[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
A DANGEROUS NEXUS: TERRORISM,
CRIME, AND CORRUPTION
=======================================================================
HEARING
BEFORE THE
TASK FORCE TO INVESTIGATE
TERRORISM FINANCING
OF THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTEENTH CONGRESS
FIRST SESSION
__________
MAY 21, 2015
__________
Printed for the use of the Committee on Financial Services
Serial No. 114-27
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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:
May 21, 2015................................................. 1
Appendix:
May 21, 2015................................................. 41
WITNESSES
Thursday, May 21, 2015
Asher, David, Member, Board of Advisors, Center on Sanctions and
Illicit Finance, Foundation for Defense of Democracies; and
Adjunct Senior Fellow, Center for a New American Security...... 8
Barrett, Richard, Senior Vice President, The Soufan Group........ 10
Farah, Douglas, President, IBI Consultants LLC; Senior Non-
Resident Associate, Americas Program, Center for Strategic and
International Studies; and Senior Fellow, International
Assessment and Strategy Center................................. 12
Realuyo, Celina B., Professor of Practice, William J. Perry
Center for Hemispheric Defense Studies, National Defense
University..................................................... 6
APPENDIX
Prepared statements:
Asher, David................................................. 42
Barrett, Richard............................................. 79
Farah, Douglas............................................... 85
Realuyo, Celina B............................................ 95
A DANGEROUS NEXUS: TERRORISM,
CRIME, AND CORRUPTION
----------
Thursday, May 21, 2015
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 10:06 a.m., in
room 2128, Rayburn House Office Building, Hon. Michael
Fitzpatrick [chairman of the task force) presiding.
Members present: Representatives Fitzpatrick, Pittenger,
Stivers, Ross, Barr, Rothfus, Schweikert, Williams, Poliquin,
Hill; Lynch, Sherman, Meeks, Green, Ellison, Himes, Foster,
Kildee, and Sinema.
Ex officio present: Representatives Hensarling and Waters.
Chairman Fitzpatrick. The Task Force to Investigate
Terrorism Financing will come to order. The title of today's
task force hearing is, ``A Dangerous Nexus: Terrorism, Crime,
and Corruption.''
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 3 minutes for an
opening statement.
I would again like to thank Chairman Hensarling and Ranking
Member Waters for working to establish this important task
force and reaffirming this committee's commitment to using its
role to address the threat of terrorism, as well as my
colleagues here today who will work to ensure its success.
At our last hearing we demonstrated the breadth and scope
of terrorism throughout the world, as well as how these groups
have evolved in the face of a strong American response. While
the United States has seen some success in shutting these
groups out of the international financial system, like
squeezing a balloon, this has lent itself to the creation of
more sophisticated and diverse funding avenues for these terror
organizations.
Terrorist groups have become entwined with transnational
criminal syndicates, or in some cases have evolved into the
role themselves, engaging in criminal activities which yield
greater profits than simply relying on state sponsorship or big
pocket donors. These activities range from, but are not limited
to corruption, drug trafficking, human smuggling, and
extortion.
Place these funding methods on top of other non-traditional
means discussed in our last hearing and it is easy to see that
today's terror organizations are often better financed than
their predecessors even a decade ago. Today's terrorist groups
and transnational criminal syndicates thrive in highly insecure
regions of the world. Terror organizations contribute to the
continued regional instability and internal conflict, while
organized crime exploits these environments for financial gain
and corruptive influence.
To witness the impact of this dangerous union, the United
States has to simply look to the Tri-Border Area. This is a
relatively lawless region along the frontiers of Argentina,
Brazil, and Paraguay. It has become the base for Hezbollah's
illicit activities to fund its terror operations in the Middle
East and around the world.
Hezbollah has engaged in several of the criminal activities
mentioned, and through them has succeeded in raising a
substantial amount of money to bankroll their actions. In fact,
according to a 2009 Rand Corporation report, Hezbollah has
netted around $20 million a year in this area alone.
It is this type of connection--the intersection between
terrorism, crime, and corruption--that today's hearing will
focus on, including current techniques being used by these
groups, effectiveness of the current U.S. policy in combating
them, and where these tactics can be improved. Groups like
Hezbollah, the Islamic State, and Boko Haram can no longer
simply be considered terrorist groups. They have evolved into
sophisticated global criminal conglomerates.
In order to effectively combat such volatile threats, U.S.
policy must evolve as well. That is the purpose for the
formation of this bipartisan task force. It is my hope that
today's dialogue between our diverse group of members and the
expert panel of witnesses joining us leads us to a better
understanding of the challenges facing us and shapes our
discussion of long-term solutions moving forward.
At this time, I would like to recognize the task force's
ranking member, and my colleague, Mr. Lynch from Massachusetts.
Mr. Lynch. Thank you, Mr. Chairman. And I want to thank
Chairman Hensarling and Ranking Member Waters for their work on
this, as well as your own, and that of Vice Chairman Pittenger.
And of course, I thank our panelists this morning. Thank
you for helping the task force with its work.
Today's Task Force on Terrorism Financing hearing will
examine the dangerous nexus between terrorism, crime, and
corruption. This hearing is particularly timely. The Director
of National Intelligence, James Clapper, identified terrorism
and transnational organized crime as among the top eight global
threats to U.S. national security when he testified this past
February before the U.S. Senate's Committee on Armed Services.
According to Director Clapper, both terrorist and
transnational criminal groups thrive in highly insecure regions
of the world, with terrorist groups contributing to regional
instability and internal conflict, while transnational
organized crime groups exploit these environments for financial
gain and corruptive influence.
One example of this can be found in Venezuela. Earlier this
week, The Wall Street Journal reported that the U.S. Drug
Enforcement Agency and U.S. prosecutors in New York and Miami
are investigating multiple high-level Venezuelan government
officials, including Venezuela's National Assembly president,
on suspicion they have turned the country into ``a global hub
for cocaine trafficking and money laundering.'' The
investigations are a response to an explosion in drug
trafficking in that oil-rich country, U.S. officials say.
I bring up the example of Venezuela because Douglas Farah's
prepared remarks for today's hearing discuss how a bloc of
countries, led by Venezuela, now operate jointly both as a
political project with an underlying goal of harming the United
States and as a joint criminal enterprise. These countries are
creating alliances across the globe with terrorist
organizations, including Hezbollah, and the drug trade seems to
be a huge source of the revenue propelling it.
The U.S. Department of the Treasury's Office of Foreign
Asset Control previously sanctioned corrupt Venezuelan
government officials pursuant to the Foreign Narcotics Kingpin
Designation Act for acting for or on behalf of the
Revolutionary Armed Forces of Colombia, which is the
narcoterrorist organization. And that is often in direct
support of its narcotics and arms trafficking activities.
Furthermore, it is important to note that this crime,
terrorism, and corruption nexus may not only play out in
Venezuela, but in other parts of the world. As reported by the
State Department in its April 2014 Country Reports on
Terrorism, the Tri-Border region of South America that the
chairman has just identified is reflective of the
interrelationship between criminal activity, terrorism, and
financing.
According to the report, the Tri-Border Area of Argentina,
Brazil, and Paraguay continues to be an important regional
nexus of arms, narcotics, and human trafficking,
counterfeiting, pirated goods, and money laundering, all
potential funding sources for terrorist organizations.
I hope that this hearing will shed more light on the scope
and pervasiveness of such threats. I look forward to hearing
the testimony from our witnesses so we can further examine
these issues and potential solutions.
Mr. Chairman, I thank you for your courtesy, and I yield
back the balance of my time.
Chairman Fitzpatrick. Next, I would like to recognize the
vice chairman of the task force, Mr. Pittenger, for 1 minute.
Mr. Pittenger. Thank you. Thank you, Chairman Hensarling,
for your leadership and vision in establishing this task force,
and thank you, Ranking Member Waters, Chairman Fitzpatrick, and
Representative Lynch for your leadership. Also, I really would
like to thank the witnesses for joining us today. This will be
a very important and very meaningful hearing.
Understanding the link between terrorism and crime is a
vital step towards understanding what efforts we can take to
deter terrorism financing. How are terrorists coordinating with
drug lords and for what benefits? How are they working with
transnational criminals to move money through the financial
system? How are they utilizing the same smuggling routes today
that have been used for years in the past? And what means that
have previously not been utilized, like cyber warfare, should
we be preparing for today? And the bigger question, what are we
going to do to stop it?
Knowing that we have ended the Threat Finance Cell, there
are strong concerns that we don't have the capabilities and the
intelligence necessary to be effective in our goals. I also
have concerns about the current effectiveness of
intergovernmental cooperation to undermine the flow of money to
terrorists.
I look forward to hearing from the witnesses on these
issues, and continuing the task force's effort to counter
terrorist financing. Thank you, Mr. Chairman, and I yield back.
Chairman Fitzpatrick. The Chair recognizes the ranking
member of the full Financial Services Committee, Ms. Waters,
for 1 minute.
Ms. Waters. Thank you very much, Mr. Chairman.
I applaud the bipartisan efforts surrounding this task
force and believe it will serve us well as we work to guard
against key threats to our national security.
Today the task force will explore a dangerous new trend,
the growing convergence of terrorism and crime. While terrorist
organizations motivated by ideology and criminal enterprises
driven generally by greed have generally been thought to
operate independent from one another, the testimony from our
witnesses today makes it clear that this is no longer the norm.
Furthermore, in an age of globalization, the growing
convergence of terrorists and criminal groups means that
illicit networks once seen as a local or regional concern now
have global security implications.
While a whole-of-government approach is certainly necessary
to tackle these issues effectively, I am hopeful that this task
force can serve as a catalyst for action on these issues that
fall squarely in our jurisdiction. In my view, a careful review
of the deterrent value of our current anti-money-laundering and
counterterrorism financing enforcement regime would be a good
place to start.
I yield back the balance of my time.
Chairman Fitzpatrick. The Chair now recognizes the
gentleman from Arkansas, Mr. Hill, for 1 minute.
Mr. Hill. Thank you, Mr. Chairman. I am honored to be a
member of this task force. My thanks to the leadership for its
formation.
I think it is important that we focus on: first, the
transnational criminal organizations that are driven by profit;
and second, how they interact with foreign terrorist
organizations who are driven by ideology. When you combine
those two things, you have a toxic soup. And we have seen many
scary examples, as noted this morning, of the relationship
between criminal activity and terrorist organizations that
interconnect throughout the world.
I am looking forward to this morning with our fine panel of
witnesses to learning more about that and finding out how we
can interdict that process and stop it.
I appreciate it, and I yield back, Mr. Chairman. Thank you.
Chairman Fitzpatrick. The Chair recognizes the gentlewoman
from Arizona, Ms. Sinema, for 1 minute.
Ms. Sinema. Thank you, Chairman Fitzpatrick and Ranking
Member Lynch.
Terrorism is an undeniable threat to our country's security
and global stability. Terrorist networks constantly develop new
ways to finance their deadly operations and threaten America.
Terrorists frequently leverage criminal networks for
financing. To keep our country safe, we must be one step ahead
of them, cutting off their funding and stopping their efforts.
The Islamic State is one of the world's most violent,
dangerous, and well-financed terrorist groups. In 2014, ISIL
generated approximately $1 million per day, predominantly
through the sale of smuggled oil. That is why I have recently
offered an amendment, which was accepted, to the National
Defense Authorization Act (NDAA) to direct the Secretary of
Defense, in coordination with the Secretary of State and the
Secretary of the Treasury, to pursue efforts to shut down
ISIL's oil revenues and report on resources needed for these
efforts.
ISIL also recently captured the famed archaeological sites
of Palmyra, raising the possibility that they will destroy or
sell priceless artifacts to fund their militant violence. I
look forward to working with my colleagues on both sides of the
aisle to keep money out of the hands of terrorists and to find
solutions that strengthen America's security.
I yield back.
Chairman Fitzpatrick. We now welcome our witnesses.
First, Ms. Celina Realuyo is a professor of practice at the
William J. Perry Center for Hemispheric Defense Studies at the
National Defense University. Professor Realuyo has been a U.S.
Diplomat; an international banker with Goldman Sachs; a U.S.
Foreign Policy Adviser under the Clinton and Bush
Administrations; and a professor of international security
affairs at the National Defense, Georgetown, George Washington,
and Joint Special Operations Universities.
