[House Report 113-543]
[From the U.S. Government Publishing Office]
113th Congress Rept. 113-543
HOUSE OF REPRESENTATIVES
2d Session Part 1
======================================================================
HEZBOLLAH INTERNATIONAL FINANCING PREVENTION ACT OF 2014
_______
July 22, 2014.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Royce, from the Committee on Foreign Affairs,
submitted the following
R E P O R T
[To accompany H.R. 4411]
[Including cost estimate of the Congressional Budget Office]
The Committee on Foreign Affairs, to whom was referred the
bill (H.R. 4411) to prevent Hezbollah and associated entities
from gaining access to international financial and other
institutions, and for other purposes, having considered the
same, reports favorably thereon with an amendment and
recommends that the bill as amended do pass.
TABLE OF CONTENTS
Page
The Amendment.................................................... 1
Summary and Purpose.............................................. 8
Background and Need for Legislation.............................. 8
Hearings......................................................... 11
Committee Consideration.......................................... 12
Committee Oversight Findings..................................... 12
New Budget Authority, Tax Expenditures, and Federal Mandates..... 12
Congressional Budget Office Cost Estimate........................ 12
Directed Rule Making............................................. 13
Non-Duplication of Federal Programs.............................. 13
Performance Goals and Objectives................................. 14
Congressional Accountability Act................................. 14
New Advisory Committees.......................................... 14
Earmark Identification........................................... 14
Letters of Jurisdiction.......................................... 15
Section-by-Section Analysis...................................... 19
The Amendment
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Hezbollah
International Financing Prevention Act of 2014''.
(b) Table of Contents.--The table of contents for this Act is as
follows:
Sec. 1. Short title and table of contents.
Sec. 2. Statement of policy.
TITLE I--PREVENTION OF ACCESS BY HEZBOLLAH TO INTERNATIONAL FINANCIAL
AND OTHER INSTITUTIONS
Sec. 101. Report on imposition of sanctions on certain satellite
providers that carry al-Manar TV.
Sec. 102. Sanctions with respect to financial institutions that engage
in certain transactions.
TITLE II--REPORTS ON DESIGNATION OF HEZBOLLAH AS A SIGNIFICANT FOREIGN
NARCOTICS TRAFFICKER AND A SIGNIFICANT TRANSNATIONAL CRIMINAL
ORGANIZATION
Sec. 201. Report on designation of Hezbollah as a significant foreign
narcotics trafficker.
Sec. 202. Report on designation of Hezbollah as a significant
transnational criminal organization.
Sec. 203. Report on Hezbollah's involvement in the trade of conflict
diamonds.
Sec. 204. Rewards for justice and Hezbollah's fundraising, financing,
and money laundering activities.
Sec. 205. Report on activities of foreign governments to disrupt global
logistics networks and fundraising, financing, and money laundering
activities of Hezbollah.
Sec. 206. Appropriate congressional committees defined.
TITLE III--MISCELLANEOUS PROVISIONS
Sec. 301. Rule of construction.
Sec. 302. Regulatory authority.
Sec. 303. Termination.
SEC. 2. STATEMENT OF POLICY.
It shall be the policy of the United States to--
(1) prevent Hezbollah's global logistics and financial
network from operating in order to curtail funding of its
domestic and international activities; and
(2) utilize all available diplomatic, legislative, and
executive avenues to combat the global criminal activities of
Hezbollah as a means to block that organization's ability to
fund its global terrorist activities.
TITLE I--PREVENTION OF ACCESS BY HEZBOLLAH TO INTERNATIONAL FINANCIAL
AND OTHER INSTITUTIONS
SEC. 101. REPORT ON IMPOSITION OF SANCTIONS ON CERTAIN SATELLITE
PROVIDERS THAT CARRY AL-MANAR TV.
(a) In General.--Not later than 30 days after the date of the
enactment of this Act, the President shall submit to the Committee on
Foreign Affairs of the House of Representatives and the Committee on
Foreign Relations of the Senate a report that includes--
(1) a list of all satellite, broadcast, Internet, or other
providers that knowingly provides material support to al-Manar
TV, and any affiliates or successors thereof; and
(2) with respect to all providers included on the list
pursuant to paragraph (1)--
(A) an identification of those providers that have
been sanctioned pursuant to Executive Order 13224
(September 23, 2001); and
(B) an identification of those providers that have
not been sanctioned pursuant to Executive Order 13224
and, with respect to each such provider, the reason why
sanctions have not been imposed.
(b) Form.--The report required by subsection (a) shall be submitted
in unclassified form to the greatest extent possible, and may contain a
classified annex.
SEC. 102. SANCTIONS WITH RESPECT TO FINANCIAL INSTITUTIONS THAT ENGAGE
IN CERTAIN TRANSACTIONS.
(a) Prohibitions and Conditions With Respect to Certain Accounts Held
by Foreign Financial Institutions.--
(1) In general.--Not later than 120 days after the date of
the enactment of this Act, the Secretary of the Treasury, with
the concurrence of the Secretary of State and in consultation
with the heads of other applicable departments and agencies,
shall prohibit, or impose strict conditions on, the opening or
maintaining in the United States of a correspondent account or
a payable-through account by a foreign financial institution
that the Secretary determines, on or after the date of the
enactment of this Act, engages in an activity described in
paragraph (2).
