[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
                           
                           
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]                           

                 
                         U.S. GOVERNMENT PUBLISHING OFFICE
95-071 PDF                    WASHINGTON : 2015                         
                 
________________________________________________________________________________________ 
For sale by the Superintendent of Documents, U.S. Government Publishing Office, 
http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center, 
U.S. Government Publishing Office. Phone 202-512-1800, or 866-512-1800 (toll-free).
E-mail, [email protected].  
                
                 
                 
                 
                 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

                              ----------                              
                                                                   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
                              
                              
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 

                               [all]