As the State Department Director of Counterterrorism
Finance Programs, Professor Realuyo managed a multi-million-
dollar foreign assistance program aimed at safeguarding
financial systems against terrorist financing. Professor
Realuyo is a graduate of the Harvard Business School, the Johns
Hopkins University School of Advanced International Studies,
and the Georgetown University School of Foreign Service.
Second, Dr. David Asher is an adjunct senior fellow at the
Center for a New American Security, and serves on the Board of
Advisors of the Center on Sanctions and Illicit Finance at the
Foundation for Defense of Democracies. Over the last decade,
Dr. Asher has advised the leadership of SOCOM, CENTCOM, DEA,
and the Departments of Defense, Treasury, State, and Justice on
top counterthreat finance priorities.
Dr. Asher conceived of and spearheaded several of the
highest profile anti-money-laundering actions in history. From
2002 until 2005, Dr. Asher organized and ran the North Korea
Illicit Activities Initiative for the National Security Council
and the Department of State. Dr. Asher graduated from Cornell
University and received his doctorate in international
relations from the University of Oxford.
Third, Mr. Richard Barrett is a senior vice president at
The Soufan Group, and a fellow at the New American Foundation
in Washington, the Royal United Services Institute in London,
and the Center for Research and Security Studies in Islamabad.
From March 2004 to December 2012, Mr. Barrett served as the
coordinator of the al Qaeda and Taliban Monitoring Team at the
United Nations in New York. In 2005, he helped establish what
became the United Nations Counterterrorism Implementation Task
Force following the adoption by the General Assembly of the
global strategy to counter terrorism in 2006. Before joining
the United Nations, he worked for the British government both
at home and overseas.
And finally, Mr. Douglas Farah is currently the president
of IBI Consultants LLC. He is also a senior non-resident
associate at the Americas Program at the Center for Strategic
and International Studies, and a senior fellow at the
International Assessment and Strategy Center. Mr. Farah works
as a consultant and subject matter expert on security
challenges, terrorism, and transnational organized crime in
Latin America.
For the 2 decades before consulting, Mr. Farah worked as a
foreign correspondent and investigative reporter for The
Washington Post, covering the civil wars in Central America,
the drug wars in the Andean region, conflicts and the illicit
diamond trade in West Africa led by Charles Taylor, radical
Islam, and terrorism financing.
The witnesses will now be recognized for 5 minutes to give
an oral presentation of their 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
within which to ask their questions.
On your table, for the witnesses, there are three lights:
green means go; yellow means you are running out of time; and
red means stop. The microphone, we are told, is very sensitive,
so please make sure that you are speaking directly into it.
With that, Professor Realuyo, you are now recognized for 5
minutes, and we thank you for your attention here.
STATEMENT OF CELINA B. REALUYO, PROFESSOR OF PRACTICE, WILLIAM
J. PERRY CENTER FOR HEMISPHERIC DEFENSE STUDIES, NATIONAL
DEFENSE UNIVERSITY
Ms. Realuyo. Thank you, Chairman Fitzpatrick, Vice Chairman
Pittenger, Ranking Member Lynch, and members of the task force
for the opportunity to appear before you today to testify on
the dangerous nexus of terrorism, crime, and corruption that
threatens U.S. national security at home and abroad.
Illicit networks of terrorists, criminals, and their
facilitators actively capitalize on weak governance, black
markets, and corruption to challenge security and prosperity
around the world. After examining the critical enablers of
these networks, in particular financing, and illustrating the
convergence of illicit networks in the case of ISIL, I will
propose some specific measures to further leverage our
financial instrument of national power to combat terrorism,
crime, and corruption.
Illicit networks threaten the four key missions of the
nation-state: to provide security; promote prosperity;
safeguard the rule of law; and ensure that the government
represents the will of the people. Illicit actors require
critical enablers to realize their political and revenue
objectives. They are leadership, personnel, illicit activities,
logistics, communications, weapons, technology, corruption, and
financing.
Financing is the most vital enabler, since money serves as
the oxygen for any activity. Consequently, following the money
trail is instrumental to detect, disrupt, and dismantle these
networks. Since 9/11, the United States has countered terrorist
financing through intelligence and law enforcement operations,
including the Iraq and Afghan Threat Finance Cells, public
designations and sanctions, and capacity-building programs.
As a result of these efforts, the al Qaeda operatives
complained about a lack of funding for terrorist operations,
and the Mexican cartels realized that they could no longer
easily launder profits through banks. Other measures to combat
the financing of terrorism and crime have also unexpectedly
weeded out graft and corruption at the highest levels of
government.
Terrorism, crime, and corruption have existed since the
dawn of time, but now they have gone global with record levels
of profits and violence. In many cases terrorists, cartels, and
gangs are better armed and funded than the very government
services security forces responsible for confronting them.
We are witnessing a dangerous convergence of terrorism and
crime that threatens our national security. Convergence is the
process of coming together and having one interest, purpose, or
goal. Certain groups are demonstrating a hybrid terror-crime
behavior, such as the Haqqani Network in Afghanistan, the FARC
in Colombia, Hezbollah, and ISIL.
All eyes are now on ISIL, with its brutal beheadings,
military advances in Syria and Iraq, and dramatic foreign
fighter flows. It is an example of convergence with its
ambitions for a caliphate and profit-seeking criminal activity.
ISIL requires significant financing to realize its evil agenda
and is considered the richest terrorist group in the world.
As you all know, it derives much of its income from illegal
oil sales, with additional funding from extortion, kidnapping,
stolen antiquities, human trafficking, and some donations from
external individuals.
One of the nine lines of effort of the U.S. strategy to
counter ISIL is disrupting its finances. It is focused on
disrupting its revenue streams, restricting its access to
international financial systems, and targeting ISIL leaders and
facilitators with sanctions.
On the military front, Operation Inherent Resolve has
conducted air strikes against ISIL oil infrastructure and
supply networks in Syria and Iraq. As of May 8th, 152 targets
have been damaged or destroyed, according to U.S. Central
Command.
This past weekend, U.S. Special Forces conducted a daring
raid in Syria against Abu Sayyaf, a senior leader considered
the chief financial officer of ISIL. This operation illustrates
the growing importance of targeting ISIL's finances and how
valuable the financial intelligence collected at the target
site could be to attack its networks.
To counter illicit networks, we need to further leverage
the financial instrument of national power, and I propose the
five following measures. Number one, increase resources to
government agencies to investigate and prosecute terrorism,
crime, and corruption. Number two, retain the Afghan Threat
Finance Cell and establish new ones to target emerging threats
like ISIL. Number three, revitalize the interagency Terrorist
Financing Working Group to coordinate all activities across
agencies. Number four, dedicate a percentage of the fines from
sanctions evasion and money laundering to directly support
counterthreat finance programs. And lastly, promote public-
private partnerships to empower the private sector to serve as
our eyes and ears to detect financial crimes.
In conclusion, we must understand the illicit networks that
confront us and deny their assets to critical enablers.
Stemming the flow of funding to groups like ISIL and Hezbollah
can neutralize their virulent agenda. Only through
comprehensive, proactive interagency and international
strategies can we effectively combat terrorism, crime, and
corruption around the world, and the financial instrument of
national power is a critical tool of which we must take
advantage.
Thank you for your time and attention.
[The prepared statement of Professor Realuyo can be found
on page 95 of the appendix.]
Chairman Fitzpatrick. Dr. Asher, you are now recognized for
5 minutes.
STATEMENT OF DAVID ASHER, MEMBER, BOARD OF ADVISORS, CENTER ON
SANCTIONS AND ILLICIT FINANCE, FOUNDATION FOR DEFENSE OF
DEMOCRACIES; AND ADJUNCT SENIOR FELLOW, CENTER FOR A NEW
AMERICAN SECURITY
Mr. Asher. Chairman Fitzpatrick, Vice Chairman Pittenger,
and Congressman Lynch, it is an honor to speak before you. I
actually want to say thank you for caring about this issue.
This is a very important issue. It is really not in the weeds.
It is at the heart of the matter. Money is the sinew of war.
And we are in a war against terrorists around the world whether
people want to admit it or not.
I want to highlight an experience that I have had. I have
been involved in nearly 25 years of working against terrorism
financing, doing financial operations against drug cartels,
adversarial governments, weapons proliferation networks. I have
sort of seen it all.
But what I hadn't seen until 2007 when I started to advise
the Drug Enforcement Administration--which despite some raps
recently is an awesome organization; it actually has done some
incredible stuff for our national security, well above and
beyond its remit--was a case where the United States itself has
become the largest money-laundering vehicle for terrorists in
the world.
And that is the case involving the Lebanese Canadian Bank
(LCB), a bank that was under the command and control of
Hezbollah, and most particularly the element within Hezbollah,
it appears--and this is still subject to being proven in
court--that is tied to terrorism, the Islamic Jihad
Organization that attacked our embassy twice in the 1980s and
killed hundreds of Americans.
That organization is known as the external security
organization of Hezbollah, and it controls the external
security apparatus of Hezbollah, which reaches all the way into
the United States of America itself.
To garner profit and gain influence, they have engaged in
something that I would call the criminal resistance; i.e., they
have used the $80 billion U.S.-dollarized Lebanese banking
system, which is the third-largest offshore financial center
for dollars in the world, I believe, as a center point for
their global money laundering empire.
The United States has dozens of banks with correspondent
relationships with Lebanon. The fastest-growing bank in Lebanon
until 3 years ago was called the Lebanese Canadian Bank. That
bank was under the control of Hezbollah.
Through DEA's Operation Titan, which I had the honor to
advise on from 2007 onward, the DEA was able to use undercover
informants and other sources to penetrate. This is all in the
public eye. I am speaking totally based on unclassified
information and from a personal viewpoint only.
This bank was engaged in buying primarily used cars in the
United States and Europe and textiles in Asia as part of a
massive money-laundering scheme in partnership with La Oficina
de Envigado. That is the outfit that Pablo Escobar himself set
up in the 1980s and 1990s to run the Medellin drug cartel. This
is all in the Treasury Department's Office of Foreign Assets
Control (OFAC) documents you can find on the Web.
So LCB was buying as much as a billion dollars a year in
used cars in the United States, cars which were generating
almost no profit actually, and exporting the cars to West
Africa, where the money was commingled with narcotics
trafficking proceeds coming out of Europe. That is the world we
live in; it is very complicated.
The drugs were flowing from Colombia primarily into Europe.
The money was being couriered back to Lebanon, and being wired
to the United States to buy used cars here, as well as buying
used cars in Europe with cash, and it was making its way back
into this Lebanese Canadian Bank which was at the center of
Hezbollah's money-laundering empire.
So it is the largest material support scheme in the world
and it remains the largest material support scheme in the world
for a terrorist group.
In 2010, the DEA began constructing a takedown strategy
against the Lebanese Canadian Bank on which I helped advise. I
am very proud of what we did. I won't get into all of the
details. We organized the designation of the Lebanese Canadian
Bank under Section 311 of the USA PATRIOT Act. That cut it off
from the United States, blew up the bank, $5.5 billion
Hezbollah bank, bankrupt in 3 weeks. Thank you very much. So
that was a success.
We designated the drug kingpin from the Medellin drug
cartel, Ayman Joumaa, who was at the center of this thing. He
was indicted in the Eastern District of Virginia for laundering
over a billion dollars a year for Los Zetas. He is indicted for
his relationship with the Lebanese Canadian Bank and designated
as well. He is wanted for arrest.
We went after the car parks in West Africa. We designated
those. We had never designated a car park before. It was a huge
success.
But I am here to tell you that today, unfortunately, there
are more cars being exported from the United States itself to
West African car parks controlled by Hezbollah than there were
when we made the designations in 2011 and 2012.
Our policy is a great success of interagency cooperation,
and international cooperation. I feel very proud of what the
Bush Administration and even this Administration have done to
try to make a dent in this. Unfortunately, it has not
succeeded. I would like to discuss with you some measures which
might help advance that success.
Thank you.
[The prepared statement of Dr. Asher can be found on page
42 of the appendix.]
Chairman Fitzpatrick. Thank you, Dr. Asher.
Mr. Barrett, you are now recognized for 5 minutes.
