?
Mr. Lowery. I think that would be probably a combination of
the Treasury Department and the Justice Department.
Mr. Barr. Okay. And to the point of the multitude of
Federal agencies that have jurisdiction over CFT, and many of
you have actually made the point that because we have multiple
agencies claiming jurisdiction over matters pertaining to
terrorist financing and a need to better coordinate--what is
the best--what would be the best approach to enhancing that
coordination? Which Federal agency do you believe would be best
equipped to lead that coordination?
Mr. Lowery. There are a couple of parts there. One is, I
think, that it is a combination of the Treasury Department and
the State Department working together to better coordinate it,
and if it is not working very well, then I think the National
Security Council would need to step in.
I think that going beyond that goes to some of Mr. Adams'
point about the--it is difficult to do this huge international
coordination, but that doesn't mean that it isn't an effort
that should continue to be followed very carefully.
But I think within the domestic United States, it would be
the Treasury Department and the State Department, playing in
some respects a co-lead, because Treasury, to Mr. Adams' point,
has the technical expertise a lot of times; the State
Department has the reach around the world and obviously is the
lead representative for the United States going abroad.
Mr. Barr. Is Treasury, and specifically the Office of
Technical Assistance, doing a good job in terms of prioritizing
terrorist financing concerns?
Mr. Lowery. When we were in government, I think I would
have said ``yes'' pretty clearly, and my guess is that the
answer is probably still ``yes'' today. I just don't know all
the prioritizations anymore.
Mr. Adams. Maybe if I could just make a comment as a
consumer: When I was country director for Tanzania and Uganda
in the bank for 7 years, the one regular visit I got was from
the Treasury people working on anti-money laundering. It was
the only developed country that focused on that, and they
certainly gave me the best information, at the technical level,
that I got.
This was important in these two countries because they were
both countries that have liberalized their foreign exchange and
banking systems, so they had created banking bureaus. There was
a lot of foreign exchange flowing through these bureaus. They
were private sector entities; they were not government-owned
banks.
And the ability that Treasury brought to me to analyze, to
explain where the problems were, and to explain what I had to
know and what I had to follow up on the bank side--and I am
sure they provided a similar service to the IMF--was invaluable
for our focusing on some of the capacity-building issues and
substantive policy issues we were working with Treasury and the
Central Bank on.
Mr. Barr. Given the growing threats and the expansion of
terrorism, I think the Office of Technical Assistance (OTA) has
about a $15 million a year budget. Are they adequately funded
relative to the challenge? And are there a sufficient number of
Treasury attaches deployed internationally?
Mr. Lowery. Almost assuredly not, but I would have to look
at their budget and their prioritization. And obviously, they
do technical assistance in areas that are not AML/CFT, as well,
which are very important. But my guess is that they probably do
not have a big enough budget.
Mr. Barr. Any other comments?
Mr. Kimmitt. I was just going to make a slightly related
comment, and that is when we talk about funding of the
international financial institutions (IFIs), and multilateral
development banks (MDBs), I know that is a tough vote up here,
and I think those organizations need to be held to the standard
of what are they doing to advance U.S. interests for the
taxpayer dollars we are putting in.
One thing I would note, though: Isn't it interesting that
the most volatile part of the world, the Middle East, is the
only region of the world that does not have a multilateral
development bank? There is an Asian Development Bank, an
African Development Bank, a Latin American, and even a European
Bank for Reconstruction and Development. There is not one in
the Middle East. There is an Islamic Bank; there is an Arab
Bank for Reconstruction and Development, but these banks are
pretty idiosyncratic.
If you really want to get at the core of what the problem
is, it is the lack of economic opportunity in the Middle East.
It is a cesspool breeding ground that produces Al Qaeda, ISIS,
and the rest of these horrific groups.
We have to go after them on counter-terrorist finance, but
at the end of the day, if we do not get a growth strategy
focused on the Middle East, we are going to be dealing with
this generationally.
Mr. Barr. Thank you.
I yield back.
Chairman Fitzpatrick. The ranking member of the
subcommittee, Mr. Lynch, is recognized for 5 minutes.
Mr. Lynch. Thank you, Mr. Chairman.
I know some of the Members were looking earlier in the
hearing for a list of sort of bad actors and countries that
were noncompliant or not helping in--we didn't have the buy-in
from them. FinCEN does issue an advisory periodically, and I
know they sent this to me in January, but it lists a number of
countries that are noncompliant to certain degrees.
The most extreme noncompliance was listed for
countermeasures. And these are advisories that are sent out to
U.S. financial institutions, and they list Iran and the
Democratic People's Republic of Korea (North Korea) as being
countries that would require countermeasures on the parts of
our financial institutions.
