Terrorist Financing: Agencies Can Improve Efforts to Deliver	 
Counter-Terrorism-Financing Training and Technical Assistance	 
Abroad (06-APR-06, GAO-06-632T).				 
                                                                 
Disrupting terrorists' financing is necessary to impede their	 
ability to organize, recruit, train, and equip adherents. U.S.	 
efforts to strengthen domestic and global security include, among
others, the provision of training and technical assistance in	 
countering terrorist financing abroad. An interagency Terrorist  
Financing Working Group (TFWG), chaired by the U.S. Department of
State (State), coordinates the delivery of this training and	 
technical assistance to "priority" countries--those considered	 
most vulnerable to terrorist financing schemes--as well as to	 
other vulnerable countries. In addition, the Department of the	 
Treasury (Treasury) Office of Foreign Assets Control (OFAC) leads
U.S. efforts to block access to designated terrorists' assets	 
that are subject to U.S. jurisdiction. In response to multiple	 
congressional requesters, GAO examined U.S. efforts to combat	 
terrorist financing abroad, publishing the report in October	 
2005. In this testimony, GAO discusses the report's findings	 
about challenges related to (1) TFWG's coordination of the	 
counter-terrorism-financing training and technical assistance	 
abroad and (2) Treasury's measurement of results and provision of
information needed to assess OFAC's efforts to block terrorist	 
assets. 							 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-06-632T					        
    ACCNO:   A50998						        
  TITLE:     Terrorist Financing: Agencies Can Improve Efforts to     
Deliver Counter-Terrorism-Financing Training and Technical	 
Assistance Abroad						 
     DATE:   04/06/2006 
  SUBJECT:   Assets						 
	     Counterterrorism					 
	     Foreign governments				 
	     Interagency relations				 
	     International relations				 
	     Money laundering					 
	     Performance measures				 
	     Strategic planning 				 
	     Terrorism						 
	     Terrorist Financing Working Group			 

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GAO-06-632T

     

     * Summary
     * Background
     * U.S. Government Lacks an Integrated Strategy to Coordinate t
          * U.S. Agencies Provide Wide Range of Training and Technical A
          * Key Stakeholders Disagree about Roles and Procedures
          * U.S. Effort Does Not Strategically Align Resources with Rela
               * U.S. Government Lacks Clear Record of Budget Resources for T
               * U.S. Government Has Not Assessed Human Capital Resources for
               * U.S. Government Has Not Assessed Potential International Res
          * U.S. Government Lacks System to Measure Performance and Inco
          * GAO Recommended Actions to Improve Interagency Coordination,
     * Treasury Needs Meaningful Performance Measures and Informati
          * OFAC Administers Terrorism-Related Sanctions
          * Treasury's Performance Measures Do Not Assess Results of Ter
          * Treasury Report Does Not Show Progress in Asset Blocking
     * Conclusion
     * Matter for Congressional Consideration
     * Contacts and Acknowledgments
          * TFWG Membership
          * TFWG Program Development Process
     * GAO's Mission
     * Obtaining Copies of GAO Reports and Testimony
          * Order by Mail or Phone
     * To Report Fraud, Waste, and Abuse in Federal Programs
     * Congressional Relations
     * Public Affairs

Testimony

Before the Committee on Financial Services, Subcommittee on Oversight and
Investigations, House of Representatives

United States Government Accountability Office

GAO

For Release on Delivery Expected at 10:00 a.m. EDT

Thursday, April 6, 2006

TERRORIST FINANCING

Agencies Can Improve Efforts to Deliver Counter-Terrorism-Financing
Training and Technical Assistance Abroad

Statement of the Honorable David M. Walker Comptroller General of the
United States

GAO-06-632T

Madame Chairwoman and Members of the Subcommittee:

Thank you for inviting me here today to discuss GAO's findings on certain
U.S. government counter-terrorism-financing efforts as well as various
recommendations we have made for improving the management and oversight of
these efforts. We appreciate the opportunity to contribute to the record
that this panel has created on the subject. Madame Chairwoman, we also
recognize and appreciate your consistent attention to issues related to
the financing of terrorism. For example, you cofounded the bipartisan
Congressional Anti-Terrorist Financing Task Force in 2004 to bolster
efforts to shut down terrorist funding networks. You also coauthored
recent legislation to create a certification regime, led by the Department
of the Treasury, that would annually report to Congress the efforts of
other countries to combat terror funding and would impose sanctions on
countries that fail to perform up to standard. Thank you for your
leadership in this area.

As you have stated on prior occasions, Madame Chairwoman, disrupting
terrorist financing can raise terrorists' costs and risks of gathering and
moving assets and is necessary to impede their ability to carry out
significant operations. The United Nations (UN) reports that more than
ever before, security threats are interrelated; a threat to one country
can be a threat to all, and no country by its efforts alone can make
itself invulnerable. It is in every country's interest, accordingly, to
cooperate both internally and with other countries in addressing threat
priorities.

In GAO's October 2005 report on U.S. efforts to counter terrorist
financing abroad, we noted that the United States plays an active and
ongoing role in building international support for measures to combat
terrorist financing.1 For example, the U.S. government has participated in
efforts to develop and implement international standards to combat
terrorist financing, sometimes leading these efforts. The United States
also conducts various intelligence and law enforcement activities designed
to identify and disrupt the flow of terrorist financing abroad. These
activities include, among others, gathering intelligence and sharing
information with other countries.

1See GAO, Terrorist Financing: Better Strategic Planning Needed to
Coordinate U.S. Efforts to Deliver Counter-Terrorism Financing Training
and Technical Assistance Abroad, GAO-06-19 (Washington, D.C.: October 24,
2005).

Further, the United States provides training and technical assistance to
help countries that are vulnerable to terrorist financing establish
effective counter-terrorism-financing regimes. To coordinate the delivery
of this training and assistance to about two dozen "priority
countries"-those considered most vulnerable-as well as to other vulnerable
countries, the National Security Council (NSC) established the interagency
Terrorist Finance Working Group (TFWG), whose members include, among
others, the Department of State (State), which chairs the group; the
Treasury; and the Department of Justice (Justice).

In addition, the United States has participated in global efforts to
publicly designate individuals and groups as terrorists and to block
access to their assets. U.S. officials have worked with members of the UN
to develop and support UN Security Council resolutions to freeze the
assets of designated individuals or groups that conduct or facilitate
terrorist acts. The United States successfully participated in bilateral
efforts with Saudi Arabia and jointly designated more than a dozen
Saudi-related entities and multiple individuals as terrorists or terrorist
supporters. Officials of the Department of the Treasury (Treasury) have
stated that public designations discourage further financial support and
encourage other governments to more effectively monitor the activities of
the designated individuals or groups. Treasury's Office of Foreign Assets
Control (OFAC) serves as the lead U.S. agency for blocking the assets of
terrorists designated by the United States unilaterally or bilaterally or
as a result of UN Security Council Resolutions.