STATEMENT OF RICHARD BARRETT, SENIOR VICE PRESIDENT, THE SOUFAN
GROUP
Mr. Barrett. Thank you, Chairman Fitzpatrick, Vice Chairman
Pittenger, Ranking Member Lynch, and distinguished members of
the House Financial Services Committee. It is an honor to
testify before you today on this issue of perennial concern.
Although terrorism, along with other forms of violent
crime, lacks a profit motive, any terrorist attack costs money,
and it is reasonable to assume, therefore, that the less money
that a terrorist group has available, the less able it will be
to mount an attack. And if it does so, limited finances should
result in limited impact.
But terrorism of course by its nature is asymmetric, and it
is asymmetric in all of its aspects, including financially. And
even a relatively cheap attack can have a devastating impact.
For example, the last al Qaeda attack in a Western country
occurred in my country.
On the 7th of July, 2005, four individuals associated with
al Qaeda blew themselves up on the public transport system in
London, killing 52 people. The official inquiry into the attack
estimated that it had cost less than 8,000 pounds. That is
about $13,000 or so.
To quote from the report: ``The group appears to have
raised the necessary cash by methods that would be extremely
difficult to identify as related to terrorism or other serious
criminality. Khan--he was one of the group--appears to have
provided most of the funding. Having been in full-time
employment for 3 years since university, he had a reasonable
credit rating, multiple bank accounts, each with just a small
amount deposited for a protracted period, credit cards, and a
10,000 pound personal loan. He defaulted on his personal loan
repayments and was overdrawn on his accounts.''
So it was very difficult to detect. But despite the low
cost of that attack and the unremarkable financial activity
associated with it, it had a devastating impact, of course, on
the United Kingdom beyond the deaths. The cost to the U.K.
economy was estimated at 2 billion pounds just in the rest of
2005 alone. And the cost of the official inquiry itself, I
might say, was put at 4.5 million pounds.
So even an unsuccessful attack, which might therefore cost
even less, can have a huge impact. Just think of the costs
resulting from another plot that originated in the United
Kingdom, the 2006 plot to blow up 7 airlines traveling to North
America. The additional security checks imposed on airports as
a result have cost billions of dollars.
The point I am trying to make is that terrorism does not
have to be expensive to be effective, whether in its primary
objective of making people afraid or in its secondary objective
of forcing governments to react.
The second point is that terrorists can fund their
operations through legal means, quasi-legal means, and illegal
means. Legal means might include donations or the self-
financing of the London bombings. Quasi-legal means might
include the raising of income through traditional means by
terrorist groups that control territory: taxing income; selling
natural resources; and so on. Whereas illegal means of course
might include kidnap for ransom or all of the other things we
have heard about.
And it is my belief that although terrorists have few
qualms about how they raise money, they don't have any
preferred means. They do whatever is easiest and most
effective. And they will raise money according to opportunity,
aiming all the while of course to minimize effort and risk
while maximizing their returns. And this complicates countering
the financing of terrorism as the money used by terrorists is
not necessarily criminally tainted before it is collected.
Increasingly, terrorists are attracted to less governed
areas of the world where they can establish bases and control
territory. And inevitably too, these areas are ones that
criminals use for their own transshipments of drugs or other
contraband and things like that.
And to this extent, terrorists have established a close
relationship both with crime and with criminal gangs, though in
my view they are more likely to take a cut from the criminal
gangs than to join their rackets or compete with them.
Terrorists and criminals who operate for profit are not
natural bedfellows. Criminals see terrorists as dangerous both
in and of themselves, and also in that they are likely to bring
attention from the authorities. An official might easily be
bribed to allow conventional criminal activity, but is less
likely to agree to turn a blind eye to terrorism. Likewise,
terrorists are suspicious of criminals as people who have no
sympathy with their cause and might well attack or betray them
if they saw profit in doing so.
So the point I wanted to make, Mr. Chairman, was that
although there is undoubtedly an association between terrorism
and criminality, it is not necessarily straightforward nor even
universal.
Thank you.
[The prepared statement of Mr. Barrett can be found on page
79 of the appendix.]
Chairman Fitzpatrick. Thank you, Mr. Barrett.
Mr. Farah, you are recognized now for 5 minutes.
STATEMENT OF DOUGLAS FARAH, PRESIDENT, IBI CONSULTANTS LLC;
SENIOR NON-RESIDENT ASSOCIATE, AMERICAS PROGRAM, CENTER FOR
STRATEGIC AND INTERNATIONAL STUDIES; AND SENIOR FELLOW,
INTERNATIONAL ASSESSMENT AND STRATEGY CENTER
Mr. Farah. Members of the task force, thank you very much
for the opportunity to testify about the dangerous nexus among
terrorism, crime, and corruption. I speak only for IBI
Consultants and myself, not on behalf of the institutions with
which I am affiliated. I am going to focus my remarks on Latin
America, where we are seeing a convergence of these three
factors in new and dangerous forms.
The convergence of terrorism, transnational crime, and
corruption are the core of what I believe is a significant
strategic threat to the United States. I have described this
emerging tier-one security priority as criminalized states.
That is, states that actively use transnational organized crime
as an instrument of statecraft, rely on the revenues from
illicit activities to fund themselves, and often overlap this
protective mechanism with terrorist organizations.
In our hemisphere we are primarily seeing this in the
network that emanates, I would argue, from Venezuela in the
Western Hemisphere, where you have the political project, the
joint political project among multiple nations whose underlying
goal is harming the United States, as well as operating in a
conjoined criminal enterprise. Rather than being pursued by law
enforcement and intelligence services in these states in an
effort to impede their activities, transnational organized
criminal networks and protected terrorist groups are able to
operate in more stable, secure environments, something that
most businesses, both licit and illicit, crave. Rather than
operating on the margins of the state or seeking to co-op small
pieces of the state machinery, these criminal groups in these
states are able to concentrate their efforts at the state on
multiple levels.
Within that stable environment, a host of new options
become available, from the sale of weapons to the use of
national aircraft registries, shipping registries, the easy use
of banking structures, the use of national airlines and
shipping lines to move large quantifies of unregistered goods,
and the acquisition of diplomatic passports and other
identification forms.
The threat originating in Venezuela is not confined to
Venezuela. The late Hugo Chavez, acting in concert with his
allies, Rafael Correa in Ecuador, Evo Morales in Bolivia,
Daniel Ortega in Nicaragua, and Cristina Fernandez de Kirchner
in Argentina, set out to redefine the political landscape in
Latin America. Senior members of El Salvador's current FMLN
government are also allied with this movement.
To a large degree this movement, self-described as the
Bolivarian alliance, has been successful. Unfortunately, what
their policies have wrought internally are massive corruption,
rising violence, a disdain for the rule of law, and the
collapse of institutions.
On the strategic level this has brought new alliances with
Iran and Hezbollah, Russia and Russian organized crime, China
and Chinese organized crime, as well as Mexican drug cartels
and the Colombian criminal organizations. The Revolutionary
Armed Forces of Colombia, FARC, a designated terrorist
organization by the United States and the European Union, as
well as a major drug trafficking organization, is directly
supported by the Bolivarian nations as a matter of state
policy.
Such a relationship between state and non-state actors
provides numerous benefits to both. The FARC and Hezbollah gain
access to the territory of Bolivarian nations without fear of
reprisals. They gain access to identification documents and
access to routes for exporting cocaine to the United States and
Europe, while using the same routes to imports large quantities
of sophisticated weapons and communications equipment.
In return, the Bolivarian governments offer state
protection and reap the rewards of the financial benefits of
the individuals, as well as institutions derived from the
cocaine trade. Iran, whose banks have been largely barred from
the Western financial system, benefit from access to the
international markets through Venezuela, Ecuador, and Bolivian
financial institutions, which act as proxies by moving Iranian
money as if it originated in their own unsanctioned banking
structures.
There is significant new evidence of the criminalization of
these states. The first is the recent investigation by Veja, a
Brazilian magazine, showing that Venezuela, with the help of
Argentina, actively tried to help Iran's nuclear program in
violation of international sanctions.
The Wall Street Journal, as mentioned earlier, has a long
list of senior Venezuelan administration officials being
investigated for drug trafficking. The recent book, ``Bumeran
Chavez,'' the ``Chavez Boomerang,'' which was just released,
describes in detail from numerous eyewitnesses cocaine dealings
at the highest level of the Venezuelan government and their
contacts with Hezbollah and FARC operatives in officially
sanctioned meetings and at the highest level.
And the recent designation of Banca Privada d'Andorra by
FinCEN as a foreign financial institution of primary money
laundering control.
All of these mechanisms allow for literally billions of
dollars to slosh through states that are completely unaccounted
for, both by legislative oversight or by any form of
accounting. Understanding how these groups develop and how they
relate to each other and form from outside the region,
particularly given the rapid pace with which they are expanding
their control across the continent and across the hemisphere,
make this, I would argue, a tier-one threat and something
critical that we need to understand and something that we often
don't look at in the underlying ideological underpinnings of
the movement.
Thank you.
[The prepared statement of Mr. Farah can be found on page
85 of the appendix.]
Chairman Fitzpatrick. We thank all the witnesses for their
testimony today, and the Chair will now recognize himself for 5
minutes for questions.
At our first hearing of this task force, which was held
last month, we had some testimony on the question of the Iraq-
Afghanistan Threat Finance Cell. And because it was mentioned
again here today in Professor Realuyo's testimony, I will ask a
question the professor perhaps can respond to, and then I would
like to hear the thoughts of each of the panel witnesses.
And the question is whether or not a concept similar to the
Iraq and Afghanistan Threat Finance Cell, if replicated in
Latin America, could be an effective means to combat these
terror criminal hybrid franchises that operate there in Latin
America?
Ms. Realuyo. One of the lessons learned, unfortunately,
from our experiences in Iraq and Afghanistan, has been that
interagency, and more importantly, collaborative fusion cells
have been extremely effective, particularly when you are
designing a list of targets, and more importantly, harvesting
information that comes of a financial and economic nature, to
actually incorporate it within our broader set of understanding
these adversaries.
In terms of Latin America, it would depend on different
groups. Also, more importantly, since a lot of the activities
are drug trafficking related, as well as human trafficking
related, we would have to try to figure out which of the
agencies would be the most suited. So it is a concept of
actually creating a task force.
In the case of post-9/11, the joint terrorism task forces
that were established by the FBI are a model that has been
studied by many academics such as myself, as well as other ways
to actually leverage the know-how and then more importantly the
resources that each of the agencies brings to bear.
One other one which we did not discuss today is a very
effective one under the U.S. Southern Command, which is the
Joint Interagency Task Force-South, it is called JIATF-South,
based in Key West, Florida. It actually is interagency with all
of the uniformed services, but even more importantly, the
intelligence and the law enforcement agencies represented
there, as well as liaison, full-time liaison officers from
other countries.
Their primary mission is countering illicit trafficking,
which already reflects the way that they are changing the look
of the--it used to be just drug trafficking. They are actually
are encountering a lot of precursor chemicals, as well as,
sadly, alien smuggling going through there. So there is a
greater way of how we can use these lessons learned, and then
more importantly, apply them to what we call emerging threats.
Chairman Fitzpatrick. Dr. Asher?
Mr. Asher. First, Celina is actually spot on. I do feel,
though, that you need almost like an Untouchables-type approach
to this stuff. You need a group of people who are in charge to
go after this money and to have global authority to roam. The
money goes global. You see more money being laundered through
the Sinaloa drug cartel and Hezbollah today in China probably
than anywhere else.
But we also, as I note in my testimony, have a massive
amount of laundering right through the United States, right
through the purchase of used cars. We have designated this. We
have identified it to banks. And guess what? People are still
accepting billions of dollars a year in payments from places
like Lebanon for buying used cars that are going to West
Africa.
We need a law enforcement, top-down, task force approach,
and the law enforcement professionals and the prosecutors need
to be held accountable for results. We know, based on overt
evidence that has been presented in court, that this is going
on. So why is it still happening?
I think the task force approach that you are interested in
is very important, but I don't think it can just be regional. I
think it needs to be almost threat-specific.
So Hezbollah, al Qaeda, why have we not applied the
racketeering, the RICO charge against al Qaeda? It is a racket.
Terrorism is against the law. And the reason it would matter on
a financing level is we could go after, through long-arm
capabilities, all their assets all over the world. And we have
more than enough countries in the world that endorse terrorism
as a national-level crime.
