Money Laundering & Terrorist Financing in the ME and South Asia
Money Laundering and Terrorist Financing in the Middle East and South Asia
E. Anthony Wayne, Assistant Secretary for Economic and Business Affairs
Testimony before the Senate Committee on Banking, Housing, and Urban Affairs Washington, DC
July 13, 2005
Thank you for the opportunity to discuss with you the contribution of the Department of State to U.S. Government
efforts to combat money laundering and the financing of terrorism in the Middle East and South Asia. My colleague,
Ambassador Nancy Powell, Acting Assistant Secretary for the Bureau of International Narcotics and Law Enforcement
Affairs is also here, and she can answer any questions on money laundering that you may have. Combating money laundering
and the financing of terrorism are vital tasks and high priorities for the Department of State. Your interest and
attention to this key area is extremely valuable and much appreciated.
The main theme that you will hear throughout my presentation today is that we have made significant strides at
bolstering the political will and ability of governments in the Middle East and South Asia to act against the common
threat of terrorism and the financing of terrorism but that we need to do more. We face a resilient, adaptable and
ruthless foe and must constantly anticipate and help the countries of these key regions prepare for the next move before
it happens. This is why your hearing today is especially important.
Mr. Chairman, your letter to the Secretary noted that your committee is particularly interested in the Department of
State's perspective on the interagency effort to execute this component of the war on terror. I have been working on the
U.S. Government's campaign against terrorist finance since right after September 11, 2001 and agree with the 9/11
Commission's view that the current interagency structure has improved the coordination and effectiveness of our ability
to block funds to terrorists. Our efforts to combat terrorist finance serve many objectives and employ many tools. My
goal today is to sketch for you the role the Department of State plays in the overall interagency process that aims to
strike the right balance of priorities and use the right mix of tools in our efforts to keep funds out of the hands of
terrorists in the Middle East and South Asia.
Tracking Terrorist Finances
The two major policy strategies utilized by the Administration in the terror finance area are: freezing the assets of
terrorist financiers and using information about terrorist financiers to disrupt the terrorist networks themselves. As
terrorists largely operate internationally, a key component of the fight is to build international cooperation. To
achieve this goal, our approach has been to draw as appropriate on a wide range of flexible policy tools, including:
1) Bilateral and multilateral diplomacy; 2) Law enforcement and intelligence cooperation; 3) Public designations of
terrorists and their supporters for asset-freeze actions; 4) Technical assistance; and 5) Concerted international action
through multilateral organizations and groups, notably the Financial Action Task Force on Money Laundering (FATF) and
the United Nations.
Effective diplomacy is a key element in winning the political commitment from which cooperation in other areas flows.
Our diplomats are the overseas eyes, ears and voices of the U.S. Government in dealing with foreign governments and
financial institutions on terrorism finance. Our diplomats meet additional responsibilities in the many countries where
we have no resident legal or Department of Treasury attaché. With enhanced cooperation, intelligence and law enforcement
officers are able to follow the money trail. With international cooperation on asset-freezes (as well as travel bans and
arms embargoes under UN resolutions), we force terrorists into less reliable and more costly means of moving money.
Designations also chill support for terrorism - it is one thing to write a check or transfer money to terrorists when no
one is looking; it is quite another to realize that such actions can bring unwanted official attention and lead to
prosecution. Public identification of charitable groups that funnel some of their donations off to support terrorists
has also proven a powerful tool to discourage further donations and to encourage other governments to monitor more
effectively the activities of non-governmental organizations.
Since 9/11, we have ramped up our efforts and made substantial progress. We also acknowledge that much remains to be
done. Since September 11, 2001, we have:
Developed a broad and strong international coalition against terrorist financing; Ordered the freezing of the U.S.