Myanmar is also listed as a country that requires enhanced
due diligence, so it is sort of a warning to any U.S. financial
institutions: If you are doing business in Myanmar, we advise
you to be very careful and to apply enhanced due diligence in
dealing with any financial transactions in that country.
As well, there are a number of other countries here listed
for structural deficiencies in their anti-money laundering and
terrorist financing regimes, and those countries are--it looks
like alphabetical order--Afghanistan, Algeria, Angola, Bosnia
and Herzegovina, Guyana, Iraq, Panama, Papua New Guinea,
Syria--obviously--Uganda, and Yemen.
So Iraq, Syria, and Yemen you have--and Afghanistan--you
have civil war, at least in some of those countries, and open
conflict in others, so they pose a demonstrative--they do note
that Algeria has made some progress in an action plan to remove
those deficiencies. And Ecuador and Sudan, who had earlier been
on that list, had also made significant progress in adopting
technical changes and other measures to remove those
deficiencies.
So those are some countries that--in our discussion we were
talking about which countries would probably require or would
call out for the assignment of a Treasury official to that
embassy, and I think all of the countries on that list where we
do have embassies would probably satisfy that condition, and
that is probably something we should look at. And perhaps the
task force could advise the White House on providing enhanced
Treasury presence at those embassies to help us in this effort.
I don't have any more questions.
I want to thank you very much for your advice. You have all
made significant contributions to the discussion here, and we
really do appreciate your work and your willingness to appear
before the task force. Thank you.
I yield back.
Chairman Fitzpatrick. I thank the ranking member.
Mr. Pittenger of North Carolina is now recognized.
Mr. Pittenger. Thank you, Mr. Chairman.
And I thank each of you again for being here with us today.
It means a lot to us, and your advice and counsel has been
well-received.
In the broader sense, we clearly have conflicting issues
with Russia and with China. However, both of those countries
have vulnerabilities from terrorists. Can they be a reliable
partner overall in their process of addressing terrorism
financing?
Mr. Kimmitt. I actually find that countering terrorism and
terrorist finance is one of the few areas where we do have a
good dialogue with those two countries. And I would measure it
by the U.N. Security Council resolutions that we were able to
put into place precisely against the two countries mentioned by
Mr. Lynch--that is Iran and North Korea--that had very strong
financial sanctions elements in there, because both Russia,
with its internal concerns, and China, with its concerns about
terrorism and attacks, particularly in the western provinces, I
have found take this pretty seriously.
I am not saying that they are gold star recipients on this,
but I would say that particularly if you work within that
Permanent Five of the Security Council structure against some
of these worst actors--Iran and North Korea would be the two
exemplars--I have actually found that you can have good
discussions with those two countries--Russia and China-- on
that subject.
Mr. Pittenger. Do you see them coming to the FATF level?
Would they collaborate with us in terms of their own financial
institutions inside their own country?
Mr. Kimmitt. I think they would probably be more hesitant
about that, but as their financial institutions seek to both
make acquisitions abroad, branch abroad, and so forth, they
know they are going to be held to those standards. I think it
would be in their interest, but you have have to make them see
that it is in their interest.
Mr. Pittenger. Russia is seeking loans today that seem like
it may be a good time.
From my experience, our government works government-to-
government very well on issues related to intelligence
collaboration. For example, with Germany they have worked very
closely. However, when you get beyond the government and get
down into the Bundestag, there has been very little awareness.
I have had a series of forums to bring these individuals
together, and met again with a number of Germans this weekend.
They seem to be a very important asset, these parliament
members. We had about 100 from 25 countries who have come to 3
different forums we have had.
Do you believe that we should have a more engaged effort,
not just with the governments, but to fully implement the
issues that we have, whether it is related to what we are
talking about today or the broader context of terrorism
financing, that we have to be more fully engaged beyond just
the central figures of the government, but when they do have
parliaments that we need to be full impact in terms of
communication with them?
Mr. Wechsler, you seem to have--
Mr. Wechsler. Yes. I completely agree. The relationship
between the U.S. Congress and other parliaments around the
world is a vitally important and, frankly, strategically
underused tool of our--to advance U.S. national security
interests, and it is something that I would greatly encourage
any Member of Congress in the positions that you are in to
actively pursue.
Quite frankly, there have been times--present company here,
of course, not involved--when Members of Congress have gone to
a given country and want to meet with the military leaders or
other maybe not-so-democratically elected leaders, and the U.S.
Government policy is to encourage the strength of the
parliament. There would be nothing better than to have the U.S.