Chairman Fitzpatrick. Dr. Asher, on the issue of trade-
based money laundering, which you talked about in your
testimony, what is your assessment of current U.S. policy?
Mr. Asher. Absolute interest and unfortunate
ineffectiveness. And it is not for lack of effort. Everybody I
have worked with, I have had a great honor and pleasure to work
with. There are great people in our government. There is
awareness of these issues that we never had before. There is
awareness that we should go after the financial networks as a
means to tackle the whole network. It is a revolution. I am
very proud of it. But it is not working. There is more
Hezbollah money being garnered in the United States today than
there was in 2011 when we took the action.
So we have to look at charging strategies like RICO. We
need to approach these things more like organized criminal
rackets than just terrorism. Terrorism almost honors these
people. And we need to impose our OFAC penalties with much
greater impunity and cut our financial system off, when
necessary, from threats.
Chairman Fitzpatrick. At this point, I am going to
recognize Ranking Member Lynch for 5 minutes.
Mr. Lynch. Thank you.
And, again, I want to thank the witnesses. We have had a
chance to read your testimony, and it is very helpful.
Dr. Asher, for a while there with the Lebanese Canadian
Bank we had great success using Section 311 sanctions
identifying them as primary money laundering concerns. And it
was not just us, it was the financial community that saw them
as toxic, and everybody backed away. So it basically shot them
out of the legitimate banking system, especially the United
States.
Would this work if we expanded 311 to go after, say, the
auto dealers in Benin or West Africa that are operating? If we
continue to use that 311-type mechanism, would that be enough
to choke off some of this funding?
Mr. Asher. Yes. In my written testimony I recommend that we
need to look at imposing Section 311 against the actual nation
of Benin. It can be done. It is a very extreme measure. I would
propose that it is a very temporary measure. I don't want to
obliterate the economy of a West African state that is growing
very fast. But their fastest-growing area is used cars coming
from the United States that are going to provide material
support for a terrorist organization.
We have Section 311, which is a regulation, okay, and it
can be lifted very easily to protect our Nation's financial
system against money laundering. There is most definitely
massive money laundering going on here and most definitely it
is going to a terrorist organization. And more of it is going
to the military wing, we believe, of a terrorist organization,
the one that has killed hundreds of American citizens in the
past and is engaged in activities against their interests right
now in the Middle East.
We don't have these laws on the books for nothing. But I do
believe an enforcement approach is also critical. We can't just
impose sanctions and penalties and force the banks to be the
enforcers of the law. We really need law enforcement to get
into gear and to build financial cases against these complex
conspiracies. They are very complicated, and they are very hard
to prosecute, but it can be done.
So I support a hybrid approach. But at the end of the day--
Mr. Lynch. Let me stop you there. I have another question.
I don't want to use all of my time.
We have a problem coming up, which is the agreement that
the Administration is trying to pursue with Iran. We have
sanctions against Iran and a number of banks that had
previously worked with them on nonproliferation issues, and
those are major sanctions, the Iran Sanction Act, the Iran-
Syrian Sanction Act. And the President is negotiating taking
away those sanctions, dropping those sanctions in return for
assurances and verification that Iran is not actively pursuing
a military nuclear program.
On the other hand, we also have a whole set of sanctions
that are based on the work that you have been doing, which is
Iran has also been financing Hezbollah, Islamic Jihad.
According to Juan Zarate's book, they even gave money to al
Qaeda.
So those activities, if we were to drop the sanctions and
allow their economy to grow, what is to stop them from
continuing that activity with respect to some of the work that
the Islamic Revolutionary Guard is perpetrating, which is
directly supportive of some of this illicit activity, the
criminal activity that is happening in so many other countries?
Mr. Asher. There will be moral and human outrage if those
laws are rescinded. Okay? At the end of the day, the terrorism
record stands. For those of us who worked in the war in Iraq,
we had more involvement in EFP and other IED-related attacks
from Iran than almost certainly any other nation-state.
I was the senior adviser to the United States Government
for the Six Party Talks with North Korea. I know what
multilateral nuclear diplomacy looks like. I also worked on the
dark side to go after their finances in North Korea. I
understand we have to have a hybrid approach sometimes in
nuclear counterproliferation. But on terrorism we have to draw
the line.
Mr. Lynch. Right. And so is your understanding that those
sanctions, 311, things like that, that are targeted towards the
criminal activity that have been enforced by banks, these banks
that don't want to do business with any bank that is doing
business with Iran because of the criminal activity, those
should remain, right?
Mr. Asher. The terrorism record stands.
Mr. Lynch. Right. Okay.
Chairman Fitzpatrick. The Chair now recognizes the vice
chairman of the task force, Mr. Pittenger, for 5 minutes.
Mr. Pittenger. Thank you, Mr. Chairman.
Dr. Asher, last March I asked Secretary Lew about the
effectiveness of our intergovernmental communication and
coordination as it relates to stopping the financing of
terrorism, specifically, U.S. Customs and their full access of
data with limited access by FinCEN.
Do you believe that we should be looking more seriously at
better coordination, particularly as it relates to trade-based
financing? Should we be looking at and targeting this type of
better cooperation?
Mr. Asher. I don't want to dominate all the questions here.
First, U.S. Customs is an awesome organization. Everyone
deserves to take a look at what they do. They don't get nearly
enough credit. I have been so impressed by their data systems.
They have probably stopped more terrorism than any other
organization, including the CIA and the FBI.
However, sharing data is very important. They are very good
at receiving data. I think the ability to take some of their
data and use it, for example, in organizations like FinCEN
would be very proper and to the greater good because so much of
the trade-based money laundering is going on in a way that is
very difficult to measure. And one of the only ways to measure
it is through things like bills of lading, these customs
receipts that occur when you export something.
And so to the extent that those data systems aren't linked
together, it holds us back in enforcing the law against these
trade-based schemes. And trade-based money laundering is where
it is at today for money laundering writ large.
Mr. Pittenger. Yes, sir. You mentioned Section 311 and how
effective that was with the Lebanese Canadian Bank. And of
course we saw how important it was in the Bank of Macau as it
related to North Korea and other instances.
Do you believe that this is a central focus we should have
in terms of trying to force some of these institutions to not
be able to exist utilizing 311? Do you think that there are
other institutions out there that--clearly, we are in an
unclassified briefing--should be a focus of our efforts?
Mr. Asher. Yes, it is the most powerful lever we have ever
developed in financial warfare against adversaries. And it is
something that needs to be utilized not every day, but
periodically. It is an incredible coercive or tool. And there
is nothing like cutting someone off from the United States
financial system. It is not our job to offer access to
terrorist groups and criminals to our financial system. When we
see it happening, we should be allowed to cut it off, and 311
offers that opportunity.
Mr. Pittenger. Mr. Barrett, in your testimony you talked
about smuggling and the link between terrorism and crime in
some measure. Could you briefly compare ISIL oil smuggling and
the smuggling used by Saddam Hussein to evade the Oil for Food
Program?
My sense is that ISIL is using the same routes and
mechanisms and perhaps the same people, but the United States.
And our allies haven't succeeded in stopping this. Why haven't
we been able to deal with this the second time around and what
should we be doing to stop it?
Mr. Barrett. It is an interesting question, Vice Chairman
Pittenger. Of course, the Oil-for-Food Programme was a huge
agreement by the international community through the Security
Council in 1991 with Saddam Hussein, as you said, with the
government, and did allow a certain amount of export of oil in
order to be able to allow the Iraqi government to feed its
people. And that was open to many abuses, and it was indeed
abused.
But the scale on which Saddam Hussein was operating as a
government, of course, was very different from the scale on
which the Islamic State is able to operate, whereas Saddam
Hussein, I think over the 12 or 13 years of the Oil-for-Food
Programme, probably sold about $50 billion worth of oil. Of
course, the Islamic State is selling perhaps now up to $2
million a week, so $100 million a year.
And, also, whereas, the export of oil under Saddam Hussein
was authorized and, therefore, done in a regular way, in the
Islamic State, it is done very much in small scales out of sort
of almost homegrown refineries into trucks, which may take it
into Turkey, may take it into Kurdish areas, may even sell it
to the Syrian government, or most of it, in fact, was probably
sold and consumed within the area controlled by the Islamic
State itself. So this makes it much harder for outside powers
to control them, possibly Turkey. But, generally speaking, it
is difficult.
Mr. Pittenger. Thank you very much.
Professor Realuyo, you mentioned the transport and the
illicit sale of oil going out of Iran through Turkey.
Have we been effective at all in trying to minimize that?
And what else could we be doing?
Ms. Realuyo. There is the decision specifically to target
the oil infrastructure through the military campaign that I
described in my testimony, and there has been damage done. But
the bigger problem is that we cannot actually outright destroy
the actual supply routes that feed the regular illicit economy
as well as the movement of people who are actually the
innocents who are basically in the way of a lot of the ISIL.
A lot of the market is actually driven by more localized
consumption. So I have been asked a lot--having worked on Wall
Street at one point, looking at oil markets, it is not--
actually, this oil is not entering global OPEC markets. It is
actually a question of how to stem the demand locally. A lot of
it is crossing into Turkey, which is disturbing. But, more
importantly, it is driven by those who are daily looking for a
cheaper gallon of gasoline.
Chairman Fitzpatrick. The gentleman's time has expired.
Mr. Pittenger. Thank you.
And correction: Iraq, that is through Turkey. Thank you.
Chairman Fitzpatrick. The Chair now recognizes the ranking
member of the full Financial Services Committee, Ms. Waters,
for 5 minutes.
Ms. Waters. Thank you very much.
I would like to continue with the discussion about money
laundering, and I am interested in pursuing information or
closing, in time, money-laundering loopholes for persons
involved in real estate closings. And this is, I suppose, a
question for Ms. Realuyo.
An investigation recently conducted by The New York Times
revealed the ease by which anonymous foreign billionaires can
purchase luxury real estate in the United States with few
questions asked. In fact, nearly half of the most expensive
residential properties in the United States are now purchased
anonymously through shell companies.
One of the reasons few questions are asked about a buyer's
identity is because FinCEN has exempted persons involved in
real estate settlements and closings from having to ask basic
questions as part of maintaining an anti-money-laundering
compliance program in accordance with the Bank Secrecy Act.
The PATRIOT Act allows FinCEN to temporarily exempt certain
entities from the requirement to establish anti-money-
laundering programs. One of the exemptions was persons involved
in real estate closings and settlements.
Do you believe that large cash purchases of luxury real
estate by anonymous buyers could pose money-laundering risks
that need to be addressed?
Ms. Realuyo. That has always been a question in terms of
what we call covert institutions since, basically, the wake of
9/11, the idea that other businesses, including real estate,
could be used to launder money as well as move funds that are
of an illicit nature.
Under the banking system, you are very well aware of the
Know Your Customer practice. So there have been moves afoot not
just in the United States, but around the world, to actually
try to enforce a broadening of the coverage of who would be
required to know your customer and, more importantly, taking a
look at things such as real estate.
I do a lot of work in Mexico, where this is a huge issue,
of the cartels actually buying businesses, but, more
importantly, real estate. And now there is a move afoot there
for notary publics, who are critical in order to actually
transact the purchase or the sale, to actually also be required
to do reporting and due diligence on their clients. And it is
something that we might be able to consider here in terms of
the United States. as well.
A lot of the flows of the money, particularly in real
estate here in the United States, by foreigners is also suspect
of tax evasion of their home jurisdiction, which is something
that we should also be concerned about, particularly if that
money is coming from corrupt governments abroad who are coming
to seek financial safe haven within the United States markets.
Ms. Waters. Several years ago, I became interested in money
laundering because we discovered that one of our national banks
had purchased a lot of the small banks in Mexico that were
known to launder drug money.
And so, in taking a look at that, we discovered that our
banks were not following any Know Your Customer policy. I don't
even think they had a registration on hand for one of the
officials at that time--I think it was a brother of one of the
presidents of Mexico--who had large sums of money in this bank.
And, of course, the same thing was true with the Abacha
brothers from Nigeria, who had all of their money in our banks.
While, of course, I am interested in this real estate
aspect of it, you did mention--you brought up Know Your
Customer problems with our banks.