(2) Activities described.--A foreign financial institution
engages in an activity described in this paragraph if the
foreign financial institution--
(A) knowingly facilitates a significant transaction
or transactions for Hezbollah;
(B) knowingly facilitates a significant transaction
or transactions of a person designated for acting on
behalf of or at the direction of, or owned or
controlled by, Hezbollah;
(C) knowingly engages in money laundering to carry
out an activity described in subparagraph (A) or (B);
(D) knowingly facilitates a significant transaction
or transactions or provides significant financial
services to carry out an activity described in
subparagraph (A), (B), or (C), including--
(i) facilitating a significant transaction or
transactions; or
(ii) providing significant financial services
that involve a transaction of covered goods; or
(E)(i) knowingly facilitates, or participates or
assists in, an activity described in subparagraph (A),
(B), (C), or (D), including by acting on behalf of, at
the direction of, or as an intermediary for, or
otherwise assisting, another person with respect to the
activity described in any such subparagraph;
(ii) knowingly attempts or conspires to facilitate or
participate in an activity described in subparagraph
(A), (B), (C), or (D); or
(iii) is owned or controlled by a foreign financial
institution that the Secretary finds knowingly engages
in an activity described in subparagraph (A), (B), (C),
or (D).
(3) Penalties.--The penalties provided for in subsections (b)
and (c) of section 206 of the International Emergency Economic
Powers Act (50 U.S.C. 1705) shall apply to a person that
violates, attempts to violate, conspires to violate, or causes
a violation of regulations prescribed under paragraph (1) of
this subsection to the same extent that such penalties apply to
a person that commits an unlawful act described in section
206(a) of that Act.
(4) Regulations.--The Secretary of the Treasury shall
prescribe and implement regulations to carry out this
subsection.
(b) Waiver.--
(1) In general.--The Secretary of the Treasury, with the
concurrence of the Secretary of State and in consultation with
the heads of other applicable departments and agencies, may
waive, on a case-by-case basis, the application of a
prohibition or condition imposed with respect to a foreign
financial institution pursuant to subsection (a) for a period
of not more than 180 days, and may renew that waiver for
additional periods of not more than 180 days, on and after the
date that the Secretary of the Treasury, with the concurrence
of the Secretary of State--
(A) determines that such a waiver is vital to the
national security interests of the United States; and
(B) submits to the appropriate congressional
committees a report describing the reasons for the
determination.
(2) Form.--The report required by subparagraph (1) shall be
submitted in unclassified form, but may contain a classified
annex.
(c) Provisions Relating to Foreign Financial Institutions.--
(1) Report.--Not later than 45 days after the date of the
enactment of this Act, and every 180 days thereafter, the
Secretary of the Treasury shall submit to the appropriate
congressional committees a report that--
(A) identifies each foreign central bank that the
Secretary determines engages in one or more activities
described in subsection (a)(2)(D); and
(B) provides a detailed description of each such
activity.
(2) Special rule to allow for termination of sanctionable
activity.--The Secretary of the Treasury shall not be required
to apply sanctions to a foreign financial institution described
in subsection (a) if the Secretary of the Treasury, with the
concurrence of the Secretary of State and in consultation with
the heads of other applicable departments and agencies,
certifies in writing to the appropriate congressional
committees that--
(A) the foreign financial institution--
(i) is no longer engaging in the activity
described in subsection (a)(2); or
(ii) has taken and is continuing to take
significant verifiable steps toward terminating
the activity described in subsection (a)(2);
and
(B) the Secretary has received reliable assurances
from the government with primary jurisdiction over the
foreign financial institution that the foreign
financial institution will not engage in any activity
described in subsection (a)(2) in the future.
(d) Definitions.--
(1) In general.--In this section:
(A) Account; correspondent account; payable-through
account.--The terms ``account'', ``correspondent
account'', and ``payable-through account'' have the
meanings given those terms in section 5318A of title
31, United States Code.
(B) Agent.--The term ``agent'' includes an entity
established by a person for purposes of conducting
transactions on behalf of the person in order to
conceal the identity of the person.
(C) Appropriate congressional committees.--The term
``appropriate congressional committees'' means--
(i) the Committee on Foreign Affairs and the
Committee on Financial Services of the House of
Representatives; and
(ii) the Committee on Foreign Relations and
the Committee on Banking, Housing, and Urban
Affairs of the Senate.
(D) Covered goods.--The term ``covered goods'' has
the meaning given the term in section 1027.100 of title
31, Code of Federal Regulations.
(E) Financial institution.--The term ``financial
institution'' means a financial institution specified
in subparagraph (A), (B), (C), (D), (E), (F), (G), (H),
(I), (J), (K), (M), (N), (P), (R), (T), (Y), or (Z) of
section 5312(a)(2) of title 31, United States Code.
(F) Foreign financial institution; domestic financial
institution.--
(i) Foreign financial institution.--The term
``foreign financial institution'' has the
meaning of such term in section 1010.605 of
title 31, Code of Federal Regulations, and
includes a foreign central bank.
(ii) Domestic financial institution.--The
term ``domestic financial institution'' has the
meaning of such term as determined by the
Secretary of the Treasury.
(G) Hezbollah.--The term ``Hezbollah'' means--
(i) any person--
(I) the property of or interests in
property of which are blocked pursuant
to the International Emergency Economic
Powers Act (50 U.S.C. 1701 et seq.);
and
(II) who is identified on the list of
specially designated nationals and
blocked persons maintained by the
Office of Foreign Asset Control of the
Department of the Treasury as an agent,
instrumentality, or affiliate of
Hezbollah; and
(ii) the entity designated by the Secretary
of State as a foreign terrorist organization
pursuant to section 219 of the Immigration and
Nationality Act (8 U.S.C. 1189).
(H) Money laundering.--The term ``money laundering''
means any of the activities described in paragraph (1),
(2), or (3) of section 1956(a) of title 18, United
States Code, with respect to which penalties may be
imposed pursuant to such section.
(2) Other definitions.--The Secretary of the Treasury may
further define the terms used in this section in the
regulations prescribed under this section.
TITLE II--REPORTS ON DESIGNATION OF HEZBOLLAH AS A SIGNIFICANT FOREIGN
NARCOTICS TRAFFICKER AND A SIGNIFICANT TRANSNATIONAL CRIMINAL
ORGANIZATION
SEC. 201. REPORT ON DESIGNATION OF HEZBOLLAH AS A SIGNIFICANT FOREIGN
NARCOTICS TRAFFICKER.