As our October 2005 report showed, much has been accomplished. However,
our report also noted various challenges that could negatively affect the
results of some of these efforts as well as U.S. agencies'-and
Congress's-accountability for, and oversight of, these efforts. Today, as
requested, I will discuss our report's findings and recommendations
regarding challenges related to

           o  TFWG's efforts to coordinate interagency delivery of
           counter-terrorism-financing training and technical assistance
           abroad and
           o  Treasury's use of performance measures and provision of
           information necessary to assess OFAC's efforts to block terrorist
           assets.

In discussing these challenges, I will address the need for more strategic
and integrated planning that focuses on achieving results in connection
with U.S. counter-terrorism-financing activities rather than on the
activities themselves. Such planning should include a risk management
element-a systematic process for assessing threats and taking appropriate
steps to deal with them.

GAO's mission is to help Congress improve the performance and ensure the
accountability of the federal government for the benefit of the American
people. We have been actively involved in improving the federal
government's performance in the critically important area of homeland
security, including providing numerous products related to
counter-terrorism financing. We have also been privileged to actively
support Congress and the 9/11 Commission by providing details about key
personnel, testifying before Congress and the 9/11 Commission, and sharing
our research, products, and experiences. In addition, GAO is an active
member of the International Organization of Supreme Audit Institutions
(INTOSAI),2 a professional organization of national supreme audit
institutions that provides its members opportunities to share knowledge
and experiences about the challenges in today's global environment, to
ensure that government auditing continuously progresses with new
developments. GAO also serves on an INTOSAI task force on international
anti-money laundering that aims to design and promote policies,
strategies, and actions to enable INTOSAI members to strengthen their
anti-money laundering capabilities.

In preparing our October 2005 report, we examined documentation and
interviewed officials from State, Treasury, Justice, and the Departments
of Homeland Security and Defense as well as from the intelligence
community. We also assessed information from the UN, Financial Action Task
Force (FATF) on Money Laundering, World Bank, and International Monetary
Fund (IMF). We conducted field work in Pakistan, Indonesia, and Paraguay,
where we assessed information from government, law enforcement,
nongovernmental organizations, regional organizations, and donor
government officials as well as from U.S. embassy officials. We performed
our work for the report from April 2004 to July 2005. In addition, for
this testimony, we obtained information in March 2006 from State and
Treasury on their actions to implement our recommendations. All work was
conducted in accordance with generally accepted government auditing
standards.

2INTOSAI has more than 180 members consisting of supreme audit
institutions from countries that belong to the UN or its specialized
agencies.

                                    Summary

Although the U.S. government provides a range of training and technical
assistance to countries it deems vulnerable to terrorist financing, it
does not have a strategic and integrated plan to coordinate the delivery
of this assistance. The training and technical assistance coordinated by
TFWG include, among other activities, training courses and the placement
of intermittent or long-term resident advisors. However, we found that the
interagency effort lacks three elements that GAO has previously identified
as critical to effective strategic planning for operations within and
across agencies: key stakeholder acceptance of roles and procedures, a
strategic alignment of resources with needs and risks, and a process to
measure results.3

           o  Key stakeholder acceptance of roles and procedures. State and
           Treasury disagree about roles and procedures related to the
           delivery of counter-terrorism-financing training and technical
           assistance. Among these disagreements, Treasury does not accept
           State's assertion of leadership over the delivery of all U.S.
           counter-terrorism-financing training and technical assistance to
           vulnerable countries and criticizes the range of control that
           State exerts as chair of TFWG. Consequently, the overall effort
           lacks effective leadership, resulting in less than optimal
           delivery of training and technical assistance. For example, in May
           2005, State denied a Treasury official entry into a priority
           country to help set up a financial intelligence unit (FIU)4 at the
           central bank minister's request. State officials told us that
           because the country had been designated as a priority country
           after Treasury began preliminary work there, State wanted to
           conduct a TFWG assessment before allowing Treasury to continue its
           work.5 At the U.S. Embassy's request, State delayed the assessment
           and Treasury's work proceeded, but the Treasury official's entry
           into the country was delayed several months.
           o  Strategic alignment of resources with needs. The U.S.
           government, including TFWG, has not systematically assessed the
           allocation of its resources for counter-terrorism-financing
           training and technical assistance. For example, the government has
           no clear record of the funding that key agencies allocate for the
           training and assistance and has not systematically assessed the
           availability and suitability of the agencies' human capital
           resources or of international resources. As a result, government
           decision-makers are limited in their ability to strategically
           align available resources with the needs and relative risks of
           priority countries and other vulnerable countries.
           o  Performance measurement process. The U.S. government, including
           TFWG, has not established a system to measure the results of its
           counter-terrorism-financing training and technical assistance. In
           addition, a database that Justice created in November 2004 to
           track the results of training and assistance delivered to priority
           countries was, as of July 2005, not yet functional. As a result,
           the government is unable to systematically consider the past
           performance of these efforts when strategizing for the future.

3See GAO, Executive Guide: Effectively Implementing the Government
Performance and Results Act, GAO/GGD-96-118 (Washington, D.C.: June 1996).
Also see GAO, Electronic Government: Potential Exists for Enhancing
Collaboration on Four Initiatives, GAO-04-6 , pages 17-21 (Washington,
D.C.: Oct. 10, 2003) for a discussion of key practices for interagency
collaboration.

4A financial intelligence unit is a central, national agency responsible
for receiving, analyzing, and disseminating financial information
concerning suspected proceeds of crime or required by national regulation
in order to counter money laundering. Treasury's Financial Crimes
Enforcement Network (FinCEN) is the FIU for the United States.

5A TFWG assessment includes meetings with host government financial
regulatory agencies, the judiciary, law enforcement agencies, the private
financial services sector, and nongovernmental organizations. TFWG
assessment teams are, like TFWG, led by State and comprise technical
experts from each of TFWG's member departments and agencies.

In our October 2005 report, we recommended that the Secretaries of State
and the Treasury, in consultation with the NSC and other government
agencies, implement an integrated strategic plan and sign a Memorandum of
Agreement to improve coordination of counter-terrorism-financing training
and technical assistance. In their March 2006 letters to Congress
regarding their responses to our recommendations, State and Treasury
describe, in general terms, steps they are taking to improve the
interagency process-for example, working with one another and with other
TFWG members to review and revise TFWG procedures-that may provide a basis
for improving stakeholder acceptance of roles and procedures. However, the
letters do not provide any information regarding steps to systematically
assess or align U.S. resources with country needs or to measure results of
the training and technical assistance, and they do not address our
recommendation of a Memorandum of Agreement.

Treasury's OFAC undertakes a number of activities as part of its terrorist
asset blocking efforts. We found in October 2005, however, that Treasury
lacked meaningful performance measures and that sufficient information was
not available for Congress and decision-makers to assess the results of
these efforts. Although Treasury had developed some limited performance
measures, OFAC officials acknowledged that these measures were not
specific to terrorist financing, were not designed to show progress, and
did not track related activities and results. The officials reported that
they were in the process of developing more meaningful performance
measures as well as an OFAC-specific strategic plan. In addition, OFAC's
annual Terrorist Assets Report to Congress regarding the nature and extent
of terrorists' U.S. assets does not provide the information needed to
assess results that have been achieved. Although it shows the amount of
assets blocked each year, it does not show changes from amounts of assets
blocked in previous years or explain such changes. We noted in our report
that this information, along with other key performance metrics, could
help Congress assess results related to OFAC's asset blocking efforts. We
recommended that Treasury complete its efforts to develop an OFAC-specific
strategic plan and performance measures and that the annual Terrorist
Assets Report include more complete information about blocked assets. OFAC
officials told us in March 2006 that OFAC had developed new performance
measures to assess its role in administering and enforcing economic
sanctions against terrorists; however, we have not reviewed the new
measures. According to OFAC officials, its strategic plan has not yet been
finalized. In its March 2006 letter, Treasury reported that it would work
with Congress to discuss recrafting the Terrorist Assets Report to address
congressional interests.