Congress meet with those parliamentarians and to help encourage
them to be seen as a center of power in those, and it doesn't
happen as much as it should.
Mr. Pittenger. Thank you very much. I deeply appreciate you
being with us today.
I yield back.
Chairman Fitzpatrick. The gentleman yields back.
And I will now recognize myself for a couple of follow-up
questions.
Mr. Wechsler, could you expand on your proposal to
encourage other countries to establish counterparts to the
Treasury Office's Intelligence and Analysis Agency within their
finance ministries? Are you talking about other G7 and G20
countries?
Mr. Wechsler. Yes, that is exactly where I would start. It
is very important, of course, for other countries to collect
intelligence and analyze intelligence and to--on financial
matters focused on terrorist finance, to not just rely on
information that, frankly, we give to the United Nations or to
them bilaterally, but to themselves be creators of
intelligence.
What we have found inside the United States is the
innovation that, again, bipartisan across multiple
Administrations and started under George W. Bush, was to have
an office that is dedicated to doing this inside our finance
ministry has really been beneficial. I have seen the benefits
of it to the work that the Treasury Department does, but beyond
the work that the Treasury Department does to the wider
intelligence community and even extending to the military side.
The recent bombings that have taken place where the
military has targeted cash holdings of the Islamic State is--
those happen because of the integration of financial-related
intelligence to our military targeting system. Frankly, I don't
know if that would have happened as well as it has happened if
not for the innovation of the creation of the Office of
Intelligence and Analysis in the Treasury Department and the
resulting higher priority of that kind of intelligence.
The fact of the matter is that many of the other countries
that we cooperate with most closely who are wealthy and who can
afford it have not made a similar commitment to that kind of
financial intelligence, and then have certainly not made the
decision, if they have done so, to house part of it in their
financial ministry, thus giving it the kind of import that we
have seen in the United States.
Chairman Fitzpatrick. Why do you think it has not happened?
Mr. Wechsler. Frankly, I think sometimes the United States
has good ideas first. And that is what we had with FinCEN, and
over the next decade-plus, that model was adopted by members of
FATF, starting with the G7.
I think that it costs money, there are turf battles, like
in any level of bureaucracy. These are all the things that we
had to confront when, undoubtedly, my colleagues in the
Administration went about the creation of that office.
But again, it has been a very successful experiment. Not
all of our experiments in the United States are successful, but
this one was, and we should very strongly encourage our other
partners to consider adopting it for themselves.
When we created FinCEN, we didn't say that every financial
intelligence unit had to be exactly like ours, but we said you
had to have something like it.
Chairman Fitzpatrick. The ranking member, Mr. Lynch, is
recognized.
Mr. Lynch. Thank you.
What I will do is--Mr. Ellison has just arrived, and I know
he has been very active, especially on the Somalia issue, and I
would like to yield 5 minutes to Mr. Ellison.
Mr. Ellison. Well, let me thank the ranking member.
And also, let me thank our chairman today.
And let me thank all of our panelists today. I have been
paying as close attention as I could being outside the room,
but I have been watching and getting notes from my staff about
today.
And I know some discussion has focused on Somalia. At the
risk of a little bit of duplication, I hope you won't mind me
just making a few notes.
One is that I have probably as many, if not more, people of
Somali descent in my district as anyone, in Minneapolis, and we
are very proud of this community. They do tremendously good
things for our district.
And one of the things that came up recently that is really
important is that the Somali parliament recently passed an
anti-money laundering bill. I don't know if you are aware of
that; you probably are.
But I am glad that I can share that with you because one of
the things that has been holding things up in terms of making
progress on remittances is Somalia kind of emerging from its
civil war and sort of stepping into its own and taking on its
own sovereignty as a nation and responsibility for its
financial system. I hope that will help improve the situation
for Somalia in receiving and remittances.
They have made substantial progress. They are no longer a
failed state. They are a fragile state, but they are making
progress every single day.
And I wonder if you would mind answering--sharing your
thoughts on this question. The Treasury Department, the World
Bank, and others are engaged with the Somali Central Bank, and
together they have made significant progress in weakening Al
Shabaab.
Mr. Wechsler, I wonder if you might offer your views: What
should Treasury, FinCEN, and other banking regulators do to
help Somalia stabilize its financial system and receive
remittances?
Mr. Wechsler. Yes, I think you have touched on a very
important issue, because of course for countries that are very
poor that are in the process of developing and coming out of
very difficult circumstances, legitimate legal remittances can
be a very significant proportion of their gross domestic
product. And we want to make sure that the people inside the
United States who make their money legally are able to send it
to their grandmother or their cousin to help them out.