(a) Findings.--Congress makes the following findings:
(1) In 2008, after the two year Operation Titan run by the
U.S. Drug Enforcement Administration and Colombian authorities
dismantled an international narcotics ring that smuggled
cocaine into the United States, Europe, and the Middle East,
and was run by Chekry Harb, also known as ``Taliban''.
According to lead prosecutor for the special prosecutor's
office in Bogota, Gladys Sanchez, ``The profits from the sales
of drugs went to finance Hezbollah.''.
(2) In 2011, the Department of the Treasury blacklisted the
Lebanese Canadian Bank as a primary money laundering concern,
alleging that it is part of a drug trafficking network that
profited Hezbollah by moving approximately $200,000,000 per
month.
(3) In April 2013, when the Department of the Treasury
blacklisted two Lebanese exchange houses, Kassem Rmeiti & Co.
and Halawi Exchange Co., for laundering drug profits for
Hezbollah, it stated that Hezbollah was operating like ``an
international drug cartel,'' adding that the ``Halawi Exchange,
through its network of established international exchange
houses, initiated wire transfers from its bank accounts to the
United States without using the Lebanese banking system in
order to avoid scrutiny associated with Treasury's designations
of Hassan Ayash Exchange, Elissa Exchange, and its Lebanese
Canadian Bank Section 311 Action. . .Money was then wire
transferred via Halawi's banking relationships indirectly to
the United States through countries that included China,
Singapore, and the UAE, which were perceived to receive less
scrutiny by the U.S. Government.''.
(4) The Department of Justice reported that 29 of the 63
organizations on its FY 2010 Consolidated Priority Organization
Targets list, which includes the most significant international
drug trafficking organizations (DTOs) threatening the United
States, were associated with terrorist groups, and noted with
concern Hezbollah's international drug and criminal activities.
(b) Sense of Congress.--It is the sense of Congress that--
(1) Hezbollah meets the criteria for designation as a
significant foreign narcotics trafficker as set forth in the
Foreign Narcotics Kingpin Designation Act (21 U.S.C. 1901 et
seq.); and
(2) the President should so designate Hezbollah as a
significant foreign narcotics trafficker.
(c) Report.--
(1) Report required.--Not later than 120 days after the date
of the enactment of this Act, the President shall submit to the
appropriate congressional committees--
(A) a detailed report on whether the Hezbollah meets
the criteria for designation under the Foreign
Narcotics Kingpin Designation Act (21 U.S.C. 1901 et
seq.) as a significant foreign narcotics trafficker;
and
(B) if the President determines that Hezbollah does
not meet the criteria for designation under the Foreign
Narcotics Kingpin Designation Act as a significant
foreign narcotics trafficker, a detailed justification
as to which criteria have not been met.
(2) Form.--The report required by paragraph (1) shall be
submitted in unclassified form, but may include a classified
annex.
SEC. 202. REPORT ON DESIGNATION OF HEZBOLLAH AS A SIGNIFICANT
TRANSNATIONAL CRIMINAL ORGANIZATION.
(a) Findings.--Congress makes the following findings:
(1) Hezbollah is engaged array of illicit activities, from
counterfeiting currencies, passport documents, to stolen
automobile rings and other illicit activities.
(2) In 2002, authorities in Charlotte, North Carolina
arrested members of a cell run by Mohammed and Chawki Hamoud
and convicted them on various charges, including funding the
activities of Hezbollah from proceeds of interstate cigarette
smuggling and money laundering.
(3) In 2006 the Department of the Treasury designated
operations of Assad Barakat, treasurer for Hezbollah, as
providing material support for a foreign terrorist organization
and noted that Barakat had engaged in mafia-style shakedowns
and ``threatened TBA (triborder area) shopkeepers who are
sympathetic to Hezbollah's cause with having family members in
Lebanon placed on a `Hezbollah blacklist' if they did not pay
their quota to Hezbollah'' and also was ``involved in a
counterfeiting ring that distributes fake U.S. dollars and
generates cash to fund Hezbollah operations''.
(4) In 2009, Paraguayan authorities arrested Moussa Hamdan
and three other individuals for selling fraudulent passports
and trafficking in counterfeit money and sporting goods,
illegally obtained consumer electronics and automobiles and
then using the proceeds to buy arms for Hezbollah.
(5) In October 2011, a group of businessmen pled guilty to
attempting to ship electronics to a shopping center in South
America that the Department of the Treasury had designated as a
Hezbollah front.
(6) A June 2014 ``threat assessment'' report by Canada's
Integrated Terrorism Assessment Centre indicated that Hezbollah
members in Canada are involved in organized crime.
(b) Sense of Congress.--It is the sense of Congress that--
(1) Hezbollah meets the criteria for designation as a
significant transnational criminal organization under Executive
Order 13581 (76 Fed. Reg. 44757); and
(2) the President should so designate Hezbollah as a
significant transnational criminal organization.
(c) Report.--
(1) Report required.--Not later than 120 days after the date
of the enactment of this Act, the President shall submit to the
appropriate committees of Congress--
(A) a detailed report on whether the Hezbollah meets
the criteria for designation as a significant
transnational criminal organization under Executive
Order 13581 (76 Fed. Reg. 44757); and
(B) if the President determines that Hezbollah does
not meet the criteria for designation as a significant
transnational criminal organization under Executive
Order 13581, a detailed justification as to which
criteria have not been met.
(2) Form.--The report required by paragraph (1) shall be
submitted in unclassified form, but may include a classified
annex.
SEC. 203. REPORT ON HEZBOLLAH'S INVOLVEMENT IN THE TRADE OF CONFLICT
DIAMONDS.