                                   Background

The financing of terrorism is the financial support, in any form, of
terrorism or of those who encourage, plan, or engage in it.6 Terrorist
financing may derive from licit activities, such as fundraising by
charities, or from illicit activities, such as selling counterfeit goods,
contraband cigarettes, and illegal drugs.7 Disguising the source of
terrorist financing, whether licit or illicit, is important to terrorist
financiers: if the source can be concealed, it remains available for
future terrorist financing activities. Some international experts on money
laundering find that there is little difference in the methods used by
criminal organizations or terrorist groups to conceal their proceeds by
moving them through national and international financial systems.8

6World Bank and International Monetary Fund, Reference Guide to Anti-Money
Laundering and Combating of Financing of Terrorism, (2003). As noted in
the guide, the formal definition of terrorist financing is provided in the
United Nations International Convention for the Suppression for the
Financing of Terrorism (1999). However, a universally accepted definition
for "terrorism" has not been established owing to significant political
and national implications that differ from country to country. The UN
continues to work to gain worldwide consensus on the definition of
terrorism.

7See GAO, Terrorist Financing: U.S. Agencies Should Systematically Assess
Terrorists' Use of Alternative Financing Mechanisms, GAO-04-163
(Washington, D.C.: Nov. 14, 2003).

FATF, an intergovernmental body, sets internationally recognized standards
for developing anti-money laundering and counter-terrorism-financing
regimes and assesses countries' abilities to meet these standards. To
strengthen anti-money-laundering and counter-terrorism-financing
worldwide, international entities such as the UN, FATF, World Bank, and
IMF, as well as the U.S. government, agree that each country should
implement practices and adopt laws that are consistent with international
standards.9 The U.S. government has worked with international donors and
organizations-for example, the United Kingdom, Australia, Japan, the
European Union, FATF, UN, the Organization of American States, the Asian
Development Bank, IMF, and the World Bank-to build
counter-terrorism-financing regimes in vulnerable countries.

U.S. offices and bureaus-primarily within the Departments of State, the
Treasury, Justice, and Homeland Security-and the federal financial
regulators10 provide training and technical assistance, chiefly funded by
State and Treasury, to countries deemed vulnerable to terrorist financing.
One of TFWG's functions is to prioritize the delivery of such assistance
to countries that it deems most vulnerable. To identify priority
countries, TFWG considers intelligence community analysis of countries'
vulnerabilities to terrorist financing, importance to U.S. security, and
capacity to absorb U.S. assistance. NSC guidance for TFWG states that
delivery of assistance to other vulnerable countries-that is, those that
have not been designated as priority-may proceed so long as it is possible
without adversely affecting the delivery of assistance to priority
countries. Other vulnerable countries receive counter-terrorism-financing
training and technical assistance through other U.S. government programs
as well as through TFWG. (See app. 1 for TFWG membership and process.)

8These experts define money laundering as the processing of criminal
proceeds to disguise their illegal origin in order to legitimize
ill-gotten gains.

9International standards are represented by the UN International
Convention for the Suppression of the Financing of Terrorism and by FATF's
40 recommendations on money laundering and nine special recommendations on
terrorist financing.

10These federal regulators are the Federal Reserve Board, the Federal
Deposit Insurance Corporation, and the Office of the Comptroller of the
Currency.

U.S. Government Lacks an Integrated Strategy to Coordinate the Delivery of
                       Training and Technical Assistance

Although the U.S. government provides a range of training and technical
assistance to countries it deems vulnerable to terrorist financing, it
lacks an integrated strategy to coordinate the delivery of this
assistance. Specifically, the effort lacks key stakeholder acceptance of
roles and practices, a strategic alignment of resources with needs, and a
process to measure results-three elements that previous GAO work has
identified as critical to effective strategic planning within and across
agencies. GAO recommended that the Secretaries of State and the Treasury
implement an integrated strategic plan and a Memorandum of Agreement for
the delivery of training and technical assistance. According to March 2006
correspondence from State and Treasury, the departments have taken several
steps to enhance interagency coordination.

U.S. Agencies Provide Wide Range of Training and Technical Assistance

The training and technical assistance that U.S. agencies provide to
vulnerable countries are intended to help the countries develop the five
elements that, according to State, are needed for an effective
anti-money-laundering and counter-terrorism-financing regime: a legal
framework, a financial regulatory system, an FIU, law enforcement
capabilities, and judicial and prosecutorial processes. The training and
assistance are offered through courses, presentations at international
conferences, the use of overseas regional U.S. law enforcement academies
or U.S.-based schools, and the placement of intermittent or long-term
resident advisors.11 According to State officials, at the time of our
review, TFWG had coordinated the delivery of training and technical
assistance in at least one of these five elements to more than 20 priority
countries.

Key Stakeholders Disagree about Roles and Procedures

U.S. agencies involved in providing counter-terrorism-financing training
and technical assistance disagree both about agencies' roles relating to
the coordination of the training and assistance efforts and about training
and assistance procedures and practices. Consequently, the overall effort
lacks effective leadership, resulting in less than optimal delivery of
training and technical assistance to vulnerable countries.12

11See GAO-06-19 , appendix IV, for key U.S. counter-terrorism-financing
and anti-money-laundering training and assistance for vulnerable countries
by U.S. agency and financial regulators.

State and Treasury disagree regarding State's role in coordinating the
training and technical assistance. According to State, its Office of the
Coordinator for Counterterrorism is charged with directing, managing, and
coordinating all U.S. agencies' efforts to develop and provide
counter-terrorism financing programs, including, but not limited to, those
in priority countries. Treasury, a key stakeholder, asserts that there are
numerous other efforts outside States' purview and that State's role is
limited to coordinating, as chair of TFWG, the provision of such
assistance in priority countries.13 In addition, senior Treasury officials
told us that they strongly disagree with the degree of control State
asserts over TFWG decisions and said that State creates obstacles rather
than coordinating efforts. Officials from Justice, which provides training
and technical assistance14 and receives funding from State, told us that
they respect State's role as the TFWG chair and coordinator and said that
all counter-terrorism-financing training and technical assistance efforts
should be brought under the TFWG decision-making process. While supportive
of State's position, Justice's statement demonstrates that State's role
lacks clear definition and recognition in practice.