assets of 400 individuals and entities linked to terrorism; Submitted and supported the submission by other countries,
including Saudi Arabia and several of our other Middle Eastern partners, over 300 al Qaida- or Taliban-linked names to
the UN 1267 Sanctions Committee (also known as the al Qaida/Taliban Committee) for sanctions, including asset-freezing,
thereby requiring all countries to act against these names; Worked closely with concerned agencies to designate three
financiers of the Zarqawi network, or al Qaida in Iraq, since the beginning of 2005 pursuant to E.O.13224. The
designations of Bilal Mansur al-Hiyari on April 13, 'Ayyad al-Fadhli on February 15, and Sulayman Kahlid Darwish on
January 25 are helping stem the funding of the Iraqi insurgency; Designated Jama'at al-Tawhid wa'al-Jihad (JTJ) both as
a Foreign Terrorist Organization and separately under E.O. 13224 on October 15, 2004 for having ties to the al-Zarqawi
network. At the request of the United States, the United Kingdom, Jordan, and Iraq, this organization was also listed by
the UN 1267 Sanctions Committee on October 18. On November 30, the USG amended the previous designation of Jama'at
al-Tawhid wa'al-Jihad (JTJ), to include its new alias Tanzim Qa'idat al-Jihad fi Bilad al-Rafidayn and all its possible
translations. On December 2, Japan, joined by the United Kingdom and Germany, submitted to the Sanctions Committee the
new alias Tanzim Qa'idat al-Jihad fi Bilad al-Rafidayn and all its possible translations and transliterations. The USG
fully supported those efforts. Designated charities funding HAMAS for asset freeze; and taken action against Saudi
terrorism financiers and financial support networks; Frozen approximately $147.4 million and seized approximately $65
million in assets located internationally, including in the United States; Through our embassies, formally approached
world governments internationally to freeze the assets of each and every name we designate; Supported changing national
laws, regulations and regulatory institutions around the world to better combat terrorist finance and money laundering;
including working with the European Union, APEC, the Organization of American States, and the Financial Action Task
Force and their Members to strengthen their counterterrorism finance regimes; and Made it harder for terrorists and
their supporters to use both formal and informal financial systems.
Effective U.S. Government Coordination Key to our success in tackling terrorism finance in the Middle East and
worldwide is effective U.S. interagency coordination. A Policy Coordination Committee (PCC), chaired by the National
Security Council, ensures that these activities are well coordinated. This strong interagency teamwork involves the
intelligence agencies and the law enforcement community, led by the FBI, as well as State, Treasury, Homeland Security,
Justice, and Defense collectively pursuing an understanding of the system of financial backers, facilitators and
intermediaries that play a role in this shadowy financial world. As appropriate, PCC members also draw on the expertise
of financial regulators. The overarching lesson I draw from my experience since 9/11 is the importance of overall
direction of the terrorist finance effort by a body that can direct all of the USG participants in the process to find
the right blend of instruments to use on a case-by-case basis. The NSC is ideally placed to play this coordinating role
against terrorist finance, as it has traditionally done in other national security areas.
Treasury develops and coordinates financial packages that support public designations of terrorists and terrorism
supporters for asset freeze action. Treasury also leads our outreach to FATF and the international financial
institutions. Justice leads the investigation and prosecution in a coordinated campaign against terrorist sources of
financing. And, State initiates asset-freeze designations of terrorist groups and shepherds the interagency process
through which we develop and sustain the international relationships, strategies and activities to win vital
international support for and cooperation with our efforts, including through UN action. These efforts include the
provision of training and technical assistance in coordination with Justice, Treasury, Homeland Security and the
financial regulatory agencies. The U.S. Government's task has been to identify, track and pursue terrorist financing
targets and to work with the international community to take measures to thwart the ability of terrorists to raise and
channel the funds they need to survive and carry out their heinous acts.
Our diplomatic posts around the world are essential partners in implementing this global strategy. They have each
designated an official, generally the Deputy Chief of Mission, as the Terrorism Finance Coordination Officer (TFCO).
These officers chair interagency meetings at posts on a regular basis, not only to evaluate the activities of their host
governments, but also to develop and propose individual strategies on most effectively getting at specific targets in
their regions. The increased level of interagency cooperation we in Washington are seeing on this front is generating
new embassy initiatives focused sharply on terrorist finance. The ability of diplomats at our embassies to develop
high-level and immediate contacts with host officials in these efforts has built broad responsiveness around the world
to various targeting actions.