(a) In General.--Not later than 120 days after the date of the
enactment of this Act, the Secretary of State shall submit to the
Committee on Foreign Affairs and the Committee on Ways and Means of the
House of Representatives and the Committee on Foreign Relations of the
Senate a report detailing Hezbollah's involvement in the trade in rough
diamonds outside of the Kimberley Process Certification Scheme.
(b) Form.--The report required by subsection (a) shall be submitted
in unclassified form, but may contain a classified annex.
SEC. 204. REWARDS FOR JUSTICE AND HEZBOLLAH'S FUNDRAISING, FINANCING,
AND MONEY LAUNDERING ACTIVITIES.
(a) Report.--Not later than 90 days after the date of the enactment
of this Act, the Secretary of State shall submit to the appropriate
congressional committees a report that details actions taken by the
Department of State through the Department of State rewards program (22
U.S.C. 2708) to obtain information on fundraising, financing, and money
laundering activities of Hezbollah and its agents and affiliates.
(b) Briefing.--Not later than 90 days after the date of the enactment
of this Act, and annually thereafter, the Secretary of State shall
provide a briefing to the appropriate congressional committees on the
status of the actions described in subsection (a).
(c) Appropriate Congressional Committees Defined.--In this section,
the term ``appropriate congressional committees'' means the Committee
on Foreign Affairs of the House of Representatives and the Committee on
Foreign Relations of the Senate.
SEC. 205. REPORT ON ACTIVITIES OF FOREIGN GOVERNMENTS TO DISRUPT GLOBAL
LOGISTICS NETWORKS AND FUNDRAISING, FINANCING, AND
MONEY LAUNDERING ACTIVITIES OF HEZBOLLAH.
(a) Report.--
(1) In general.--Not later than 90 days after the date of the
enactment of this Act, the President shall submit to the
appropriate congressional committees a report that includes--
(A) a list of countries that support Hezbollah, or in
which Hezbollah maintains important portions of its
global logistics networks;
(B) with respect to each country on the list required
by subparagraph (A)--
(i) an assessment of whether the government
of the country is taking adequate measures to
disrupt the global logistics networks of
Hezbollah within the territory of the country;
and
(ii) in the case of a country the government
of which is not taking adequate measures to
disrupt those networks--
(I) an assessment of the reasons that
government is not taking adequate
measures to disrupt those networks; and
(II) a description of measures being
taken by the United States Government
to encourage that government to improve
measures to disrupt those networks;
(C) a list of countries in which Hezbollah, or any of
its agents or affiliates, conducts significant
fundraising, financing, or money laundering activities;
(D) with respect to each country on the list required
by subparagraph (C)--
(i) an assessment of whether the government
of the country is taking adequate measures to
disrupt the fundraising, financing, or money
laundering activities of Hezbollah and its
agents and affiliates within the territory of
the country; and
(ii) in the case of a country the government
of which is not taking adequate measures to
disrupt those activities--
(I) an assessment of the reasons that
government is not taking adequate
measures to disrupt those activities;
and
(II) a description of measures being
taken by the United States Government
to encourage the government of that
country to improve measures to disrupt
those activities; and
(E) a list of methods that Hezbollah, or any of its
agents or affiliates, utilizes to raise or transfer
funds, including trade-based money laundering, the use
of foreign exchange houses, and free-trade zones.
(2) Form.--The report required by paragraph (1) shall be
submitted in unclassified form to the greatest extent possible,
and may contain a classified annex.
(3) Global logistics networks of hezbollah.--In this
subsection, the term ``global logistics networks of
Hezbollah'', ``global logistics networks'', or ``networks''
means financial, material, or technological support for, or
financial or other services in support of, Hezbollah.
(b) Briefing on Hezbollah's Assets and Activities Related to
Fundraising, Financing, and Money Laundering Worldwide.--Not later than
90 days after the date of the enactment of this Act, and every 180 days
thereafter, the Secretary of State, the Secretary of the Treasury, and
the heads of other applicable Federal departments and agencies (or
their designees) shall provide to the appropriate congressional
committees a briefing on the disposition of Hezbollah's assets and
activities related to fundraising, financing, and money laundering
worldwide.
(c) Appropriate Congressional Committees Defined.--In this section,
the term ``appropriate congressional committees'' means--
(1) the Committee on Foreign Affairs, the Committee on
Financial Services, and the Permanent Select Committee on
Intelligence of the House of Representatives; and
(2) the Committee on Foreign Relations, the Committee on
Banking, Housing, and Urban Affairs, and the Select Committee
on Intelligence of the Senate.
SEC. 206. APPROPRIATE CONGRESSIONAL COMMITTEES DEFINED.
Except as otherwise provided, in this title, the term ``appropriate
congressional committees'' means--
(1) the Committee on Foreign Affairs, the Committee on
Financial Services, and the Committee on the Judiciary of the
House of Representatives; and
(2) the Committee on Foreign Relations, the Committee on
Finance, and the Committee on the Judiciary of the Senate.
TITLE III--MISCELLANEOUS PROVISIONS
SEC. 301. RULE OF CONSTRUCTION.
Nothing in this Act or any amendment made by this Act shall apply to
the authorized intelligence activities of the United States.
SEC. 302. REGULATORY AUTHORITY.
(a) In General.--The President shall, not later than 90 days after
the date of the enactment of this Act, promulgate regulations as
necessary for the implementation of this Act and the amendments made by
this Act.
(b) Notification to Congress.--Not less than 10 days prior to the
promulgation of regulations under subsection (a), the President shall
notify the appropriate congressional committees (as defined in section
204) of the proposed regulations and the provisions of this Act and the
amendments made by this Act that the regulations are implementing.
SEC. 303. TERMINATION.