And given that the statute that I referenced allowed only
temporary exemptions, do you believe it is time that those
involved in these types of real estate transactions should be
required to implement U.S. anti-money-laundering programs?
Ms. Realuyo. Yes. And that is actually what we are trying
to take a look at now. As financial innovations and new ways of
moving and potentially laundering money or financing terrorism
evolve, things such as the virtual world, we need to think
about legislation that keeps up with these financial
innovations in order to preclude dirty money from entering the
U.S. system.
Thank you very much for your interest on this topic. But
anything that moves in terms of hiding money, the criminals and
terrorists are very good at trying to circumvent our measures.
Ms. Waters. Thank you.
And I suppose you are aware of the extensive article that
was done about the Time Warner Center. And it is absolutely
startling to take a look at the purchase of those properties
and who is buying them and how it all operates.
So I think that this information is very instructive, and
it certainly should cause us to want to take a closer look at
what we do about these kinds of real estate transactions. Thank
you very much.
I yield back.
Chairman Fitzpatrick. The Chair now recognizes the
gentleman from Texas, Mr. Williams, for 5 minutes.
Mr. Williams. Thank you, Mr. Chairman. I appreciate it.
I have two questions: the first one to you, Mr. Farah; and
the second one to Dr. Asher.
In your testimony this morning, you spoke about how
countries likes Iran, whose banks are largely barred from the
Western financial systems, have been able to gain access to
international markets through countries in Latin America.
Would you help this committee further understand what
implications terrorists or criminal groups who are supported or
allowed to operate in Latin America have on this country.
Mr. Farah. Thank you for the question, sir.
I think that, if you look at the way Iran has penetrated
the financial systems of the Bolivarian states--particularly
where I have documented it is in Venezuela and Ecuador, where
you have Iranian banks setting up under falsified banks and
operating as Venezuelan banks or, in the case of Ecuador where
the president of Ecuador authorized a small state-owned bank to
become a channel for Iranian money and authorized it explicitly
and they were going to have their communications encrypted and
the encryption key for the financial communications was going
to be held in the Iranian embassy--that is a little unusual, I
would say, for a normal banking structure.
And I think that what--the problem in this setting is that
when you have a state sanctioning those activities, no one is
going to investigate them and no one is going to move further
down the road. And that goes the point of the absolute impunity
that the state cover provides.
So once you have a state that is willing to use either
transnational organized criminal organizations or terrorist
groups or both as part of their state-sanctioned policy as
opposed to what we see perhaps in Mexico, what do the narcos
want? They want a judge who won't condemn them. They want a
border guard who will let them cross. They want a policeman who
will let their things go by.
What these guys--the new construct in Latin America is
entirely state-protected and state-driven, and I think that is
a fundamental shift. And I think that opens the door for what
you see Hezbollah doing in the region, what you see Iran doing
in the region, what you see ETA from Spain doing in the region,
which is having unfettered access to financial institutions in
ways that would not be possible without direct state
participation.
Mr. Williams. Thank you for your answer.
Dr. Asher, let me visit with you really quick, and go back
to the used car situation.
What was the number of used cars you said were going out of
this country? Was it a billion dollars?
Mr. Asher. Just to Benin alone, it may be as much as a
billion dollars.
Mr. Williams. Okay. So my question is: Who is buying these
cars? Were they buying them in auctions? Were they buying them
from dealers? Were they buying them from individuals? Where are
these cars being purchased?
Mr. Asher. They are buying them in auctions, typically. The
money is coming out of Lebanon. It is thousands and thousands
of people. I think that CBP has probably denied thousands of
visas for people from Lebanon. It is an unfortunate thing for
our relationship with Lebanon, but there are people coming here
who are being told, ``Go buy cars'' and they just do it.
They are going to get a big cut on the payment because it
is drug money. There is a profit associated with it. So they
don't really care how much money can be made on the car
transaction itself. They just want the car because, without the
car, they can't launder the money. So they buy them.
You see it at a lot of car lots just in the State of
Virginia or in the City of Baltimore. You go there and you see
all these cars sitting there and you never see anyone in the
car lot. Ask yourself who is running the racket. They season
these cars on these lots. They sit there for a few days and
then they are off on a boat to West Africa to car lots owned by
Hezbollah.
Mr. Williams. Now, did you say that the cars they are
buying are around $2,500 or do they--
Mr. Asher. There are a lot of cars they are buying that are
below the $2,500 Customs threshold so they don't come into our
statistical database.
Mr. Williams. Okay.
Mr. Asher. It is sort of interesting. They know our laws
better than we do.
Mr. Williams. So they are beating the system. They know how
to beat the system.
Mr. Asher. They know how to beat the system. These guys
are--they are really brilliant, actually.
Mr. Williams. How are those cars being paid for? Cash, at
the--
Mr. Asher. No. Typically, it is wire-transferred. So the
banks are involved, and this is an issue. I don't want to blame
our bankers. Our bankers are trying very hard to enforce anti-
money-laundering and probably are given a hugely onerous
responsibility to do so.
What we need to do is we need to target the Lebanese, who
are sending the money, and we need to say that this typology,
which is subject to Section 311 of this USA PATRIOT Act, is a
money-laundering typology for terror and it shall be banned
until it can be proven otherwise not involved with terrorism.
Mr. Williams. And then you said this, but, again, tell us,
so they get these cars. How are they being used?
Mr. Asher. They are being driven around Nigeria by
relatively poor people who want a cheap car. There is nothing
wrong with the cars themselves. What is wrong is that they are
buying them as part of a money-laundering scheme.
Mr. Williams. I am in the car business, is the reason I am
asking, and I want to talk to you later. Okay?
I yield back my time, Mr. Chairman.
Chairman Fitzpatrick. The Chair now recognizes the
gentleman from California, Mr. Sherman, for 5 minutes.
Mr. Sherman. Much of our U.S. Government is doing an
outstanding job. Some agencies aren't. I have an example that
may beat the ones of our witnesses, an example where giving
money to terrorists is not only easy; it is tax deductible.
In 2009, I brought to the attention of the IRS that an
organization called the IFCO, which was a 501(c)(3)
organization, had on its Web site, ``Give us the money and we
will give it to Viva Palestinia and then Viva Palestinia will
give it to Hamas.''
It took them 4 years to take it seriously. Then, in October
2013, the organization put on its Web site the IRS report as to
why the organization should lose its tax-exempt status and used
it as a fundraising device, saying, ``Look, the IRS doesn't
like us. Give us more money. We will give it to Hamas.''
And even today, somebody who looks at the list of
organizations to which they can give tax-exempt contributions,
can give it to the IFCO. So I think just the fact that we make
it a little easy for the terrorists, I have you beat. We make
it tax-deductible.
Remittances: a lot of ordinary Americans want to send money
to Somalia to their relatives. Would it make sense for the
United States to green-list licensed organizations where if you
give them the money, the money will go to an individual Somali
relative?
Now, of course, there is always a possibility that your
relative has been seduced by terrorist propaganda and gives
some of the money to terrorists. But at least, if the money
gets to the relative of an American, does it make sense for the
United States Government to give Americans an avenue where they
can feel relatively safe?
Do we have a witness who wants to answer that?
Mr. Barrett?
Mr. Barrett. Can I address that?
Mr. Sherman. Yes.
Mr. Barrett. Somalia is a very good example. Many, many
Somalians rely on remittances to feed their families and to
keep going. So it is an essential area of income for them. And,
of course, in Somalia, they aren't operating banks. And so,
many of these remittances are made through hawalas and so on,
informal systems.
You noticed the other day that, after the Garissa attacks
in Kenya, the Kenyan government wanted to shut down some of
these remittance services because they reckoned they were also
funding terrorism. But, of course, there was a huge outcry
internationally because it would mean so many Somalis were
disadvantaged.
So I think that your question is absolutely right. What
needs to be done is to be able to bring these informal systems
into a more formal structure rather than banning them and
trying to push them out. And one of the problems that we face
now is that formal banks are very unwilling to offer banking
services to hawalas because they fear the regulations and so
on.
Mr. Sherman. Thank you.
I want to move on to another issue, ISIL and the Iraqi
government. One of the best ways ISIL has financed its
uppermost successful way is seizing a lot of currency. What
various countries have done is they have issued new currency,
replacing old bank notes with new bank notes. This is
incredibly inconvenient for criminals and corrupt politicians,
say in Baghdad, just as it would invalidate the bank notes
stolen at the Mosul regional bank by ISIL.
First, does anyone here have a good estimate as to the
value of the bank notes seized by ISIL? I have heard various
reports. I don't see anybody--
Mr. Barrett. I think it is very hard to say. In Mosul, they
were alleged to have stolen $500 million worth, but whether
that was in gold or in bank notes or what--
Mr. Sherman. You would hope that the Iraqi government would
at least know the gold and currency it had in its bank before
its American armed troops turned tail and ran and left the
money for ISIL. But it goes beyond that.
The government is paying salaries to bureaucrats in Mosul,
and that money is freely taken by ISIL. It is my
understanding--and I would like Mr. Barrett or any other
witness to respond--that the Iraqi government is sending
electricity into Mosul free and then ISIL gets to collect from
the utility users. And I get conflicting arguments or
propaganda--well, I don't want to use the word ``propaganda,''
``spin'' from our government.
Half of the time the Iraqi government is boasting that they
are undermining ISIL's support by making it impossible for ISIL
to provide good governance, and the other half of the time they
are saying, ``We care about the people governed by ISIL and
want to make sure their lives are comfortable.''
Finally, there is the oil that the Professor spoke about,
the oil wells. It is hard to--we can bomb the oil wells. We
have chosen to not do that because we want to make sure that
Mosul motorists are not inconvenienced.
Ms. Realuyo. More importantly, the bigger question is after
you bomb the oil wells, whomever is going to hopefully take
back that territory in a legal manner, this is a bigger
question of infrastructure--right?--in terms of--that is
actually the question.
They have been targeting those mobile refineries because
they are taking a look at the supply chain just like any
business in terms of--
Mr. Sherman. Professor, I know they are bombing the mobile
refineries. I have asked about bombing the oil wells. We didn't
hesitate to bomb factories in France in 1941 and 1942 when we
were serious.
I yield back.
Chairman Fitzpatrick. The gentleman yields back.
The Chair now recognizes the gentleman from Maine, Mr.
Poliquin, for 5 minutes.
Mr. Poliquin. Thank you, Mr. Chairman. I appreciate it.
And thank you all very much for being here today and
dealing with this new dimension of terrorism financing. I
encourage everybody to continue to do your good work to make
sure our country stays on offense and make sure we do
everything humanly possible to stop the flow of funds to
terrorist groups that threaten our homeland.
I am a little bit concerned today as we go down this path
and now all of a sudden we see a marriage between organized
crime and terrorism and so it is an additional source of
funding to terrorism. And I know all of us in this country are
getting increasingly alarmed by the savagery that we see over
in the Middle East, in particular, dealing with these
organizations.
I would like to follow up with you, Professor Realuyo, if I
can, with Mr. Lynch's question dealing with the
Administration's negotiations currently with respect to a
nuclear deal with Iran.
And if, in fact, sanctions are lifted that are currently
imposed on Iran, freeing up roughly $125 billion, $150 billion
of cash to that country, what might that do with respect to the
increased marriage between organized crime and terrorist
funding?
In particular, could you walk us through, to the best of
your knowledge, knowing that you have a background in
international banking and, also, national security, what would
happen next?
Ms. Realuyo. One of the concerns that several of us have
who are looking at different scenarios of how the Iran nuclear
deal might turn out--one of the objections that several who
are, I say, proponents of the sanctions regime, the sanctions
brought the Iranians to the negotiating table. That is clear.
More importantly, the Iranian economy is so suffocated now
because of the sanctions.
One of the scenarios that the Iranians would like is
immediately upon signature of the agreement that there would be
an automatic lifting of the sanctions. And it is very hard to
put back in place the genie that is out of the bottle. The
bigger issue, too, is you have now a global sanctions regime.
And you know the United States issues sanctions as well as
the EU and other countries and then, more importantly, on an
international level. Once you actually have countries who are
hoping to do business with Iran, not necessarily the United
States, see the opening of the lifting of the sanctions, it
will be very hard to actually apply what are these so-called
snapback sanctions.
More importantly, you will see that they will be able to
enter into the global economy licitly as well as illicitly.