U.S. Asset Freezing (E.O. 13224) Actions One of our tools to prevent terrorism is to starve its practitioners of
financial resources. A key weapon in the effort to disrupt terrorist financing has been the President's Executive Order
(E.O.) 13224, which was signed on September 23, 2001. That order, issued pursuant to the International Emergency
Economic Powers Act and other authorities, provided new authorities that have been fundamental to an unprecedented
effort to identify and freeze the assets of individuals and entities associated with terrorism. Under that order, the
Administration has frozen the assets of 400 individuals and entities on 65 separate occasions. The agencies cooperating
in this effort are in daily contact, examining and evaluating new names and targets for possible designation resulting
in asset freezing. However, our actions in relation to E.O. 13224 are not taken in isolation. We consider other actions
as well, including developing diplomatic initiatives with other governments to conduct audits, exchange information on
records, law enforcement and intelligence efforts; and shaping new regulatory initiatives. While using E.O. 13224 to
designate entities and organizations as "specially designated global terrorists" is the action that is most publicly
visible, it is by no means the only action or the most important in seeking to disrupt the financing of terrorism.
Foreign Terrorist Organizations A second tool the Secretary of State has in the war on terrorist finance is the
designation of Foreign Terrorist Organizations (FTO). The Congress gave the Secretary of State this authority in 1996,
and 40 organizations are currently designated as FTOs. In addition to requiring the freezing of FTO assets by U.S.
financial institutions that know they control or possess FTO funds, this authority renders FTO members who are aliens
inadmissible to the United States, and permits their removal under certain circumstances. Once an organization is
designated as an FTO, it becomes a criminal offense to knowingly provide material support or resources to the
organization. Offenders are subject to prison terms of up to fifteen years (or, if death results from the offense, life
imprisonment). The designation of groups under this authority is one of the steps most widely recognized by the American
public in the war on terrorism and terrorist finance.
United Nations Actions Even before 9/11, the UN Security Council (UNSC) had taken action to address the threat of
terrorism. It had adopted resolutions 1267 and 1333, which collectively imposed sanctions against the Taliban, Usama bin
Laden and al Qaida. Following 9/11, the UNSC stepped up its counterterrorism efforts by adopting Resolutions 1373 and
1390. Among other things, Resolution 1373 requires all States to prevent and suppress the financing of terrorist acts
and to freeze the assets of terrorists and their supporters. It also imposes travel restrictions on these individuals.
Resolution 1390 (strengthened by Resolutions 1455 and 1526) expanded sanctions, including asset freezes, travel
restrictions and arms embargos, against Usama bin Laden, and members of the Taliban and al Qaida and those associated
with them. The UN 1267 Sanctions Committee maintains and updates a list of individuals and entities subject to these
sanctions, which all States are obligated to implement.
Through these actions, the UNSC has sent a clear and strong message underscoring the global commitment against
terrorists and their supporters and obligating UN Member States to implement asset freezes and other sanctions. This is
extremely important, because: (1) most of the assets making their way to terrorists are not under U.S. control; and (2)
when the 1267 Sanctions Committee designates individuals or entities associated with al Qaida, all 191 UN Member States
are obligated to implement against those persons the applicable sanctions, which include asset freezes. The 1267
Sanctions Committee has listed over 300 persons and over 100 entities that are subject to the sanctions. With respect to
South Asia, we recently convinced the UN 1267 Sanctions Committee to list Pakistani supporters of al Qaida for worldwide
asset freeze and travel ban.
In January, then-Treasury Assistant Secretary Zarate and I met with the 1267 Committee to detail U.S. implementation of
the resolution's asset freeze, travel ban and arms embargo provisions. At this meeting I proposed several ideas aimed at
reinforcing current sanctions, including enhancing the sanctions list, promoting international standards and furthering
bilateral and multilateral cooperation. The Committee is actively encouraging other members to make similar
presentations. In mid-May, the UK addressed the Committee on their implementation efforts, with an emphasis on oversight
of charitable organizations. In July, Dutch and Australian officials addressed the Committee on their implementation
efforts. We have also begun initial discussions with other Security Council Members on further steps to strengthen the
implementation and reach of these UN sanctions in the context of a new resolution that the Council will consider this
month; the U.S. is taking the lead in drafting that resolution.
In those cases where the United States Government decides to propose the inclusion of a terrorist and/or the
terrorist's financier on the 1267 Committee list, State plays a key role in recommending how best to gain the broadest
international support. First, we need to be sure that we can make an effective public case. This is much more difficult
and time-consuming than it sounds but is crucial to the success of this approach. Often, strong cases are based heavily
on classified information, and we must weigh competing priorities. If we go to the UN to propose a designation and the
unclassified information standing alone is weak, other Member States will not support us. On the other hand, there are
often compelling reasons not to declassify further information. The Department and our embassies help the interagency
team strike the right balance by providing advice and insights on what it will require for a designation to gain
international approval. Once a designation proposal is decided, the Department seeks international support in the form
of potential cosponsors and must garner unanimous support from members of the UN Committee. When a new name goes onto
the Committee's list, we bring it to the attention of world governments to ensure that they are able to take effective
and quick action against the designee.