In addition, State and Treasury officials disagree about procedures and
practices for delivering the training and technical assistance. State
cited NSC guidance and an unclassified State document focusing on TFWG as
providing procedures and practices for delivering training and technical
assistance to all countries. Treasury officials told us that the
procedures and practices defined by NSC were pertinent only to the TFWG
priority countries and that TFWG has no formal mandate or process to
provide technical assistance to non-priority countries. Moreover, Justice
officials indicated that differences in the procedures and practices for
delivering training and technical assistance to priority countries versus
those for other vulnerable countries had created problems.

12We have previously found that building a collaborative management
structure across participating organizations is an essential foundation
for ensuring effective collaboration and that strong leadership is
critical to the success of intergovernmental initiatives. [For a
discussion of practices essential to interagency collaboration, see GAO,
Electronic Government: Potential Exists for Enhancing Collaboration on
Four Initiatives, GAO-04-6 (Washington, D.C.: Oct. 10, 2003): 17-21.]
Moreover, involvement by leaders from all levels is important for
maintaining commitment.

13For example, according to Treasury officials, the agency has developed
numerous counter-terrorism-financing programs to advance the core
strategic aims identified in the 2003 National Money Laundering Strategy.
The officials said that these programs are not under TFWG's, and therefore
State's, purview.

14According to Justice, a high-level interdepartmental decision has
assigned Justice the lead among U.S. agencies in drafting foreign criminal
laws, reviewing the legal sufficiency of such laws, and providing
prosecutorial training and development for the TFWG countries.

State and Treasury officials cited numerous examples of their
disagreements on procedures and practices. For example:

           o  According to Treasury officials, funding provided by Treasury's
           Office of Technical Assistance (OTA) should primarily support
           intermittent and long-term resident advisors, who are U.S.
           contractors.15 According to State officials, OTA should instead
           supplement State's funding for counter-terrorism-financing
           training and technical assistance, which primarily funds current
           employees of other U.S. agencies.
           o  According to OTA officials, their contractors provide
           assistance in drafting counter-terrorism-financing and
           anti-money-laundering laws in non-priority countries and OTA
           provides the drafts to Justice and other U.S. agencies for review
           and comment. State officials cited NSC guidance that current
           Justice employees should be primarily responsible for working with
           foreign countries to assist in drafting
           counter-terrorism-financing and anti-money-laundering laws and
           voiced strong resistance to use of contractors. Justice cited two
           examples in which contractors' work resulted in laws that did not
           meet FATF standards. According to OTA officials, the host country
           itself is ultimately responsible for final passage of a law that
           meets international standards.16 
           o  State officials said that OTA's use of confidentiality
           agreements between contractors and the foreign officials they
           advise had impeded U.S. interagency coordination in one country
           and that the continued practice could present future challenges.17
           However, Treasury officials said that the incident was an isolated
           case involving a contract problem and that procedural steps have
           been taken to ensure the problem is not repeated.
           o  According to TFWG procedures for priority countries, if an
           assessment trip is determined to be necessary, State is to lead
           and determine the composition of the teams and set the travel
           dates.18 However, this procedure becomes complicated when a
           vulnerable country is designated a priority country. For example,
           in November 2004, Treasury conducted an OTA financial assessment
           in a vulnerable country and subsequently reached agreement with
           the country's central bank minister to install a resident advisor
           to set up an FIU. However, after TFWG had changed the country's
           status to priority, State officials, in May 2005, denied clearance
           for Treasury officials to visit the country to arrange for the
           placement of a resident advisor; according to State TFWG
           officials, State delayed the officials' visit until a TFWG
           assessment could be completed. At our review's conclusion in July
           2005, Treasury's work had been delayed by 2.5 months. However, the
           U.S. embassy requested that Treasury proceed with its visit and
           TFWG delay its assessment.

15According to Treasury officials, OTA funds other Treasury offices that
conduct assessments or deliver training, such as Terrorist Financing and
Financial Crimes and FinCEN, in conjunction with its programs. Also
according to Treasury, OTA has funded the expenses of other agencies to
deliver technical assistance in support of an existing work plan and to
meet performance objectives.

16According to OTA officials, Justice and other U.S. agencies do not
always have the time and resources to comment on draft laws. Justice
officials agreed but maintained that this problem will be resolved only
when other agencies acknowledge Justice's jurisdiction and expertise.
According to Treasury, in many cases, countries pass laws that don't meet
international standards, even after having received substantial commentary
from the U.S. government.

U.S. Effort Does Not Strategically Align Resources with Related Needs and Risks

The U.S. government, including TFWG, has not strategically aligned its
resources with its mission to deliver counter-terrorism-financing training
and technical assistance.19 The U.S. government has no clear record of the
budgetary resources available for counter-terrorism-financing assistance.
Further, the government has not systematically assessed the suitability
and availability of U.S. human capital resources or the potential
availability of international resources. As a result, decision makers do
not know the full range of resources available to meet the needs and
address the related risks they have identified in priority countries and
to determine the best match of remaining resources to other vulnerable
countries' needs.

17When signing a contract for placement of a resident advisor, OTA also
signs an agreement with foreign officials that it advises to not share
sensitive information with third parties.

18A TFWG assessment, conducted by a Financial Systems Assessment Team,
includes meetings with host government financial regulatory agencies, the
judiciary, law enforcement agencies, the private financial services
sector, and nongovernmental organizations.

19Our previous work has shown that alignment of resources is critical to
making strategic planning a dynamic and inclusive process. See GAO,
Executive Guide: Effectively Implementing the Government Performance and
Results Act, GAO/GGD-96-118 (Washington, D.C.: June 1996).

  U.S. Government Lacks Clear Record of Budget Resources for Training and
  Assistance

State and Treasury do not have clear records of the funds that they
allocate for counter-terrorism-financing training and technical
assistance. Each agency receives separate appropriations that it can use
to fund training and technical assistance provided by themselves, other
agencies, or contractors. State primarily transmits its training and
technical assistance funds to other agencies, while Treasury primarily
employs short- and long-term advisors through contracts.20 However,
because funding for counter-terrorism-financing training and assistance is
mingled with funding given to the agencies for anti-money-laundering
training and assistance and other programs, it is difficult for U.S.
government decision-makers to determine the actual amount allocated to
these efforts.21

State officials told us that funding for State counter-terrorism-financing
training and technical assistance programs derives from two primary
sources:

           o  Non-Proliferation, Anti-Terrorism, Demining, and Related
           Programs. State's Office of the Coordinator for Counterterrorism
           uses funding from this account to provide counter-terrorism
           financing training and technical assistance to TFWG countries. Our
           analysis of State records showed that budget authority for the
           account included $17.5 million for counter-terrorism-financing
           training and technical assistance for fiscal years 2002-2005.
           o  International Narcotics Control and Law Enforcement. State's
           Bureau of International Narcotics Control and Law Enforcement uses
           funding from this account to provide counter-terrorism-financing
           and anti-money-laundering training and technical assistance to a
           wide range of countries, including seven priority countries,
           during fiscal years 2002-2005, as well to provide general support
           to multilateral and regional programs. Our analysis of State
           records shows that budget authority for this account included
           about $9.3 million for anti-money-laundering assistance,
           counter-terrorism-financing training and assistance, and related
           multilateral and regional activities for fiscal years 2002-2005.22

20OTA also funds the travel of all Treasury participants in the assessment
process and has funded other U.S. government employees in support of an
existing work plan and to meet performance objectives.