And, as we all know, Iran is a state sponsor of terrorism, as
declared by the State Department. But, more importantly, it is
the godfather and patron of Hezbollah, which we haven't raised
today, and is actually supplying the foreign fighters for the
Assad regime in Syria.
It is so complex and convoluted. But if we take a look at
it from an economic point of view, other countries who would
like to do trade with Iran or, more importantly, get access to
the oil that Iran produces, once you lift the punitive measures
of the sanctions, it would be very, very hard to backtrack and
re-impose them.
Mr. Poliquin. Let's drill down, Professor, a little bit
more, if we can, please.
Assuming those sanctions were to be lifted--and, as you
stated, Iran is a sponsor of terrorism throughout the Middle
East, whether it be Syria or Somalia or Yemen--what would be
the mechanics?
What would we see if you were involved in the international
banking community with respect to how the lifting of those
sanctions might facilitate organized crime interconnecting with
terrorism activities? And how might the Iranian regime be
involved, specifically, to facilitate that?
Ms. Realuyo. You would actually list first the financial
sections, which means that Iran would be able to bank globally,
which is perhaps the most painful of the sanctions piece.
More importantly, if we take a look at it from a physical
trade piece, their ability to actually think about importing or
exporting components that perhaps could be used for other
nuclear aspirations.
In terms of the bank itself, we all--and when I was working
at Goldman Sachs, I did a ton of compliance. And, more
importantly, there are several who are anticipating--not
necessarily U.S. institutions, but other global financial
actors, who are going to see this and seize the opportunity to
increase their physical ability to access Iran.
Once Iran actually also lines its coffers with more money,
they will be able to use that money, particularly since there
is not a lot of difference between the state and the private
sector, the way we have it here in the United States, and that
is the thing that we fear.
Doug Farah and I spent a lot of time taking a look at how
Iran and its, let's say, actors in the region and Latin America
could also destabilize other parts of the world with its
nefarious agenda.
Mr. Poliquin. Thank you very much.
I appreciate everybody being here. And let's stay on
offense. Thank you.
I yield back my time. Thank you, sir.
Chairman Fitzpatrick. The gentleman yields back.
I now recognize the gentleman from Texas, Mr. Green, for 5
minutes.
Mr. Green. Thank you, Mr. Chairman.
And I thank the witnesses for appearing as well.
And, Mr. Chairman, I am very much concerned about the
notion that we should follow the money, but I am also concerned
about following the counterfeit money, what is called
``supernotes.''
This currency is so finely tuned that sometimes it is very
difficult to be detected but for some sort of special
technology. As you know, the dollar is the reserve currency for
most of the world, and there is a war for currency supremacy.
My concern--or maybe I shouldn't be concerned, and I will
let you tell me--is whether or not these supernotes flowing in
and out of our country and into other countries can pose some
sort of threat to security in this country in the long run.
I do understand that we retooled our currency, but I am
still concerned about nationals larger than terrorist
organizations, countries, if you will, that can play a role in
devaluing and creating mistrust in our currency.
Does anyone care to respond?
Mr. Asher. Having overseen the multiyear initiative for the
U.S. Government against North Korea's illicit financial
networks, including supernotes, I guess I can comment.
It has been a very costly endeavor for the United States.
We have had to redesign our currency twice as a result of North
Korea's national-level counterfeiting of our currency. I do not
know that they have succeeded at counterfeiting the latest
iteration of the $50 and $100 bills, though.
Congressman, I definitely appreciate your interest in this
and concern. It is a concerning issue. It has cost us hundreds
of millions of dollars to redesign the currency over the years.
And North Korea did spur on several huge bank runs
overseas. In Taiwan, I think we had over $500 million in bank
runs in just a period of a couple of weeks back in 2003 or
2004.
So the amount of money that the regime in North Korea has
actually garnered from supernote circulation is probably not as
high as some people think, but the damage they have done is
considerable and the damage they could do.
And if they can indeed counterfeit the security features on
the new notes, it would be--first, it would be pretty
incredible technologically. But they have been pretty good up
to now. They have managed to do it four different times, I
believe, with notes.
And we know that they are essentially printing their notes
and our notes that they are making, their version of our notes,
on their printing presses. North Korea is using its absolute
best capabilities here. So, it is a concern. I think that the
Department of the Treasury is very much on top of it.
But the bigger issue is, why didn't North Korea get
prosecuted when we investigated them? The State Department
played a very big role supporting the Department of Justice.
The FBI had an incredible investigation into North Korea's
supernote activity, including its ties to the official IRA and
its ties to Japanese terrorist groups from the 1970s. And it
was just wild stuff, featured in Vanity Fair and Wall Street
Journal articles and things.
President Bush, whom I had the honor to serve, decided that
it was too controversial and we couldn't press charges against
the Kim regime at the same time we were negotiating with them.
And, of course, I was negotiating with them and I was
involved in trying to press charges against them at the same
time. I didn't understand the reason not to do that. The North
Koreans knew darn well what they were doing, and somebody needs
to be held accountable, but we didn't do it.
That evidence still exists. In theory, somebody could make
a case. The statute of limitations probably doesn't expire
against a state sponsor of terrorism, if we--at least it was at
the time.
Mr. Green. Mr. Asher, if I may, I appreciate your answer. I
do want to interrupt for this reason. I have one other question
for you. This one relates to knockoffs. I want to move to a
more pedestrian level now, if I may.
Knockoffs: we see a lot of it on the streets. And the
question is, to what extent are these knockoffs related to
either networks of criminal activity--not just as individuals,
but networks--and, also, the possibility of being linked to
terrorism? You talked about cars.
Mr. Asher. The largest export for North Korea, believe it
or not, is counterfeit cigarettes coming out of North Korean
government-controlled criminally-run factories. They are making
maybe as much as $700 million to a billion dollars a year in
revenue on these, and we have them trafficked all the over the
United States. Frequently, they appear in the press as coming
out of China, but they are actually just coming through China
because North Korea doesn't export directly to the United
States, particularly.
So is it benefiting the regime? Absolutely. Is it
benefiting the most despicable dangerous elements of the
regime? Absolutely. Are they tied into transnational organized
crime? 100 percent certain. And we have proven it in court
repeatedly. So you should be concerned.
Mr. Green. Thank you, Mr. Chairman, for the time. I yield
back.
Chairman Fitzpatrick. The Chair now recognizes my colleague
from Pennsylvania, Mr. Rothfus, for 5 minutes.
Mr. Rothfus. Thank you, Mr. Chairman.
Mr. Farah, you point out in your testimony that Iran, whose
banks are largely barred from the Western financial system,
benefits from access to the international financial market
through Venezuela, Ecuador, and Bolivian financial institutions
which act as proxies by moving Iranian money as if it
originated in their own unsanctioned financial systems.
Can you explain on a practical level how Iran was able to
use these institutions to evade international sanctions
regimes, and what the United States has tried to do, clearly
unsuccessfully, to prevent this?
Mr. Farah. Thank you, sir.
There are two specific cases that I can go into, in some
detail. One is the Banco Internacional de Desarrollo in
Venezuela, which was set up as a Venezuelan bank, but all of
its directors were Iranian.
And when I and some others dug up the initial documents
showing that, in fact, the directorships were all Iranian
citizens and it was operating, in fact, as a subsidiary of an
Iranian bank, not as a Venezuelan bank, as the Venezuelan
government had claimed. OPAC eventually--the Treasury
Department eventually sanctioned them. And they are now
functioning, but at a much smaller level than they were before,
but they still have the Iranian influence.
The other case is the case of COFIEC Bank in Ecuador, where
we were able to get the records of some investigative
journalists in the region, and I was able to supplement it with
some other stuff. I got the records of the meeting between
President Rafael Correa and President Ahmadinejad in February
2012, and President Correa eventually acknowledges these
documents were legitimate. So we don't have the debate over
whether this was real or not.
President Ahmadinejad asked President Correa for a bank.
President Correa says, ``Oh, I have a bank for you, COFIEC
Bank,'' which was a national bank that was virtually
nonfunctional at the time, but still existed as a bank. So it
didn't have to register the bank.
After they reached that agreement, President Correa sent
the president of the Central Back of Ecuador with a delegation
to Iran to negotiate which bank they would--with whom they
would have correspondent relationships.
On their way there, they stopped in Russia on the first
stop and opened an account in a Russian bank that maintains
corresponding banking relations with Iran. So, therefore, you
could have interbank transfers without registering through the
Swiss system.
Then they go down and they negotiate with the Iranian
banks. There are communications from the people on the
delegation saying, ``These are all sanctioned banks. Is it
okay?'' And the Ecuadorian government says, ``Yes. Go ahead.''
Mr. Rothfus. Are there policies that we could implement to
better prevent this from happening?
Mr. Farah. Absolutely. I think that one of the things you
are seeing now in the construct I have described in Central
America where you have literally billions of unexplained
dollars washing through banks is they have regular
correspondent relationships with the United States, there would
be multiple things which Dr. Asher led on the Lebanese Canadian
bank-type thing.
The chairman's first question was, ``In Latin America,
would those joint task forces be good?'' Those guys are looking
at pocket litter and different things and did very well in what
they did.
What we are looking at now is state-run banking systems
where we have multiple banks in Central America that are
growing exponentially with no rational explanation for that. We
have banks in Panama that are doing exactly the same thing.
Mr. Rothfus. Would any measures we take, though, be moot by
a lifting of sanctions with respect to Iran's banks?
Mr. Farah. I think that it would make it much more
difficult. I think that, as Professor Realuyo said, once the
sanctions are lifted, the snapback is not going to be very
rapid or nearly as enforceable as the initial sanctions--
Mr. Rothfus. Let me bring the professor in for a minute
there, because in your testimony one of the measures that you
identified to counter these illicit networks was to maintain a
vigorous designation and sanctions regime against state
sponsors of terrorism, foreign terrorist organizations,
transnational criminal organizations, foreign narcotics
kingpins, and specially designated nationals.
I have contended that the sanctions regime in place with
Iran today is justified completely on the fact that they have
been exploiting terror for decades, responsible for hundreds of
American deaths since 1980, really, if you go back to the
rescue attempt and the people we lost there and then go through
the list of what they have been doing, including the killing of
hundreds of our soldiers in Iraq. That alone justifies a
sanctions regime without regard to the nuclear program they
have.
I guess my question, Dr. Asher, Professor Realuyo, is if
you could address whether you think--if we lift these sanctions
on Iran, will we see more terror financing coming from Iran?
Ms. Realuyo. It is one of the things that has actually
limited them from supporting Hezbollah as--
Mr. Rothfus. The current sanctions have?
Ms. Realuyo. The current sanctions have.
So if you think about it, if that is the measure and they
are actually going to alleviate a lot of the economic stress
that the country that is a state sponsor is actually--it is a
question of--we have been able to basically make their pockets
smaller--right?--as a global sanctions regime.
And more importantly, the question is, what are they going
to use with all the income they are going to have once they re-
enter the global marketplace, whether it is financial as well
as the import and export in trade. And there are more than
enough other countries that are interested in doing business
with Iran.
And, unfortunately, that is the downside of globalization,
which I also wrote about in my testimony. As we benefited
tremendously from a productive and interconnected world,
unfortunately, the terrorists and the criminals are taking the
same advantages.
Mr. Rothfus. I think my time has expired, Mr. Chairman.
Thank you all for your testimony and for your work in this
field.
Chairman Fitzpatrick. I now recognize the gentleman from
Arkansas, Mr. Hill, for 5 minutes.
Mr. Hill. Thank you, Mr. Chairman.
And I thank the panel for participating today.
Dr. Asher, reflect for me on when we put pressure on
particularly developed countries and through the financial
process, through the PATRIOT Act, we squeeze legitimate users
and illegitimate users out of those marketplaces relative to
the U.K. banking system or the American banking system, and
Mutual Legal Assistance Treaties (MLATs) have been a big,
important tool that we have had diplomatically, whether it is
finding Noriega's assets or other players around the world.
What can we do in that arena? Can we expand the MLAT
process? Can we amend it? Is there a mini-MLAT that we could
use with countries with which we don't have a full treaty?
Would you expand on that for a minute.
Mr. Asher. I think that is a really interesting question,
because we haven't really utilized outside of the world of just
straight-up drug trafficking, the MLAT process of asset
forfeiture that effectively.