And as Secretary Lowery pointed out, the problem is from a
commercial point of view, if you are a bank there is very
little profit to be made by doing business with Somalia, but
there is a very high reputational risk at stake because of the
challenges of actually knowing your customer.
The response from the Treasury Department and wider U.S.
policy has, I think, been halfway there. The good part about it
is we are trying to provide technical assistance and get them
to create the laws and regulatory structures, which will take
time.
But even after doing it, U.S. banks are not going to be
rolling into downtown Mogadishu any time soon.
So if U.S. Government policy is, as it should be, that we
have a strategic national security interest in building the new
legitimate government of Somalia--we have literally spent tens,
scores, maybe even hundreds of millions of dollars over the
last two Administrations on military activities, assistance
activities, police--to help get ourselves into the position
where we are now, which is when we are about to send an
ambassador in there, hopefully soon.
Mr. Ellison. Right.
Mr. Wechsler. Perhaps we could think of an innovative way
to take some of the risk onto the United States Government's
shoulders that we have traditionally put on the banks'
shoulders. We have told them, ``It is your job to know your
customer,'' which is by and large the right thing to do.
But in this case, we have a market gap. The market is not
going to fill it any time, so I think it is worth exploring
innovative ways for the United States to work more actively
with the private sector to sort of de-risk their activities in
dealing with Somalia.
Mr. Ellison. Thanks for pointing that out.
Does anybody else have a comment on what the United States
should be doing in Somalia to stabilize things? Mr. Lowery?
Mr. Lowery. I think the World Bank is trying to figure out
whether or not you could create some sort of a safe corridor
for Somalia. I think those efforts need to be continued.
I think the IMF could actually be of assistance in that
area, but it is a difficult problem and I know, Congressman,
you have been very eloquent on raising this issue for a while
now. It is a tough issue.
I do think that it is important that it is kept on the
radar screen of both our Treasury Department as well as our
Federal Reserve, because they should continue to push to see
whether there are solutions that get towards what Mr. Wechsler
is trying to get at.
Mr. Ellison. It looks like I am like 17 seconds over.
I just want to just get your response to this question: It
seems to me that it is absolutely in the U.S. national interest
to stabilize Somalia. We know now that failed states are
attractive nuisances for terrorists, so it is in our interest
to have stable, strong states so that they can partner with us
to ward off these people.
And yet, some of the policies that we have been pursuing, I
think aren't helping, because the remittances are going to
Grandma or Cousin Joe. They are paying school fees; they are
buying food.
But are they going in suitcases? And if good money is going
in suitcases, some bad money could also be getting in there by
the same route.
So in my view, somebody will hand--somehow coming up with
something innovative is in our interest to do because we want
more transparency so we can have more accountability. What do
you all think about--how do you react to that statement I just
made?
Mr. Lowery. I guess broadly, I agree. It is how innovative
can one get, because in the end what will happen, of course, is
that these are going to be private sector decisions as to
whether or not I am going to do business in that country or
send remittances.
Mr. Wechsler raises a point--look, I have talked to people
about it and they said, ``Yes, all right, if the Federal
Government steps in and indemnifies me maybe I will do this.''
But that is a hard thing for the Federal Government to do.
Mr. Ellison. Mr. Lowery, I have never had a bank tell me
they don't want to do any business in Somalia. They say, ``We
would do it. We are trying to make it. We will do it. But the
cost and the risk has to be commensurate with our business
model.''
And so that is really the nut to crack.
Mr. Lowery. I completely agree that it is a tough nut to
crack, and I know that there are people at Treasury who are
very concerned about it. They also want to crack that nut, but
it is a cost-benefit analysis just like you said, and I think
that there are institutions that would like to do it but the
costs right now--at least perceived costs--are too high. And so
hopefully, if we could figure out a way to lower those costs,
that would be helpful.
Mr. Ellison. Thank you.
Chairman Fitzpatrick. The ranking member, Mr. Lynch, is
recognized for 5 minutes.
Mr. Lynch. Thank you, Mr. Chairman, and thank you for your
indulgence.
We just did a survey. We went to the refugee camps right on
the Syrian border in Turkey and in Jordan and in Lebanon, and
talking about the issue of Somalia, they did have a sort of an
ATM system set up right on that border.
They are using IRS scans, but very small amounts of money,
but they are allowing those refugees, and a lot of them are
coming right out of an ISIS-controlled area so there is that
terrorist concern. But they are able to conduct it in a way
that at least small amounts of money are getting to those
people who desperately need it.