21TFWG expenditures are classified.

State officials also told us that other State bureaus and offices provide
counter-terrorism-financing and anti-money-laundering training and
technical assistance (e.g., single-course offerings or "small-dollar"
programs) as part of regional, country-specific, or broad-based
programs.23

Treasury officials told us that OTA's counter-terrorism-financing
technical assistance is funded through its Financial Enforcement program.
Our analysis of Treasury records showed that OTA received budget authority
totaling about $30.3 million for all financial enforcement programs for
fiscal years 2002-2005. However, because OTA funding for
counter-terrorism-financing training and technical assistance is embedded
with funding for anti-money-laundering assistance, the exact amount
allocated to countering terrorist financing cannot be determined. One OTA
official told us that in any given year, as much as two-thirds of these
program funds may be spent on counter-terrorism-financing or
anti-money-laundering assistance.

  U.S. Government Has Not Assessed Human Capital Resources for Training and
  Assistance

The U.S. government, including TFWG, has not systematically assessed the
availability and suitability of the human capital resources used by the
agencies for counter-terrorism-financing training and technical
assistance. As a result, agency decision makers lack reliable information
to use in determining the optimal balance of government employees and
contractors to meet the needs and relative risks of vulnerable countries.

According to State and Treasury officials, the effectiveness of
contractors and current employees in delivering the various types of
training and technical assistance has not been systematically evaluated.
Decisions at TFWG appear to be based on anecdotal information rather than
transparent and systematic assessments of resources. In addition,
according to the State Performance and Accountability Report for fiscal
year 2004, a shortage of anti-money-laundering experts continues to hamper
efforts to meet the needs of nations that request assistance, including
priority countries. According to State officials, U.S. technical experts
are especially overextended because of their frequent need to divide their
time between assessment, training, and investigative missions. Moreover,
officials from State's Office of the Coordinator for Counterterrorism said
that a lack of available staff had slowed the disbursement of funding at
TFWG's inception.24

22An official from State's Bureau of International Narcotics and Law
Enforcement Affairs Office told us that in fiscal year 2004 about $2.3
million, which had been carried forward from prior years, was transferred
to a development program, reducing the total to $7 million.

23State's Bureau of International Narcotics and Law Enforcement Affairs
Office provided a document showing about $4.1 million in Support for
European Democracy funds obligated for anti money laundering training
between Fiscal Years 2002-2004.

Although Treasury said that there may be a shortage of anti-money
laundering experts in the U.S. government who are available to provide
technical assistance in foreign countries, Treasury officials told us that
many such experts, recently retired from the same U.S. government
agencies, are available as contractors. A senior OTA official said that
OTA has actively sought to provide programs in more priority countries but
that State, as chair of TFWG, has not supported OTA's efforts.
Specifically, our analysis showed that OTA obligated about $1.1 million of
its financial enforcement program funding in priority countries, in part
to place resident advisors, in fiscal years 2002-2005.25 State officials
said that they welcomed more OTA participation in priority countries as a
component of applicable resources; however, they questioned whether OTA
consistently provides high-quality assistance. At the same time, State
officials repeatedly stated that they needed OTA funding, not
OTA-contracted staff, to meet current and future needs.26

  U.S. Government Has Not Assessed Potential International Resources

The U.S. government, including TFWG, has not systematically consolidated
and synthesized available information on other countries' and
international entities' counter-terrorism-financing training and technical
assistance activities or integrated this information into a
decision-making process. Further, TFWG has not developed a strategy for
encouraging allies and international entities to contribute resources to
help vulnerable countries build counter-terrorism-financing capabilities
and coordinate training and technical assistance activities-one of TFWG's
stated goals. State and Treasury officials told us that, instead, they
take an ad hoc approach to working with allies and international entities
on coordinating resources for training and technical assistance. These
officials also noted that at TFWG meetings, interagency issues are given
higher priority than international resource sharing. Without a systematic
way to assess information about international activities and to
consolidate, synthesize, and integrate this information into the U.S.
interagency decision-making process, the U.S. government cannot easily
capitalize on opportunities for resource sharing with allies and
international entities.

24Department of State expenditures for priority countries are classified.

25Our analysis considered 19 priority countries, excluding countries that
TFWG added to the priority list in March 2005. At the time of our review,
OTA had obligated $9.5 million of the $30.3 million budgeted for financial
enforcement programs in priority and non-priority countries in fiscal
years 2002-2005.

26State generally funds other, non-State agencies-including OTA-to provide
training to foreign governments, whereas OTA generally funds contractors,
the majority of whom are former U.S. government employees, to do so.

U.S. Government Lacks System to Measure Performance and Incorporate Results

The U.S. government, including TFWG, has not established a system to
measure the results of its training and technical assistance efforts and
to incorporate this information into its integrated planning efforts.
According to an official from Justice's Office of Overseas Prosecutorial
Development, Assistance and Training (OPDAT), OPDAT led an interagency
effort to develop a system for measuring the results of training and
technical assistance provided through TFWG and related assistance results
for priority countries. In November 2004, OPDAT assigned an intern to set
up a database to track such results. Because the database was not
accessible to all TFWG members, OPDAT planned to serve as the focal point
for entering the data collected by TFWG members.27

OPDAT asked agencies to provide statistics on programs, funding, and other
information, including responding to questions concerning results that
corresponded to the five elements of an effective
counter-terrorism-financing regime. OPDAT also planned to track key
recommendations for training and technical assistance and progress made in
priority countries as provided in FATF and TFWG assessments. However, as
of July 2005, OPDAT was still waiting to hire an intern to complete the
project. OPDAT and State officials confirmed that the system had not yet
been approved or implemented by TFWG.

27It became unclear at our meeting with OPDAT and State whether the
database should be classified. Justice had not classified the database,
because officials were under the impression that only the ranking of
priority countries was classified information, while State maintained that
the listing of priority countries was classified.

GAO Recommended Actions to Improve Interagency Coordination, and Agencies Are
Taking Steps

To ensure that U.S. government interagency efforts to provide
counter-terrorism-financing training and technical assistance are
integrated, efficient, and effective, `particularly with respect to
priority countries, we recommended in our report that the Secretary of
State and the Secretary of the Treasury, in consultation with NSC and
relevant government agencies, develop and implement an integrated
strategic plan for the U.S. government that

           o  designates leadership and provides for key stakeholder
           involvement;
           o  includes a systematic and transparent assessment of the
           allocation of U.S. government resources;
           o  delineates a method for aligning the resources of relevant U.S.
           agencies to support the mission based on key needs and related
           risks; and
           o  provides processes and resources for measuring and monitoring
           results, identifying gaps, and revising strategies accordingly.

We also recommended that the Secretaries of State and the Treasury enter
into a Memorandum of Agreement concerning counter-terrorism-financing and
anti-money-laundering training and technical assistance to ensure a
seamless campaign in providing such assistance programs to vulnerable
countries. The agreement should specify, with regard to U.S.
counter-terrorism-financing training and technical assistance,

           o  the roles of each department, bureau, and office;
           o  methods to resolve disputes concerning OTA's use of
           confidentiality agreements in its contracts; and
           o  coordination of funding and other resources.