Something I have advocated against with both ISIL and
Hezbollah is the use of RICO, which has huge transnational
resonance against terrorist organizations as organized criminal
entities because terrorism is a specified unlawful act, SUA,
under the law. So if you engage in more than two SUAs that are
allowed under RICO, you are engaged in a criminal conspiracy
that can be prosecuted.
And the thing about RICO and the way it relates to asset
forfeitures is you can charge anyone. For example, if you say,
``I am an ISIL member'' or ``I am an al Qaeda member''--a lot
of people want to brag about it--you are charged, technically.
It is a pretty interesting tool. But you can moreover go after
their money.
So if we find there is a foundation in a far-flung land,
let's say even a country that doesn't have an MLAT with us or
it doesn't honor it, Lebanon, for example--we found $150
million of the proceeds of the forced sale--basically, it was
in bankruptcy--of the Lebanese Canadian Bank in a bank called
Banque Libano-Francaise. They put their money in that. It was
apparently Hezbollah's money.
Under our law, we have a law called Section 981(k) of Title
18 that allows substitute assets to be confiscated where the
U.S. Government can actually reach those assets. So even though
we didn't have an MLAT with Lebanon--and it would have been
better, I guess, if we did--we were able to freeze the money in
the correspondent bank account of Libano-Francaise--it was the
proceeds the Department of Justice was able to freeze--and
forfeit ultimately $102 million of Hezbollah's money without
actually going to Lebanon.
So, of course, if we have MLATs, which we should use
strategically more effectively for asset forfeiture, it will be
exponentially more effective. But even where we don't have
them, we have legal tools that can be useful. The key is, we
have to deprive financial assets from our adversaries' pockets.
Mr. Hill. Thank you.
Mr. Barrett, is there a formalized model you can see in
this charitable arena where you have seen maybe a best practice
through forced disclosure of legitimate charities to warn
potential donors that they actually have a record of bad acting
through the file of their 990 report with the IRS, if it is a
U.S. charity, or is there a way to formalize a receipt of
remittances in a foreign country like Somalia that might work,
that would be a way to better monitor those flows? Do you have
a further opinion on that?
Mr. Barrett. I think you are right. I think public
awareness is enormously important, and indeed the public who
are donating to charities have a responsibility also to know
how the charities are going to spend that money.
There are regulations which have developed over the years,
best practices, as you say, in this country, and in the United
Kingdom as well, which I think require the registration of
charities and the auditing of their accounts with much more
detailed scrutiny than there has been in the past.
And I think that is having a real effect. I think there are
fewer charities now which can be found to be funding terrorism
in jurisdictions where the law is applied properly and fully.
And on remittances, too. I think that there is a mistake
often made that hawalas somehow are prepared to turn a blind
eye to transactions which banks might otherwise stop. But, in
fact, hawalas have to know their customers even more than banks
because, of course, it is based entirely on trust rather than
on a purely commercial basis.
Mr. Hill. Thank you.
I yield back, Mr. Chairman.
Chairman Fitzpatrick. The Chair recognizes the gentleman
from Kentucky, Mr. Barr, for 5 minutes.
Mr. Barr. Thank you, Mr. Chairman, for calling this
important hearing to explore and learn more about the dangerous
nexus between terrorism and criminal organizations.
I am particularly interested in whether or not there is
substantial evidence of U.S.-based criminal organizations that
have partnered with Islamic terrorist organizations. And what
is the extent of the nexus between--we have heard about
international drug cartels' involvement in partnerships with
terror organizations. But to what extent are American-based,
U.S.-based criminal organizations affiliated with Islamic
terrorist organizations like Hezbollah? Like ISIL? Anyone?
Mr. Farah. I think that there are times when you see U.S.-
based criminal organizations overlapping tangentially in the
drug trade with Hezbollah activities. I am not aware of any
systemic or systematic or larger scale U.S. criminal
organizations. I think that is the line that most people won't
cross because I think the price would be very, very high for
them, and they are aware of that.
I think criminal organizations are largely very rational
actors, and when the price they would pay would be that high
and the profit would probably--they don't need those groups to
do what they want to do, particularly in drug trafficking. I am
not aware of that on any significant scale.
Mr. Asher. I would just say briefly that the Sinaloa drug
cartel is not based in the United States, but it derives a lot
of income from the United States. The Mejia Salazar cartel,
which is supporting Sinaloa, but it is basically Pablo
Escobar's empire still living on, is exporting massive amounts
of cocaine in the United States in partnership with Sinaloa. So
they are earning a lot of income here.
In both cases, there is definitely a partnership going on
with Lebanese Hezbollah, especially the darkest side of
Hezbollah. In my work personally, I can attest to that in front
of you, that we have seen it, and hopefully someday, it is
going to be prosecuted in criminal court.
This confluence between these major cartels--and, in
criminal states, which Doug has done a great job pointing out,
like Venezuela, and organizations like Lebanese Hezbollah is
really actually almost out of control.
Mr. Barr. Let me turn to ISIL for just a minute.
We know from your testimony and from previous hearings that
the sources of ISIL funds are predominantly in oil and the
looting of the banks from Mosul and kidnappings and ransom and
the like.
To what extent does the Islamic State have access to and
participate in the international financial system? And what
could American policymakers do to disrupt the Islamic State's
access to financial institutions?
Mr. Barrett. Yes. I think that is really an excellent
question and one, I think, that is puzzling many experts who
look at ISIL.
But the fact of the matter, I think, is that most of the
money is--it is sort of a cash-based economy and a self-
generating economy and then the money circulates within the
territories occupied by ISIL.
Insofar as money is coming from the outside, it does seem
to come into ISIL-controlled territory in cash rather than
anything else. But I think increasingly we will see the sort of
transfer of money through the Internet which is becoming more
common elsewhere.
And so people who want to make donations will be able to
send it to a bank probably in Turkey or in parts of Syria and
Iraq which are not controlled by ISIL, but it will be cashed
and then brought over the border. So there will be some sort of
interaction with the international--
Mr. Barr. So is Section 311 the best tool available to the
United States to disrupt those banking activities?
Mr. Barrett. I would say that the best tool, really, is to
gather intelligence on how that is happening and then deal with
the individual cases as they come up.
I think a blanket approach can be very difficult when you
look at just sort of the variety that may be available and the
fact that predominantly the cash will come into their territory
in physical form rather than electronic form.
Mr. Barr. My time is about ready to expire.
But if any of you could just offer an opinion on what is
the single most important policy change that this Congress
could enact that would disrupt terrorists' access to criminal
organizations. Is there any one recommendation that you would
highlight?
Mr. Asher. I think the Bank Secrecy Act of 1971 needs to be
fully revised. I think we need to update it. I think there is
way too much money being spent on unsuccessful attempts by
banks to try to limit terrorism financing and financial crime
and we are not focused on the most important things.
There is a huge overregulation of the financial system in
this area. I am one of the guys who pioneered this stuff, but I
will admit it. It is not working. And that is really why I came
before you today.
We could do a much better job with less cost to our
financial institutions if we just focused on the problem
actors. There are not that many drug cartels in the world.
Our financial institutions need to be told by the Federal
Government who is in the cartel, and what they are doing. They
need to be given some sort of watch-list information like we do
with transportation companies. The airlines know if some
terrorist gets on an airplane. Why don't we tell the banks that
they are banking with some terrorists?
Mr. Barr. Thank you.
I yield back.
Chairman Fitzpatrick. The Chair now recognizes the
gentleman from Arizona, Mr. Schweikert, for 5 minutes.
Mr. Schweikert. Thank you, Mr. Chairman.
There are just so many things we would like to know in
this. And when we have 5 minutes, we try to do it very quickly.
Can I just walk through a scenario? Because I am trying to
understand flow, and also cost, discounts. The drug cartel
sells its illicit products in North America.
First, how does it get the cash back across the border? Is
it converting it to gold? Is it carrying suitcases of cash?
Mr. Farah, how are they getting it to Central America
first? What would your opinion be?
And then I am going to ask, if they end up in Ecuador, what
are they being charged? What is the cost of money laundering?
Walk me through a couple of these steps.
Mr. Farah. Thank you.
I think, on the drug trade, a lot of the money goes back in
bulk cash and a lot of it goes back in wire transfers and bank
transfers into Central America. The cost is generally about 17
to 22 percent.
There are banks in Central America where, if you deposit
over a certain amount of money, generally in the neighborhood
of $3 million or $4 million, and pay the 17 percent, they will
provide you with a history of justification of that money.
In other words, they will create all of your tax records,
all of your employment records, everything, so that money is
now untraceable as drug money. It is one of the full services
that some of the banks are offering.
Mr. Schweikert. Mr. Farah, how much of that do you think is
going to a spiff to some of the government leaders?
Mr. Farah. Of the drug--
Mr. Schweikert. Okay. Let's say I just spent 22 percent to
wash my couple million dollars of illicit cocaine money--
Mr. Farah. Right.
Mr. Schweikert. --that has come back into the country. The
government has created a charter to allow me to have access to
this bank.
What is that president, what is that administration, what
is that government, taking off of that?
Mr. Farah. I think you see right now that the vice
president of Guatemala just resigned, who was involved--his
private secretary--I believe she personally was involved in a
really lucrative scheme where there were some banks involved
and, also, largely to avoid taxes coming across the border--
Customs taxes.
And it gets--because, as the states have criminalized, it
becomes a state operation run by a state. They end up paying a
lot. I don't know the exact percentages. I know that, in some
cases, the government officials will take up to half of what
comes out of there.
You look at some of the cases that have been prosecuted,
like former President Portillo in Guatemala, who racked up
multi-hundreds of millions of dollars. You have former
President Paco Flores in El Salvador who was charged with $200
million. You have another former president of El Salvador whose
own party investigation showed he had made $450 million.
Mr. Schweikert. Don't we have investigations going on right
now in Panama and other areas in regard to certain issues?
Mr. Farah. There are. I think that what David Asher said is
true. You have a lot of really good, smart people looking at
this, operating in severe resource constraints.
And when I talk--you have, for example, the case of Banco
Leandro, which is a 311 designation, which collapsed one of the
major money-laundering operations just a couple of months ago.
They had three branches operating in Panama, and in that
branch we had at least $2 billion from the Venezuelan oil
company and many in Russian organized crime, China's organized
crime, et cetera.
Okay. When you go to talk to these people--let me finish
this thought. When you go to talk to the authorities who deal
with it, they simply don't have the resources to reach out and
do all that stuff. They say, ``This is great. It is great
information. We would like to help. We have 3 people to look at
45 cases and a lot get dropped.''
Mr. Schweikert. About 3 weeks ago, I was actually in Panama
and sat down with the parliamentarian not from Panama, but from
one of the countries you have mentioned, and he swears that he
actually sat there and watched the check from, ultimately, Iran
being deposited and has tried to speak about it publicly and
has made very, very little progress.
Dr. Asher, walk me through--because I am trying to get my
head around how formalized this is. We had a hearing a couple
of years ago that actually talked about that, in Venezuela,
there almost was a shopping list of your prices. If you are
washing 100-dollar U.S. currency, you sort of pay this, this,
this, and this, and here is how it breaks out. Is it that
formalized of a corruption?
Mr. Asher. It is national policy. It is called a criminal
state. It is crime being carried out as a act of national
policy to benefit the leaders of that regime, and they can use
it.
No surprise there is money in the oil accounts. How do you
get money from the United States? Congressman Barr, I think,
was asking earlier about, how do you get the money from the
United States?
I can't prove it, but there have been way too many cases
where you see these oil companies for countries like Venezuela
showing up in law enforcement cases related to the movement of
funds.
Have you ever heard of Citgo? Who knows what is going on
with these things. I have no idea at all if any of these
companies are involved.
But when you read the law enforcement cases, things pop up
like PDVSA and there has to be something going on with the use
of formalized transactions and trade with a lot of these
states, and it is concerning, from my think tank perspective,
that we are doing perilously little to try to police it because
they are being accorded the privileges of governments even if
they are engaged in criminal activity.
Mr. Schweikert. Mr. Chairman, thank you for the time, and
thank you for letting me go a little over.
For many of us, we would love to see some of the charting
to understand the movement between bad actors in governments,
bad actors in business, and just plain old bad actors, and see
that flowchart.