This Act shall cease to be in effect beginning 30 days after the date
on which the President certifies to Congress that Hezbollah--
(1) is no longer designated as a foreign terrorist
organization pursuant to section 219 of the Immigration and
Nationality Act (8 U.S.C. 1189);
(2) is no longer listed in the Annex to Executive Order 13224
(September 23, 2001; relating to blocking property and
prohibiting transactions with persons who commit, threaten to
commit, or support terrorism); and
(3) poses no significant threat to United States national
security, interests, or allies.
Summary and Purpose
The 2013 State Department Country Report on Terrorism
states that ``since 2012, the United States has . . . seen a
resurgence of activity by Iran's Islamic Revolutionary Guard
Corps' Qods force, the Iranian Ministry of Intelligence and
Security, and Tehran's ally [Hezbollah].'' While Hezbollah has
been designated pursuant to multiple executive orders and
provisions of law, this legislation specifically targets the
organization's international financial and logistics networks,
including its efforts to raise funds utilizing illicit means.
These support networks not only provide funding and logistics
for the terrorist group, but also a platform to conduct
terrorist attacks. The intent of this legislation is to
increase the aggregate risk associated with knowingly aiding
Hezbollah's international operations. This bipartisan
legislation will broaden financial sector sanctions against
Hezbollah. It forces other critical decisions on Hezbollah
designations and targets its media appendages used for
recruitment and financing that have been designated by the
United States as Specially Designated Terrorist Organizations.
It also contains robust reporting requirements that will serve
to focus the Administration's information gathering on
Hezbollah's global logistics and financial network. In doing
so, it provides a comprehensive framework for addressing
Hezbollah's support network, and fulfills the objective of the
legislation, which is to prevent Hezbollah's global logistics
and financial network from operating in order to curtail the
funding of its international activities.
Background and Need for Legislation
Hezbollah Financing and Logistics Networks
Hezbollah is conducting a wide range of international
activities aimed at financing the organization, and providing
for its vital logistics networks. In addition to receiving
direct support from state sponsors, the organization is also
engaged in an array of illicit activities--such as
counterfeiting currencies, arms smuggling and narcotics
trafficking.
In the past it was estimated that Hezbollah received as
much as $200 million annually from Iran, and received material
support from Syria as well. However, multiple reports indicate
that those amounts have decreased in recent years, due to
sanctions against Iran.
To offset the decreased financial support from Iran and
others, and also as a means of gaining greater financial
autonomy, Hezbollah has expanded its illicit international
activities. Over time, these activities have become
increasingly sophisticated and lucrative. Some of them are even
taking place here in the United States. For example, in 2002, a
number of Hezbollah members were convicted of running a
cigarette smuggling ring in Charlotte, North Carolina that
provided funding for the group.
This kind of activity provides Hezbollah operatives a
platform which could be used to conduct attacks against U.S.
targets. In fact, the U.S. Attorney for the Western District of
North Carolina, Anne M. Tompkins, who took part in prosecuting
this case, noted that one of the operatives convicted in this
case:
''was a student and member of Hezbollah as a youth in
his home country and came to the United States on a
Hezbollah-driven mission. He loyally accomplished his
mission by creating a criminal enterprise which
accumulated millions of dollars in profits, purchased
businesses in the U.S., preached radical Muslim
fundamentalism as he led a clandestine terrorist cell
in Charlotte, raised funds for the cause, and saw that
the funds were delivered to Hezbollah leadership in
Lebanon. His guilty verdicts rendered by the jury were
upheld by the Supreme Court of the United States.
During his time of imprisonment while he was awaiting
trial, he ordered the murder of the then prosecuting
attorney and the bombing of Charlotte's Federal
courthouse. He continues to this day to pose no less a
threat to our country and our citizens''
In 2009, four individuals in Philadelphia were charged with
attempting to provide Hezbollah with funding and weapons. The
indictment alleges that they attempted to export machine guns
from the U.S. to the Port of Latakia, Syria, and that one of
the accused reportedly boasted that the Islamic Republic of
Iran manufactured high-quality counterfeit U.S. dollars for
Hezbollah. The indictment also alleges that they sold an
informant counterfeit money, the proceeds of which they
reportedly planned to send to Hezbollah leaders.
Hezbollah's efforts remain global. Prior to an interrupted
attack, it was reported that Hezbollah used Bangkok as a
platform for logistics, money laundering and drug trafficking.
Authorities have tracked such illegal activities to countries
from West Africa to Latin America, in addition to the United
States.
In January 2011, the Department of Treasury identified
Hezbollah operative Ayman Joumma, along with nearly two dozen
individual businesses, as being involved in a massive narcotics
smuggling and money laundering scheme. According to the Drug
Enforcement Administration, Joumma laundered as much as $200
million a month from the sale of cocaine in Europe and the
Middle East through operations located in the Middle East, West
Africa, and Latin America using money-exchange houses and bulk
cash smuggling. Joumma's network laundered money through
Lebanese Canadian Bank accounts, which he used to execute
sophisticated trade-based money laundering schemes involving
used cars and other goods. In April 2013, Treasury designated
the Halawi Exchange Co. for facilitating the shipment of over
$200 million of used cars into the West African country of
Benin as part of a drug-money laundering scheme, with ties to
both Hezbollah and Latin American drug cartels. Concerns remain
regarding Hezbollah's use of Benin as a center for the
lucrative smuggling of used or stolen automobiles. When
Treasury blacklisted the two Lebanese exchange houses, they
noted the international nature of the operation, stating that
the ``Halawi Exchange, through its network of established
international exchange houses, initiated wire transfers from
its bank accounts to the United States without using the
Lebanese banking system in order to avoid scrutiny associated
with Treasury's designations of Hassan Ayash Exchange, Elissa
Exchange, and its Lebanese Canadian Bank Section 311 Action . .
. Money was then wire transferred via Halawi's banking
relationships indirectly to the United States through countries
that included China, Singapore, and the UAE, which were
perceived to receive less scrutiny by the U.S. Government.''