And I am not sure we need--we might want to look at that
model. The U.N. is running a lot of that program; USCIS is well
aware of it. But we might want to look at that, as well.
One of the things that worries me is we have a scorecard
system that we use in different countries in conjunction with
know-your-customer (KYC), and it is pretty low-tech.
For instance, in the West Bank and in Gaza, we asked the
Palestinian banking organizations there to report suspicious
transactions, large cash transactions, things like that. But
when I asked, when we were in Ramallah--even though there are
high-rises going up all over the place, a lot of construction
there, a lot of cranes; I am a former construction worker--how
many suspicious transaction reports do we get out of the Arab
Bank in the West Bank, the answer was zero; in Ramallah, zero.
It was a little bit better, oddly enough, in Gaza.
But how do we capitalize or, we use the carrot a lot,
inducing people to do the right thing. But how do we diminish
the ability of people from operating outside of the legitimate
financial system with impunity at times? Is there a more
effective way to induce compliance?
Mr. Lowery. It is a great question. You are getting at a
good point, which is some of the technology improvements over
the last few years would suggest that we should be finding more
efficient ways to deal with the compliance problem.
Some areas that are worth exploring are--there is something
called the legal entity identifier, which is basically a way
for institutions to know each other through kind of digits. And
that is a way to try to start getting a better know-your-
customer regime happening.
In the country of Mexico, the central bank is actually
looking into trying to figure out how to do this themselves.
They have the same problem. Obviously, they are not as poor a
country as Somalia, for instance--
Mr. Lynch. Right. Right. No, I understand.
Mr. Lowery. --but they are trying to do exactly what you
are looking at, which is how do I find a technological solution
to dealing with the know-your-customer issues and getting to
the point where we can't--there is going to be risk, and so it
has to be how do you figure out the risks--it can't be a zero
tolerance for risk because otherwise you would just stop doing
business.
Mr. Lynch. Right. Exactly. You can't use the death penalty
all the time.
Mr. Lowery. That is right.
Mr. Lynch. You are just pushing these people outside the
system. There has to be a way for us to use leverage to get
compliance.
Mr. Lowery. And then if you can find some solutions around
that, I think your best leverage is the ones we kind of talked
a little bit about earlier, which is the market leverage of,
hey, I can reduce my costs if things are more competitive; and
then some of the technical assistance type of leverage of
carrots-and-sticks approach from our usual kind of tools that
we have as a government, or international financial tools like
the ones that Mr. Adams was talking about.
Mr. Lynch. Okay. Last question, and I only have 25 seconds:
The Hawala problem that the Wall Street Journal article, and I
think the New York Times actually had a good article as well on
the same issue, how do we get at that? It is an informal
transfer system. Any ideas?
Mr. Kimmitt. I thought you were moving toward the Hawala
when you talked about how do we sort of watch the periphery and
out, because Clay described what we try to do once people come
inside, the digital system, and I think we are getting better
at that. But I think externally, and particularly on the Hawala
side, it comes down to good human intelligence and good
intelligence relationships on the ground with that host
country.
So we have to make sure annually when the intelligence
community puts together its NIT, its national intelligence
topics, that this has a high enough priority for the human
collection side of this and the collaborative side of it that
we are getting that kind of information.
Sometimes they can think that is pretty small-ball--
Mr. Lynch. Yes.
Mr. Kimmitt. --but it doesn't cost a lot of money to
conduct a terrorist operation.
Mr. Lynch. Right.
Mr. Kimmitt. It costs a lot more money to run a
proliferation network, and you have to have access to the
global financial system and move money around quickly on that.
But for terrorist finance, unfortunately the amounts of money
are relatively small, particularly to keep them going.
I would ascribe a particularly high priority to that
because by the time it comes to Treasury and their Office of
Intelligence and Analysis, they are going to do a very good job
with what they have, but Treasury is not going to have agents
on the ground. I think for Hawalas and that informal network
more broadly, it just comes down to human intelligence officers
risking their lives to get information that helps save American
lives.
Mr. Lynch. Thank you.
I yield back.
Chairman Fitzpatrick. The second round of questions is
concluded.
I would like to again thank our panel for their testimony
here today.
The Chair notes that some Members may have additional
questions for this panel, which they may wish to submit in
writing. Without objection, the hearing record will remain open
for 5 legislative days for Members to submit written questions
to these witnesses and to place their responses in the record.
Also, without objection, Members will have 5 legislative days
to submit extraneous materials to the Chair for inclusion in
the record.
Without objection, this hearing is adjourned.
[Whereupon, at 4:44 p.m., the hearing was adjourned.]
A P P E N D I X
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