In March 2006 letters to relevant congressional oversight and
appropriation committees, State and Treasury describe general steps that
they are taking to improve the interagency process in delivering
counter-terrorism-financing training and technical assistance abroad. The
agencies report engaging with each other at all levels to ensure increased
coordination. In addition, they report that, in concert with the NSC and
the Departments of Homeland Security and Justice, they are reviewing TFWG
and its procedures with a view to enhancing its effectiveness. Also, State
reports that it has begun chairing TFWG at the Deputy Assistant Secretary
level to further enhance coordination. State also says that it is
reconvening a senior-level interagency Training and Assistance Subgroup
that is responsible for coordinating all U.S. government assistance on
counterterrorism matters, including counter-terrorism-financing training
and technical assistance.

Although these steps could provide a basis for improved stakeholder
acceptance of roles and procedures, State's and Treasury's letters lack
sufficient detail to affirm that the preparation of an integrated and
risk-based strategic plan is under way. The letters also do not address
efforts to strategically align resources with needs or to measure
performance. Moreover, the letters do not address our recommendation
regarding the Memorandum of Agreement or offer alternative means of
ensuring the duration of any improvements in coordination.

 Treasury Needs Meaningful Performance Measures and Information to Show Results
                    and Progress of Terrorist Asset Blocking

Treasury's OFAC undertakes a number of activities as part of its efforts
to block terrorist assets. However, although Treasury uses some limited
performance measures related to OFAC's efforts, Treasury officials
acknowledged that the measures do not assess results or show how OFAC's
efforts contribute to Treasury's terrorist financing-related goals. In
addition, OFAC officials acknowledged that Treasury's annual Terrorist
Assets Report to Congress on the nature and extent of blocked terrorists'
U.S. assets does not provide the information needed to assess progress
achieved. In our report, we recommended that the Secretary of the Treasury
finalize the development of the performance measures as well as an
OFAC-specific strategic plan and provide more complete information in its
annual reports to Congress on terrorist assets blocked. As of March 2006,
OFAC had developed new performance measures and said it would work with
Congress to provide the information needed regarding OFAC's terrorist
asset blocking efforts.

OFAC Administers Terrorism-Related Sanctions

OFAC administers and enforces economic sanctions, based on U.S. foreign
policy and national security goals, against designated individuals or
groups that conduct or facilitate terrorist activity.28 Once individuals
or groups are designated by Treasury or State, OFAC serves as the lead
agency responsible for prohibiting transactions and blocking assets
subject to U.S. jurisdiction. As part of its efforts, OFAC

           o  coordinates and works with other U.S. agencies to identify and
           investigate prospective terrorist designations;
           o  compiles the administrative record or evidentiary material that
           will serve as the factual basis underlying a decision by OFAC to
           designate individuals or groups; and
           o  engages foreign counterparts to gather information, apply
           pressure, or request or offer assistance in support of terrorist
           designation and asset blocking activities.

OFAC may use the threat of designation to gain cooperation, forcing key
sources of financial support to choose between public exposure of their
support of terrorist activity of their good reputation. OFAC also works
with the regulatory community and industry groups to assure that assets
are expeditiously blocked and the ability to carry out transactions
through U.S. parties is terminated.

Treasury's Performance Measures Do Not Assess Results of Terrorist Asset
Blocking

At the time of our October 2005 review, Treasury lacked effective
performance measures to assess the results of OFAC's terrorist asset
blocking efforts or show how these efforts contribute to the department's
goals of disrupting and dismantling terrorist financial infrastructures
and executing the nation's financial sanctions policies. Treasury's 2004
Performance and Accountability Report contained limited performance
measures related to asset blocking, including terrorist designations,
including

28According to Treasury, these economic sanctions are intended to deprive
terrorists and terrorist groups of access to U.S. markets and the
international financial system and are aimed at impeding their larger
supply networks, which aid, facilitate, and ultimately underpin the
successful execution of terrorist acts. OFAC also administers other
economic and trade base sanctions against foreign countries, international
narcotics traffickers, and those engaged in activities related to the
proliferation of weapons of mass destruction.

           o  an increase in the number of terrorist finance designations in
           which other countries join the United States,

           o  an increase in the number of drug trafficking and
           terrorist-related financial sanctions targets identified and made
           public,29 and
           o  the estimated number of sanctioned entities no longer receiving
           funds from the United States.30

OFAC officials told us that they recognized the inadequacy of these
measures to assess progress in blocking terrorist assets. According to the
OFAC officials:

           o  The measures in the 2004 Performance and Accountability Report
           are not specific to terrorist financing. Two of the three measures
           do not separate data on terrorists from data on other entities
           such as drug traffickers, hostile foreign governments, corrupt
           regimes, and foreign drug cartels, although OFAC officials
           acknowledged that they could have reported the data separately.
           o  Progress on asset blocking cannot be measured simply by
           totaling an amount of blocked assets at the end of the year,
           because the amounts may vary over the year as assets are blocked
           and unblocked.
           o  As of October 2005, Treasury had not developed measures to
           track activities and results related to asset blocking. For
           example, Treasury's underlying research to identify terrorist
           entities and their support systems is used by other U.S. agencies
           for activities such as law enforcement investigations. However,
           Treasury lacked measures to track other agencies' use of this
           research.

Treasury officials also noted that measuring the effectiveness of these
efforts in terms of their deterrent value is problematic, in part because
the direct impact on unlawful activity is unknown and because precise
metrics for illegal and clandestine activities are hard to develop.
According to Treasury officials, measuring these efforts' effectiveness
can also be difficult because many of them involve multiple U.S. agencies
and foreign governments and are highly sensitive. However, contrary to a
U.S. legislative directive to agencies to ascertain and explain the
infeasibility or impracticableness of a performance goal for a program
activity, Treasury's annual report does not address the deterrent value of
designations or the difficulties in measuring their effectiveness.31

29Treasury's 2004 Annual Performance and Accountability Report states that
Treasury proposes to discontinue use of this indicator in 2005.

30Sanctioned entities include hostile foreign governments, corrupt
regimes, foreign drug cartels, and other sanctioned targets determined by
the President, the Secretary of State, or the Congress.

In October 2005, in commenting on a draft of our draft report, Treasury
officials told us that they were in the process of developing better
quantitative and qualitative measures for assessing the results of OFAC's
terrorist asset blocking efforts. In addition, Treasury officials said
that they were developing a strategic plan to guide OFAC's efforts.32 The
officials stated that they expected OFAC's new performance measures to be
completed by December 1, 2005, and its new strategic plan to be completed
by January 1, 2006. We recommended in our report that the Secretary of the
Treasury complete the efforts to develop meaningful performance measures
and an OFAC-specific strategic plan to ensure that policy makers and
program managers are able to examine the results of U.S. efforts to block
terrorists' assets. According to discussions with OFAC officials in March
2006, OFAC has developed new measures to assess its role in administering
and enforcing economic sanctions against terrorists; however, we have not
assessed the adequacy of these new measures. According to OFAC officials,
as of March 30, 2006, the strategic plan had not yet been finalized.