Chairman Fitzpatrick. I thank the gentleman.
Without objection, we will proceed to a second round of
questions, if any Member wishes to be recognized.
I recognize the gentleman from North Carolina, Mr.
Pittenger.
Mr. Pittenger. Thank you, Mr. Chairman. I appreciate the
courtesy.
And I appreciate the courtesy of each of you.
When there is a settlement with a bank related to their
being complicit in money laundering, what happens with the
proceeds of those settlement funds? Could those funds be used
for counterterrorism efforts? And how could we designate that?
Who would like to take that as an open question?
Ms. Realuyo. The U.S. Marshals Service actually manages all
of the assets that are seized. So there is freezing, which you
are very familiar with, but then there is an actual seizure of
assets. This has probably been much more popularized through
movies that kind of look at the DEA and their raids and going
after cartels.
The question then is--it is then divided among the
different agencies that were involved in that actual operation.
And it is actually a very interesting U.S. model that we are
exporting to other partner nations who are looking at asset
forfeiture as a very useful tool.
There are two things that they say in Mexico that the
cartel leaders are worried about: first, extradition to a
solitary cell without a cell phone into the United States; and
second, and more importantly, the actual expropriation of their
funds, that their children will live less luxurious a life than
themselves.
And I have actually advocated that in the actual seizure of
those funds, but more importantly, the fines that are levied to
the banks and institutions that are violating known sanctions,
regimes, and laundering money, there should be a portion
dedicated to actually helping those who have actually been
involved in uncovering and then, more importantly,
investigating and prosecuting these crimes.
I think you have heard so much about how within the U.S.
Government there are really fantastic experts and analysts who
are doing this, but because of the shortages of financial and,
more importantly, human resources and, unfortunately, too, the
fact that many of our best experts are actually leaving and
going to the private sector, we need to really work on capacity
building within the U.S. Government for combating terrorism,
crime, and corruption, particularly through that financial end.
Mr. Pittenger. I agree. Resources are critical. And we are
talking hundreds of millions and billions of dollars, and the
allocation of those funds, it seems to me, would be very
important in advancing our counterterrorism efforts.
Dr. Asher, did you want to make--
Mr. Asher. In having contributed probably a few hundred
millions dollars to the asset forfeiture fund over the years
through efforts I have been involved in, I have always wondered
whatever happens to the money. It is a great question.
Yes, we have these several billion-dollar pots that are
used, but far too little of it is allowed to be used
proactively, for example. Now, this is a very controversial
issue, I know, on the Hill here, and I respect Members'
opinions on this.
This whole fast-and-furious fiasco is something that we
will always live to regret. I have no idea how something like
that could happen. But the use of money as a tool to do sting
operations, as they exist, is indispensable.
We have to put some money on the table in law enforcement
to be able to interact with--no kidding--transnational
organized crime groups with credibility. Undercover operations
are critical. The asset forfeiture funds are critical. But
there is a tiny amount, frankly, allowed to be used for any
sort of proactive approach, which paralyzes the effectiveness
of our law enforcement organizations against them.
So, it is not just the asset forfeiture funds themselves
not being used for increasing asset forfeiture and there is
insufficiency there, it is how they are being used. I think we
have to get much more aggressive like we were in the 1980s and
1990s against the Colombian cartels largely because people are
getting shot left, right, and center in the streets of Miami.
Mr. Pittenger. Thank you.
Any further comments?
Thank you, Mr. Chairman. I yield back.
Chairman Fitzpatrick. The gentleman yields back.
And the gentleman from Arkansas, Mr. Hill, is recognized.
Mr. Hill. Thanks, Mr. Chairman.
I just wanted to follow up. There are so many Members of
the House and Senate who are so concerned about the Iranian
negotiations that are under way between the Administration and
Iran.
And when we had our last hearing, so many of us were, I
think, shocked at the magnitude of money that would flow back
to Iran were the proposed treaty to be successful: $50 billion
signing bonus, then the freeing up of cash in the accounts that
had been frozen, and then, of course, the flow, as was noted by
the Professor, of future trade capability.
In your role of interdicting terror financing and stopping
the expansion of terrorism, how would you rank that $120
billion that may flow to Iran if this treaty proceeds?
If 1 is of low importance to our national security and the
ability to stop the expansion of terror finance and 10 is
critical, very important, how would each of you rank the
freeing up of that $120 billion?
We will start with Dr. Asher and just let each of you
rank--give me a number and--
Mr. Asher. I will give you a rank. I don't think it is 10.
Mr. Hill. Yes.
Mr. Asher. It may be 5.
Mr. Hill. Okay.
Mr. Asher. It may be 3. But the big thing is, it is Iran's
revolutionary regime and its externalization of that revolution
which is its top priority as a policy that is the problem.
When we went to the North Korea six-party talks, we should
have been focused not just on the fact they were exporting a
nuclear reactor to Syria, which probably had something to do
with the Iranians right under our feet, but we also should have
been focused on the fact the North Korean regime was not
agreeing to negotiate about its destiny as a regime. Its whole
orientation was against our existence.
That is the problem with the Iranians. Now, maybe there is
something going on where they are going to change that. I hope
so. But that, to me, is the problem that concerns me, is they
are inimically opposed to us and it is their national ideology
as a state.
Mr. Barrett. Yes. I think Iran, like all nations, operates
in its own best interests and it will identify those best
interests in different ways according to the context of the
international community around it.
Sure, Iran, if it had more money, might fund actors that
the United States and its allies would not like to see better
funded.
At the moment, of course, Iran is providing a huge amount
of money to Syria, for example, to prop up the Assad regime. It
is paying for various militia in Iraq, which, on the other
hand, are probably the most effective forces against ISIL.
And I think that the main way of making sure that
additional money will not be used in ways that we wouldn't like
is to try to bring Iran much more into the international
community so they identify their interests alongside everybody
else's rather than being the sort of outlier who is always
trying to sort of find advantage.
And that, of course, comes back to the fundamental problems
in the Middle East of sectarianism, the competition between
Saudi Arabia and Iran, and many, many other complex questions.
Mr. Farah. I agree with David Asher. One of the late
prosecutors, Alberto Nisman in Argentina, was the one who
pointed out to me when we were talking about Iran and Latin
America--he asked, ``Have you ever read the Iranian
constitution?'' And I said, ``Frankly, no.'' And he said,
``Read the preamble to the Iranian constitution, their official
translation.''
It is state policy to expand using the Revolutionary Armed
Guard as the armed vanguard of spreading jihad around the world
in a world conquest. That is written into their constitution.
So I agree with David that the fundamental nature of the
Iranian regime is something that--allowing fungible money into
their system will almost inevitably point toward much more
aggressive action outside, including terrorism, because that is
their core underlying belief, which they acknowledge and write
about extensively.
Ms. Realuyo. I think it is of grave concern. Here in the
United States, we focus primarily on the nuclear deal, when at
the same time a lot of our Arab allies are much more focused on
Iranian expansionism, and, more importantly, they talk about
the revival of a Persian empire.
You have actually seen now the influence of Iran in four
major capitals. They call it the Shia Crescent. And several of
our Arab Gulf State allies are worried about becoming a Shia
circle. They have, basically, control or influence in Baghdad,
in Lebanon, in Syria, and, sadly, what you are seeing devolve
in Yemen.
So it is not even a question of a state-sponsored
terrorism. It is this question about Iran hegemony in the
Middle East, which is so complex because of the religious angle
as well as the historical rivalries.
It is something I think that we are not really covering
here in the press as much. Since we are so focused on the
Iranian nuclear deal, we are not looking at the geopolitical
aspirations of Iran.
Mr. Hill. Thank you, Mr. Chairman.
Chairman Fitzpatrick. The Chair now recognizes the
gentleman from New York, Mr. Meeks, for 5 minutes.
Mr. Meeks. Thank you, Mr. Chairman.
And I thank all of you for your testimony. I have been
listening very attentively in my office to your testimony.
And let me just ask you first a few questions because my
focus has been, on this committee, what we can do in Congress
to make sure that we are not allowing the Internet and others
to facilitate anti-money-laundering, et cetera.
Mr. Asher, I guess I will ask you the first question. I
think that in your testimony, you mentioned that Congress
should amend the Bank Secrecy Act to facilitate anti-money-
laundering data-sharing among banks.
Now, the issue that we recently had the vote--there is a
general concern among Americans about personal information
being widely available to a range of institutions with little
knowledge about how that information is being used.
So I was wondering if you could elaborate on this conflict
and how Congress should proceed with improving the Bank Secrecy
Act while also preserving the individual's human rights to
privacy debate that we have going on in Congress right now.
Mr. Asher. That is a great question, and I appreciate you
asking it.
Look, the Bank Secrecy Act was actually not passed to
protect bank secrets or privacy. It was designed to stop any
money laundering in 1971. They just changed the name because of
concerns.
I am concerned, as a private American citizen, about
personal information being divulged. But unfortunately, the cat
is sort of out of the bag as we look at the credit rating
bureaus. And the amount of data that an Experian or someone
would have about any of us is ridiculous.
It is ironic, though, that banks are reticent to share data
with other banks even though that is allowed. Under the USA
PATRIOT Act, Section 314(a) or (b)--I can't remember which
one--banks can share anti-money-laundering data with each
other, but they can't pool it.
If you could pool it, if you could do sort of the Visa or
MasterCard processing of anti-money-laundering data, you would
see massive schemes that could be stopped by banks at a
relatively low cost because you would see that this guy just
opened an account at this bank in whatever city and then at
this bank in this city, and they are smurfing the system. They
are setting up a money-laundering network. But right now, no
one can see that.
So sharing the data would not only reduce costs
dramatically for the banking system, it would improve
effectiveness. They would still be obliged to not share that
data with anyone outside of official channels. They couldn't
provide it to--they would just be sharing with each other. They
are allowed to do that.
It is not going to get divulged any more than it is being
getting divulged. So I am not that concerned. I just think
economy of scale does help in trying to stop things from
occurring. It also can bring down costs.
Moreover, a consortium could be in the position to receive
watch-list data, even classified data, from the U.S.
Government. And I think we need to consider providing that. We
provided it, again, to our airlines and shipping lines. If we
think there is a Maersk ship that is containing a container
full of, let's say, weapons coming into the United States, we
are going to tell Maersk, ``There is a container. You have to
inspect it.''
Do we tell the banks that they are doing business with drug
traffickers or Hezbollah? No. Only through public divulgence.
And I think we should keep these things--we don't need to
publicly approach these issues and tell the terrorists that we
are looking at them.
Mr. Meeks. You know that debate is going on.
Mr. Asher. I do. And I think it is a healthy debate. I am
concerned, but I don't think--if this system is done right, it
is not going to lead to any more divulsion of private
information than is occurring already. In fact, it just might
be more effective.
Mr. Meeks. I am running out of time. I would like to have
this debate more and more. But, again, I am trying to figure
out what we can do as a committee.
Let me jump to Mr. Barrett really quick because I think
that you stated in your testimony that corruption, along with
other forms of poor governance, particularly in the delivery of
justice, is possibly the most significant driver of terrorism
in the world today.
So I want to know--maybe you can elaborate on what role the
Financial Services Committee, with our oversight authority of
international monetary organizations, can play in better
ensuring governance in nations struggling with terrorist
organizations?
Mr. Farah. I think--is that for--
Mr. Meeks. Go ahead. Whomever--
Mr. Barrett. I think that what you are doing is absolutely
right because I think that, as corruption, corrupt officials,
criminality, and so on--the lack of the rule of law is such a
driver of terrorism in these areas where, essentially, the
people are completely dissatisfied with what is provided by
government.
The more you can sanction those individuals as government
leaders and others who are involved in the corrupt practices
and in the financial skullduggery that goes on in the general
criminal world, then the less--obviously, the less dissatisfied
people will be. If they see justice being served at least in
another jurisdiction, even if not in their own, that will be
very encouraging to them.
So I think that it has a knock-on effect on the terrorist
problem.
Chairman Fitzpatrick. The gentleman's time has expired.
Again, I would like to thank the witnesses for their
testimony and their time here today and for the significant
expertise that you have shared with the task force. We all
appreciate that.
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 12:06 p.m., the hearing was adjourned.]
A P P E N D I X
May 21, 2015
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