There are many other examples of Hezbollah's international
efforts to finance their illicit activities using criminal
enterprises, in addition to the funding they continue to
receive from their state sponsors. Successive Administrations
have made strong efforts to counter Hezbollah's activities, but
more remains to be accomplished.
Need for Legislation
The United States Government holds Hezbollah responsible
for the largest number of American deaths by a terrorist
organization prior to the attacks of September 11, 2001. These
include the bombing of the United States Embassy in Beirut in
April 1983, and the bombing of the United States Marine
barracks in Beirut in October 1983. Hezbollah was also behind
kidnappings in Beirut throughout the 1980s, international
airline hijackings originating in Europe and elsewhere, and
efforts to target US military personnel in Saudi Arabia.
In addition, Hezbollah reportedly provided funds and
weapons to Iraqi militias, which targeted American personnel
during Operation Iraqi Freedom. Based on information obtained
following the capture senior Hezbollah operative Ali Musa
Daqduq, it appears that the January 20, 2007 attack on the
Joint Coordination Center in Karbala, which resulted in the
death of four American soldiers, was planned with the help of
the Iranian Quds Force and Hezbollah.
Hezbollah's capabilities have increased exponentially since
its inception, and its operations have expanded well outside of
the Middle East. Hezbollah-initiated killings and bombings have
occurred in Europe, Asia and Latin America. In 2012, Hezbollah
carried out a bus bombing in Bulgaria and plotted an attack in
Cyprus, leading to the European Union's designation of
Hezbollah's ``military wing'' as a terrorist organization.
Furthermore, Hezbollah continues to fight on behalf of the
Assad regime in Syria's brutal civil war, which has resulted in
the deaths of well over one hundred thousand people.
Despite its significant capabilities, Hezbollah remains
vulnerable to financial sanctions. The Hezbollah International
Financing Prevention Act of 2014 builds on the existing
sanctions regime by placing Hezbollah's sources of financing
under additional scrutiny. In addition to targeting Hezbollah's
diverse financial network, the Act also requires the U.S.
government to report on Hezbollah's global logistics networks
and its transnational organized criminal enterprises, including
drug smuggling. By requiring such reporting, this legislation
seeks to focus additional resources on existing intelligence
gaps regarding Hezbollah, and provide a platform for the United
States to improve coordination and cooperation with allies and
other responsible countries in confronting the increasing
threat posed by Hezbollah.
Hearings
During the present Congress, the committee has continued
its active oversight regarding Hezbollah, including multiple
hearings related to the content of H.R. 4411, such as:
July 16, 2014, full committee hearing on ``Iran's
Destabilizing Role in the Middle East'' (Mr. Scott
Modell, Senior Associate, Burke Chair in Strategy,
Center for Strategic and International Studies; Mr. Ray
Takeyh, Senior Fellow for Middle Eastern Studies,
Middle East Program, Council on Foreign Relations;
Natan B. Sachs, Ph.D., Fellow, Saban Center for Middle
East Policy, the Brookings Institution);
April 8, 2014, subcommittee hearing on ``Lebanon's
Security Challenges and U.S. Interests'' (Mr. Lawrence
Silverman, Deputy Assistant Secretary, Bureau of Near
Eastern Affairs, U.S. Department of State; Matthew
Spence, Ph.D., Deputy Assistant Secretary of Defense
for Middle East Policy, U.S. Department of Defense);
March 4, 2014, subcommittee hearing on ``Iran's
Support for Terrorism Worldwide'' (The Honorable Pete
Hoekstra, Shillman Senior Fellow, The Investigative
Project on Terrorism, Former Chairman of the U.S. House
Permanent Select Committee on Intelligence; Matthew
Levitt, Ph.D., Director and Fromer-Wexler Fellow, Stein
Program on Counterterrorism and Intelligence, The
Washington Institute for Near East Policy; Mr. J.
Matthew McInnis, Resident Fellow, American Enterprise
Institute);
November 20, 2013, subcommittee hearing on
``Terrorist Groups in Syria'' (Mr. Brian Michael
Jenkins, Senior Adviser to the President, RAND
Corporation; Mr. Phillip Smyth, Middle East Research
Analyst, University of Maryland; Mr. Barak Barfi,
Research Fellow, The New America Foundation; Mr. Andrew
J. Tabler, Senior Fellow, The Washington Institute for
Near East Policy);
August 1, 2013, subcommittee hearing on ``Examining
the State Department's Report on Iranian Presence in
the Western Hemisphere 19 Years After AMIA Attack''
(Matthew Levitt, Ph.D., Director and Senior Fellow,
Stein Program on Counterterrorism and Intelligence, The
Washington Institute for Near East Policy; Mr. Michael
A. Braun, Co-Founder and Managing Partner, Spectre
Group International, LLC, Former Chief of Operations,
Drug Enforcement Administration; Mr. Eric Farnsworth,
Vice President; Council of the Americas and Americas
Society);
July 31, 2013, subcommittee hearing ``The Iran-Syria
Nexus and Its Implications for the Region'' (The
Honorable John Bolton, Senior Fellow, American
Enterprise Institute, Former United States Permanent
Representative to the United Nations; Mr. Mark
Dubowitz, Executive Director, Foundation for Defense of
Democracies; Daniel Brumberg, Ph.D., Senior Program
Officer, Center for Conflict Management, United States
Institute of Peace);
March 20, 2013, subcommittee hearing ``Hezbollah's
Strategic Shift: A Global Terrorist Threat'' (Mr. Will
Fulton, Iran Analyst, Critical Threats Project,
American Enterprise Institute; Matthew Levitt, Ph.D.,
Director, Stein Program on Counterterrorism and
Intelligence, The Washington Institute for Near East
Policy; The Honorable Roger Noriega, Founder and
Managing Director, Vision Americas LLC, Former
Assistant Secretary of State for Western Hemisphere
Affairs and Former Ambassador to the Organization of
American States).