31According to the Government Performance and Results Act (GPRA) of 1993,
Pub. L. No. 103-62, when it is not feasible to develop a measure for a
particular program activity, the executive agency shall state why it is
infeasible or impractical to express a performance goal for the program
activity. GPRA also states that the agency shall consult with the Director
of the Office of Management and Budget to determine that it is not
feasible to express the performance goal in a measurable form.

32According to GPRA, agency strategic plans should include, among other
elements, a set of general goals and objectives and a description of how
performance goals and measures are related to the general goals and
objectives of the program. Currently, OFAC's efforts are guided by
Treasury's overall strategic plan.

Treasury Report Does Not Show Progress in Asset Blocking

Treasury's annual Terrorist Assets Report, which offers a year-end
snapshot of dollar amounts of terrorist assets held in U.S. jurisdiction,
does not provide sufficient information to demonstrate OFAC's progress in
its terrorist asset blocking efforts.33 In 2004, OFAC reported that the
United States blocked almost $10 million in assets belonging to seven
international terrorist organizations and related designees.34 The 2004
report also noted that the United States held more than $1.6 billion in
assets belonging to six designated state sponsors of terrorism.35 However,
the report does not document or quantify changes from amounts of assets
blocked in previous years. For example, the 2004 report stated that the
United States held $3.9 million in al Qaeda assets, but it did not show
that this represented a 400 percent increase from the value of al Qaeda
assets held by the United State in 2003 or offer an explanation for this
increase.36

We noted in our October 2005 report that although the amounts of assets
blocked are not in themselves a complete measure to assess progress over
time, such information, along with other key performance metrics, could
help policy makers and program managers examine the results of OFAC's
asset blocking efforts. We recommended that the Secretary of the Treasury
provide more complete information in the annual Terrorist Assets Report on
the nature and extent of assets blocked, such as differences in amounts
blocked each year, explanations for such differences, results of OFAC's
terrorist asset blocking efforts, and obstacles faced by the U.S.
government. In commenting on a draft of our report, Treasury observed that
the Terrorist Assets Report "is not mandated or designed as an
accountability measure." However, nothing in the statutory language or the
congressional intent underlying the mandate precludes Treasury from
compiling and reporting in this manner. Senior OFAC officials acknowledged
that the Terrorist Assets Report is not useful for assessing results of
asset blocking efforts. In its March 2006 letter to relevant congressional
oversight and appropriation committees, Treasury responded that although
it does not believe that the amounts of assets blocked is a meaningful
measure of its efforts' effectiveness, it would work with Congress to
discuss recrafting the Terrorist Assets Report to address congressional
interests.

33Section 304 of Public Law 102-138, as amended by Public Law 103-236
(codified at 22 USC S:2656g), requires the Secretary of the Treasury, in
consultation with the Attorney General and appropriate investigative
agencies, to provide an annual report to Congress "describing the nature
and extent of assets held in the United States by terrorist countries and
organizations engaged in international terrorism." Treasury must submit
the Terrorist Assets Reports to the Committee on Foreign Relations and the
Committee on Finance of the Senate and to the Committee on International
Relations and the Committee on Ways and Means of the House.

34The 2004 Terrorist Assets Report listed the international terrorist
organizations as al Qaeda, HAMAS, Mujahedin-E Khalq Organization, New
People's Army, Palestinian Islamic Jihad, Kahane Chai, and the Taliban.
This figure does not include amounts under review or investigation.

35The 2004 Terrorist Assets Report  listed the state sponsors of terrorism
as Cuba, Iran, Libya, North Korea, Sudan, and Syria. Of the $1.6 billion,
$1.5 billion in assets are blocked because of economic sanctions imposed
by the United States.

36According to OFAC, amounts blocked for terrorist entities may shift year
to year for policy-related purposes. For example, funds may be unblocked
when the U.S. government terminates a sanctions program or when OFAC
issues exceptions to sanctions programs in accordance with applicable law.

                                   Conclusion

U.S. agencies have accomplished much in their efforts to combat terrorist
financing abroad. Despite the difficulties of interagency coordination,
TFWG has delivered counter-terrorism-financing training and technical
assistance to numerous vulnerable countries and has designated and blocked
significant amounts of terrorist assets. However, as GAO's October 2005
report described, several challenges impact the effectiveness of U.S.
agencies' efforts. Without a strategic and integrated plan for
coordinating the funding and delivery of training and technical assistance
by the agencies, the U.S. government cannot maximize the use of its
resources in the fight against terrorist financing. Interagency disputes
over State-led TFWG roles and procedures have hampered TFWG leadership and
wasted staff energy and talent. In addition, decisions based on anecdotal
and informal information, rather than transparent and systematic
assessments, have hindered managers from effectively addressing problems
before they grow and potentially become crises. Further, the U.S.
government's, including TFWG's, failure to integrate all available U.S.
and international resources may result in missed opportunities to leverage
resources to meet related needs and risks, particularly given the scarce
expertise available to address counter-terrorism financing. Finally,
without a functional performance measurement system, TFWG lacks the
information needed for optimal coordination and planning.

Although OFAC undertakes a number of important efforts with regard to
blocking terrorist assets, the lack of meaningful performance measures and
sufficient information regarding these efforts has created uncertainty
about their results and progress. The new performance measures that OFAC
has recently developed may enable Congress and other officials with
oversight responsibilities to ascertain the strengths and weaknesses of
these efforts as well as hold OFAC managers accountable. OFAC's strategic
plan, when completed, could further facilitate the development of
meaningful performance measures by describing the relation of performance
goals and measures to OFAC's mission, goals, and objectives. In addition,
including information in Treasury's annual Terrorist Assets Reports that
shows changes in the amounts of assets blocked from year to year may help
Congress and other officials better understand the importance of these
efforts in the overall U.S. effort to combat terrorist financing and may
assist in the strategic allocation of resources.

                     Matter for Congressional Consideration

In view of congressional interest in U.S. government efforts to deliver
training and technical assistance abroad to combat terrorist financing and
the difficulty of obtaining a systematic assessment of U.S. resources
dedicated to this endeavor, as stated in our report, Congress should
consider requiring the Secretary of State and the Secretary of the
Treasury to submit an annual report to Congress showing the status of
interagency efforts to develop and implement an integrated strategic plan
and Memorandum of Agreement to ensure TFWG's seamless functioning,
particularly with respect to TFWG roles and procedures.

Madame Chairwoman, this concludes my prepared statement. I would be
pleased to respond to any questions that you or other members of the
subcommittee may have at this time.

                          Contacts and Acknowledgments

Should you have any questions about this testimony, please contact Loren
Yager at (202) 512-4128 or [email protected] . Other major contributors to
this testimony were Christine Broderick, Kathleen Monahan, Tracy Guerrero,
Elizabeth Guran, and Reid Lowe.