Improving National Laws, Regulations and Standards In addition to advances on the UN front, we have witnessed
considerable progress on the part of countries around the world to equip themselves with the instruments they need to
clamp down on domestic terrorist financing. Since 9/ 11, about 90 countries in every region of the world, including the
Middle East and South Asia, have either adopted new laws or regulations to fight terrorist financing or are in the
process of doing so. This is an ongoing process with many countries refining their laws and regulations to assure they
have all of the tools needed to combat terrorist financing.
To ensure that these new laws and regulations are effective, the United States has worked very closely with the
Financial Action Task Force (FATF), a multinational organization whose 33 members are devoted to combating money
laundering. In 2003, FATF revised its 40 Recommendations to combat money laundering to include terrorist financing
provisions. These Recommendations along with the complementary Special Recommendations on Terrorist Financing, adopted
in 2001, provide a framework for countries to establish a comprehensive regime to fight money laundering and terrorist
financing. The two guiding principles the FATF has identified as critical to fighting terrorist finance are cooperation
with the UN (respecting, ratifying and implementing anti-terrorist treaties and resolutions) and identifying, defining
and criminalizing terrorist financial activity.
The FATF continues to provide critical guidance on the development of comprehensive regimes to attack the full range of
financial crimes, including terrorist financing. In October 2004, the FATF added Special Recommendation IX on terrorist
financing (to those approved in 2001), addressing the problem of cash couriers. It also continues its efforts to clarify
and refine these Special Recommendations by publishing interpretive notes and best practices guidelines to help
regulators, enforcers, financial institutions and others better understand and implement the most technical
recommendations. The FATF has also worked closely with the IMF and World Bank to develop a common methodology to
incorporate FATF's Recommendations into the financial sector reviews that all three entities undertake.
The FATF-Style Regional Bodies (FSRBS) worked throughout the year to adapt the Recommendations to their particular
regional requirements. The FATF approved two new FSRBS in 2004, (bringing the total to eight FSRBS): the Eurasian Group
(EAG) and the Middle East and North African Financial Action Task Force (MENA FATF). These two new groups filled in
critical gaps in global coverage, and the U.S. is an observer in both. The EAG was inaugurated on October 6, 2004 by six
member states: Belarus, China, Kazakhstan, Kyrgyz Republic, Russia and Tajikistan. Seven jurisdictions and nine
international organizations were admitted as observers. EAG's second plenary was held just this past April in Shanghai,
China. The fourteen founding members of MENA FATF are Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Morocco, Oman,
Qatar, Saudi Arabia, Syria, Tunisia, the UAE, and Yemen. The group was inaugurated on November 29, 2004, and held its
inaugural plenary meeting the next day. Another plenary session was held in mid-April in Bahrain at which the MENA FATF
agreed to begin the first round of mutual evaluations in 2006.
FATF is also working cooperatively with the UN Counterterrorism Committee (CTC) and the G-8-initiated Counterterrorism
Action Group (CTAG) to conduct assessments of selected countries' needs for technical assistance to improve local
ability to combat terrorist financing. FATF has conducted six of these assessments: Morocco, Egypt, Nigeria, Cambodia,
Indonesia, and Tunisia. FATF did not conduct an assessment in Thailand as was requested because a recent IMF survey had
been done, or in Cote d'Ivoire due to political instability there. The UAE did not accept a FATF assessment, indicating
to the USG that a prior U.S.-conducted assessment was enough. CTAG donors have established a gaps/ assistance matrix
based on the counterterrorism finance needs identified in FATF's assessment. Although donors made a good start in
meeting the needs of these countries, CTAG agreed that sustained assistance over time would be required to close the
gaps.