Committee Consideration
On June 26, 2014, the Foreign Affairs Committee marked up
the bill, H.R. 4411, pursuant to notice, in open session. An
amendment in the nature of a substitute was offered by the
Chairman, along with 2 other amendments, both of which were
considered en bloc. The bill, as amended, was agreed to by
voice vote.
Committee Oversight Findings
In compliance with clause 3(c)(1) of House Rule XIII, the
committee reports that the findings and recommendations of the
committee, based on oversight activities under clause 2(b)(1)
of House Rule X, are incorporated in the descriptive portions
of this report, particularly the ``Summary and Purpose,''
``Background and Need for Legislation,'' and ``Section-by-
Section Analysis'' sections.
New Budget Authority, Tax Expenditures, and Federal Mandates
In compliance with clause 3(c)(2) of House Rule XIII and
the Unfunded Mandates Reform Act (P.L. 104-4), the committee
adopts as its own the estimate of new budget authority,
entitlement authority, tax expenditure or revenues, and Federal
mandates contained in the cost estimate prepared by the
Director of the Congressional Budget Office pursuant to section
402 of the Congressional Budget Act of 1974.
Congressional Budget Office Cost Estimate
U.S. Congress,
Congressional Budget Office,
Washington, DC, July 11, 2014.
Hon. Edward R. Royce, Chairman,
Committee on Foreign Affairs,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 4411, the
Hezbollah International Financing Prevention Act of 2014.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Sunita
D'Monte, who can be reached at 226-2840.
Sincerely,
Douglas W. Elmendorf.
Enclosure
cc:
Honorable Eliot L. Engel
Ranking Member
H.R. 4411--Hezbollah International Financing Prevention Act of 2014.
As ordered reported by the House Committee on Foreign
Affairs on June 26, 2014.
H.R. 4411 would impose sanctions on foreign financial
institutions that facilitate transactions or money laundering
on behalf of Hezbollah--a terrorist organization--or its
agents. It would require several reports and briefings on
Hezbollah and the Administration's efforts to deter its
activities. CBO estimates that implementing the bill would cost
$3 million over the 2015-2019 period, assuming appropriation of
the necessary amounts. Pay-as-you-go procedures apply to this
legislation because it would affect direct spending and
revenues; however, CBO estimates that those effects would not
be significant.
Provisions of H.R. 4411 would increase the administrative
costs of several departments, primarily the Department of the
Treasury and the Department of State. Based on information from
the Administration, CBO estimates that implementing the bill
would cost $1 million in 2015 and less than $500,000 each year
over the 2016-2019 period.
Because the bill would expand the types of prohibited
activities involving Hezbollah that are subject to civil and
criminal penalties under current law, it could increase
revenues and direct spending from the collection of those
penalties; however, CBO estimates that the net budgetary effect
of any additional penalties would be negligible for each year.
H.R. 4411 contains no intergovernmental mandates as defined
in the Unfunded Mandates Reform Act (UMRA) and would not affect
the budgets of state, local, or tribal governments. H.R. 4411
would impose a private-sector mandate, as defined in UMRA, on
financial institutions by prohibiting them from opening or
maintaining certain types of financial accounts for entities
that are knowingly affiliated with Hezbollah. The cost of the
mandate would be the forgone income from opening or maintaining
such accounts. Because there are already existing sanctions in
place against Hezbollah and the number of entities that are
knowingly affiliated with Hezbollah is probably small, CBO
expects that the cost of the mandate would fall below the
annual threshold established in UMRA ($152 million in 2014,
adjusted annually for inflation).
The CBO staff contacts for this estimate are Sunita
D'Monte, Pamela Greene, and Matthew Pickford (for federal
costs) and Marin Burnett (for the private-sector impact). This
estimate was approved by Theresa Gullo, Deputy Assistant
Director for Budget Analysis.
Directed Rule Making
Pursuant to clause 3(c) of House Rule XIII, as modified by
section 3(k) of H. Res. 5 during the 113th Congress, the
committee notes that the reported text of the bill contains two
directed rule-making provisions: Section 102(a)(4) and section
302.
Non-Duplication of Federal Programs
Pursuant to clause 3(c) of House Rule XIII, as modified by
section 3(j)(2) of H.Res. 5 during the 113th Congress, the
committee states that no provision of this bill establishes or
reauthorizes a program of the Federal Government known to be
duplicative of another Federal program, a program that was
included in any report from the Government Accountability
Office to Congress pursuant to section 21 of Public Law 111-
139, or a program related to a program identified in the most
recent Catalog of Federal Domestic Assistance.
Performance Goals and Objectives
The objective of this legislation is to broaden financial
sector sanctions against Hezbollah, force other critical
designations regarding that terrorist organization, and target
its media appendages, which aid in Hezbollah's financing and
logistics networks. The overriding goal is to prevent
Hezbollah's global logistics and financial network from
operating, in order to curtail the funding of its international
activities. Performance goals associated with these objectives
include, but are not limited to, the following:
LA verifiable decrease in Hezbollah's ability
to fundraise or otherwise transfer funds through
foreign financial institutions, or businesses operating
as financial institutions.
LA verifiable decrease in Hezbollah's ability
to carry out operations against targets
internationally.
LAn increase in U.S. Government and allied
action taken against Hezbollah's illicit networks.
Congressional Accountability Act
H.R. 4411 does not apply to terms and conditions of
employment or to access to public services or accommodations
within the legislative branch.
New Advisory Committees
H.R. 4411 does not establish or authorize any new advisory
committees.
Earmark Identification
H.R. 4411 contains no congressional earmarks, limited tax
benefits, or limited tariff benefits as described in clauses
9(e), 9(f), and 9(g) of House Rule XXI.