Appendix I: Terrorist Finance Working Group (TFWG) Membership and Program
Development Process

According to the Department of State (State), the Terrorist Finance
Working Group (TFWG) was convened in October 2001 to develop and provide
counter-terrorism-financing training to countries deemed most vulnerable
to terrorist financing. Composed of various agencies throughout the U.S.
government, TFWG is cochaired by State's Office of the Coordinator for
Counterterrorism and Bureau for International Narcotics and Law
Enforcement Affairs. It meets biweekly to receive intelligence briefings,
schedule assessment trips, review assessment reports, and discuss the
development and implementation of technical assistance and training
programs.

TFWG Membership

Agencies and offices participating in TFWG include the following:

Department of State

           o  Office of the Coordinator for Counterterrorism
           o  Bureau for International Narcotics and Law Enforcement Affairs,
           Crime Programs
           o  Regional bureaus

                        o  Bureau for Economic and Business Affairs
                        o  Bureau of Diplomatic Security Office of
                        Antiterrorism Assistance
                        o  United States Agency for International Development

Department of the Treasury

           o  Terrorist Financing and Financial Crimes
           o  Office of Technical Assistance: Financial Crimes Enforcement
           Network:
           o  Office of the Comptroller of the Currency
           o  Internal Revenue Service-Criminal Investigation

Department of Justice

           o  Office of Overseas Prosecutorial Development, Assistance, and
           Training
           o  Asset Forfeiture and Money Laundering Section
           o  Counter Terrorism Section
           o  Federal Bureau of Investigation
           o  Drug Enforcement Administration

Department of Homeland Security

           o  Bureau of Customs and Border Protection
           o  Bureau of Immigration and Customs Enforcement

Other participants

           o  National Security Council
           o  Central Intelligence Agency
           o  Federal Deposit Insurance Corporation
           o  Federal Reserve Board

TFWG Program Development Process

According to State, the TFWG process for developing
counter-terrorism-financing training and assistance programs involves the
following steps:

1. With input from the intelligence and law enforcement communities,
identify and prioritize countries most vulnerable to terrorist financing ,
and needing the most assistance in combating it.

2. Evaluate priority countries' counter-terrorism-financing and
anti-money-laundering regimes with Financial Systems Assessment Team
(FSAT) on-site visits or Washington tabletop exercises. State-led FSAT
teams of 6 to 8 members include technical experts from State, Treasury,
Justice, and other regulatory and law enforcement agencies. The FSAT
on-site visits take about 1 week and include in-depth meetings with host
government financial regulatory agencies, the judiciary, law enforcement
agencies, the private financial services sector, and nongovernmental
organizations.

3. Prepare a formal assessment report on each priority country's
vulnerabilities to terrorist financing and make recommendations for
training and technical assistance to address these weaknesses. The formal
report is shared with the county's government to gauge its receptivity and
to coordinate U.S. offers of assistance.

4. Develop a counter-terrorism-financing training implementation plan
based on FSAT recommendations. Counter-terrorism-financing assistance
programs include financial investigative training to "follow the money,"
financial regulatory training to detect and analyze suspicious
transactions, judicial and prosecutorial training to build financial crime
cases, financial intelligence unit development, and training in detecting
over- and under-invoicing schemes for money laundering or terrorist
financing.

5. Provide sequenced training and technical assistance to priority
countries in the country, regionally, or in the United States.

6. Encourage burden sharing with our allies, with international financial
institutions (e.g., IMF, World Bank, regional development banks), and
through international organizations such as the United Nations (UN), the
UN Counterterrorism Committee, Financial Action Task Force on Money
Laundering, or the Group of Eight (G-8) to capitalize on and maximize
international efforts to strengthen counter-terrorism-financing regimes
around the world.

(320414)

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To view the full product, including the scope

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Highlights of GAO-06-632T , a testimony to the Subcommittee on Oversight
and Investigations, Committee on Financial Services, House of
Representatives

April 6, 2006

TERRORIST FINANCING

Agencies Can Improve Efforts to Deliver Counter-Terrorism-Financing
Training and Technical Assistance Abroad

Disrupting terrorists' financing is necessary to impede their ability to
organize, recruit, train, and equip adherents. U.S. efforts to strengthen
domestic and global security include, among others, the provision of
training and technical assistance in countering terrorist financing
abroad. An interagency Terrorist Financing Working Group (TFWG), chaired
by the U.S. Department of State (State), coordinates the delivery of this
training and technical assistance to "priority" countries-those considered
most vulnerable to terrorist financing schemes-as well as to other
vulnerable countries. In addition, the Department of the Treasury
(Treasury) Office of Foreign Assets Control (OFAC) leads U.S. efforts to
block access to designated terrorists' assets that are subject to U.S.
jurisdiction.

In response to multiple congressional requesters, GAO examined U.S.
efforts to combat terrorist financing abroad, publishing the report in
October 2005. In this testimony, GAO discusses the report's findings about
challenges related to (1) TFWG's coordination of the
counter-terrorism-financing training and technical assistance abroad and
(2) Treasury's measurement of results and provision of information needed
to assess OFAC's efforts to block terrorist assets.

Under State's leadership, TFWG has coordinated the interagency delivery of
counter-terrorism-financing training and technical assistance-for example,
providing training and placing resident advisors-in more than 20 priority
countries as well as other vulnerable countries. However, TFWG's effort
has been hampered by the absence of a strategic and integrated plan. GAO
found that the effort lacks three elements that are critical to strategic
lanning for operations within and across agencies:

p

           Key stakeholder acceptance of roles and practices

           o

           Strategic alignment of resources with countries' needs and risks

           o

           A process to measurement the effort's results 

           o

For example, two key TFWG stakeholders, State and Treasury, disagree about
the extent of State's leadership as chair of TFWG. GAO recommended that
State and Treasury, with other government agencies, implement an
integrated strategic plan that addresses these challenges and sign a
Memorandum of Agreement to improve coordination of
counter-terrorism-financing training and technical assistance abroad.
State and Treasury responded that they are taking several steps to improve
the interagency process, but they did not address all of GAO's
recommendations.

OFAC undertakes a number of efforts related to the blocking of terrorists'
assets. For example, OFAC compiles evidence as a basis for designating
terrorist groups and individuals. However, GAO found limitations regarding
Treasury's measurement of results and provision of information about FAC's
efforts.

O

           o  Inadequate measures. At the time of GAO's review, Treasury
           lacked adequate measures to assess the results of OFAC's efforts.
           OFAC was in the process of developing new measures, which it
           recently completed. Although GAO has not reviewed them, these
           measures may enable officials overseeing OFAC to ascertain the
           strengths and weaknesses of its efforts as well as hold OFAC
           managers accountable. GAO recommended that, in addition, Treasury
           develop an OFAC-specific strategic plan that describes, among
           other things, how its performance measures relate to general
           program goals and objectives. As of March 30, Treasury had not yet
           finalized the strategic plan.

           o  Insufficient information. Treasury's yearly report to Congress
           on terrorist assets blocked does not provide sufficient
           information for Congress to assess OFAC's progress. For instance,
           the report shows the total dollar value of blocked terrorist
           assets held under U.S. jurisdictions but does not show changes
           from amounts of assets blocked in previous years. GAO recommended
           that Treasury provide information on such changes, along with
           other key performance metrics, in its annual Terrorist Assets
           Report. Treasury responded that it would discuss with Congress
           recrafting the report to address congressional interests.
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