Letters of Jurisdiction
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Section-by-Section Analysis
Section 1; Short Title. The Hezbollah International
Financing Prevention Act of 2014
Section 2. Findings and Statement of Policy.
TITLE I--PREVENTION OF ACCESS BY HEZBOLLAH TO INTERNATIONAL FINANCIAL
AND OTHER INSTITUTIONS
Section 101. Imposition of Sanctions on Certain Satellite
Providers that Carry al-Manar TV. Al-Manar (the beacon) is the
official television station of Hezbollah. It is the propaganda
arm of a listed terrorist organization, complicit in the full
range of Hezbollah's activities. Al-Manar, the Lebanese
Communication Group, and the Lebanese Media Group have been
designated as Specially-Designated Global Terrorists (SDGT)--a
designation authorized under Executive Order 13224. EO 13224
prohibits persons from taking measures ``to assist in, sponsor,
or provide financial, material, or technological support for,
or financial or other services to or in support of, such acts
of terrorism or those persons listed in the Annex to this order
or determined to be subject to this order.'' The broadcast of
al-Manar by satellite providers constitute the provision of
``financial or other services'' at the very least. As a result,
this provision forces the Administration to supply Congress
with a list of such providers, and justify why they have not
been designated for providing material support to a terrorist
organization.
Section 102. Sanctions with Respect to Financial
Institutions that Engage in Certain Transactions. This
provision provides the Administration the ability to
relentlessly pursue foreign banks, including foreign Central
Banks, knowingly engage in business with entities facilitating
Hezbollah's activities. The provision would require the
Secretary of the Treasury to prohibit from or impose severe
limitations on U.S. correspondent banking for foreign financial
institutions, if that institution knowingly engages in certain
financial transactions to aid Hezbollah. The Act contains a
waiver if the President determines that exercising this waiver
is vital to the national security interests of the United
States. It also contains a special rule to allow foreign
financial institutions to wind down or cease all such
operations if they are knowingly engaged in sanctionable
behavior, in order to avoid sanctions.
TITLE II--DESIGNATION OF HEZBOLLAH AS A MAJOR DRUG SMUGGLING ENTERPRISE
AND A TRANSNATIONAL CRIMINAL ORGANIZATION
Section 201: Designation of Hezbollah as Significant
Foreign Narcotics Traffickers. Also referred to as the
``Kingpin Designation,'' this provision requires the President
to submit a report to Congress within 30 days of enactment
determining whether Hezbollah meets the criteria of
``Kingpin,'' under the Foreign Narcotics Kingpin Designation
Act; and if it does not, what criteria has not been met. The
effects of this designation would be two-fold: first, it would
undermine Hezbollah's attempts to brand itself as a charitable
and political organization in Europe, an image that is upheld
by some and has assisted in Hezbollah's ability to raise funds
through charitable donations; and second, it would equip U.S.
law enforcement agencies with the tools they need to pursue
Hezbollah operatives around the world, even in those countries
which do not currently designate all, or any, parts of
Hezbollah as a terrorist organization.
Section 202: Designation of Hezbollah as a Transnational
Criminal Organization. Similar to a ``Kingpin Designation''
this provision requires the President to submit a report to
Congress within 30 days of enactment with a determination as to
whether Hezbollah meets the criteria set forth in Executive
Order 13581 as a Transnational Criminal Organization (TCO). The
designation of Hezbollah as a TCO would further empower U.S.
law enforcement agencies to counter Hezbollah's other criminal
enterprises, such as money laundering, counterfeit goods and
pharmaceuticals, and other illicit operations from which it
funds its terrorist activities.
Section 203: Report on Hezbollah's Involvement in the Trade
of Conflict Diamonds. Given Hezbollah's past and current
criminal activities and global footprint, the provision
requires a report from the Secretary of State detailing
Hezbollah's involvement in the trade of conflict diamonds--
those outside of the Kimberley Process Certification Scheme.
Section 204: Rewards for Justice and Hezbollah's
Fundraising, Financing, and Money Laundering Activities. This
provision requires the Administration to submit a one-time
report that details actions taken by the State Department
through its rewards program (known as ``Rewards for Justice'')
to obtain information on Hezbollah's fundraising, financing and
money laundering networks. It also requires the State
Department to provide annual briefings to Congress on these
efforts.
Section 205: Report on Activities of Foreign Governments to
Disrupt Global Logistics Networks and Fundraising, Financing,
and Money Laundering Activities of Hezbollah. The purpose of
the report in this section is to provide a comprehensive
overview of countries that support Hezbollah, or in which
Hezbollah maintains important portions of its global logistics
networks. It requires a list of countries in which Hezbollah
conducts significant fundraising, financing or money
laundering. This includes those governments that are not taking
adequate efforts to disrupt Hezbollah's networks. It also
includes transnational means to conduct these activities, to
include the use of trade based money laundering networks.
Finally, the provision requires the Administration to provide
briefings to the appropriate congressional committees every six
months on the disposition of Hezbollah's assets and financing
activities worldwide.
Sec. 206. Appropriate Congressional Committees Defined. It
includes the Committee on Foreign Affairs, the Committee on
Financial Services, and the Committee on the Judiciary of the
House of Representatives; and the Committee on Foreign
Relations, the Committee on Finance, and the Committee on the
Judiciary of the Senate.
TITLE III--MISCELLANEOUS PROVISIONS
Section 301. Rule of Construction. This provision states
that nothing in this Act or any amendment made by this Act
shall apply to the authorized intelligence activities of the
United States.
Section 302. Regulatory Authority. This section provides
for the promulgation of regulations, and the notification to
Congress of such regulations.
Section 303. Termination. This provides for a termination
authority if the President certifies that Hezbollah is no
longer designated as a terrorist organization, and poses no
significant threat to the United States or our allies.