We have seen substantial progress in securing countries' commitment to strengthen their anti-money laundering laws and
regulations, which is inextricably linked to combating the financing of terrorism. In large part due to FATF's focus and
our technical assistance and diplomatic pressure, governments pass amendments to improve their ability to combat
terrorist financing. For instance, the Indonesian Parliament passed important amendments to its anti-money laundering
law on September 16, 2003 that will improve the country's ability to take actions against terrorist financing.
Similarly, it was FATF's efforts, in conjunction with our diplomacy and technical assistance, which led the Philippines
to pass legislation in March 2003 that will significantly increase that country's ability to carry out meaningful
anti-terrorist financing measures. FATF advises on whether such regulations and legislation meet international standards
and are effective instruments to combat money laundering and terrorist financing.
In addition to providing countries with the guidance they need to develop effective regimes, FATF also places pressure
on difficult countries via its Non-Cooperating Countries and Territories (NCCT) program, which provides for listing
countries that are non-cooperative with respect to internationally accepted anti-money laundering practices. FATF's NCCT
program creates an incentive for States to vigorously address their legal and regulatory environments to allow
appropriate action against money laundering. Nigeria and the Philippines, for instance, in December 2002 and February
2003 respectively, took meaningful legislative steps to strengthen their anti-money laundering laws to avoid imposition
of FATF measures. Our extensive efforts with the Philippines and Indonesia also played a key role in their removal from
the FATF Non-Cooperative Countries and Territories list.
As we, together with others in the international community, began to look into how terrorist groups raised and moved
their funds, the fact that much of this took place outside regular banking systems quickly became apparent. As a result,
international efforts underway to set standards for tackling terrorist financing are also addressing how to prevent
charities and not-for-profit organizations from being abused by those with malicious intentions and also how to help
keep cash couriers and alternative remittance systems, such as "hawala," from being used to finance terrorism. The FATF,
which has already addressed some of these issues through its Special Recommendations on terrorist financing, is now
working to develop guidelines and standards on wire transfers and regulation of charities and non-governmental
organizations. Setting new standards and norms in these areas is key to making our international efforts more effective.
Economic Tools U.S. policies to counter terrorism do include economic policies that encourage development. An important
tactic to stamp out terrorism is to improve the economic prosperity and employment opportunities in priority countries.
Extremism and terrorism thrive in countries that lack freedom, political expression, and economic and educational
opportunity. People, especially youth, who live in poverty and have no voice are more likely to be susceptible to
extremist ideologies and to join terrorist organizations. To support the reforms already underway in the region, the
United States and its G-8 partners joined at the 2004 Sea Island Summit to launch the Broader Middle East and North
Africa (BMENA) Initiative in partnership with governments, businesses, and civil society groups from the region. BMENA
includes initiatives to increase democratic participation, promote the development of civil society, fight illiteracy,
and support job-creating small businesses. These reforms will allow the people of the Broader Middle East more
opportunity to have a say in the direction their societies are taking and help combat extremism.
As a matter of United States policy, development is central to the President's National Security Strategy.
Well-conceived and targeted aid is a potential leveraging instrument that can help countries implement sound policies,
reducing any attraction that anti-Western terrorist groups may have in failing states.
The Millennium Challenge Account represents a new compact for development -- a new way of doing business. It provides
assistance to those countries that rule justly, invest in their people and encourage economic freedom. Good governance,
which attracts investment and allows the private sector to flourish, not foreign aid, is the key to economic
development. U.S. trade and investment flows to the developing world dwarf our foreign aid. Unutilized capital in
developing countries, owing to weak policies and poor property rights, is estimated to be as high as $9 trillion.
Debt relief for the poorest countries is another element of our development strategy. Our long-standing support for the
Heavily Indebted Poor Countries (HIPC) initiative promotes debt sustainability and enables the poorest countries to
devote additional resources to reducing poverty and promoting economic growth.
Our aggressive multilateral and bilateral trade agenda to open agricultural and non-agricultural markets and liberalize
financial services, transportation, telecommunications and government procurement all support development. Free trade
and open markets can be drivers for greater prosperity and job opportunities, especially for the young people in these
key regions who are thirsting for a stake in the future. Under the President's vision for a Middle East Free Trade Area
(MEFTA) by 2013, the U.S. has concluded a bilateral free trade agreement with Jordan. Agreements with Morocco and
Bahrain should go into effect in the near future; and Free Trade Agreement (FTA) talks with Oman and the United Arab
Emirates have just been launched. We also have Trade and Investment Framework Agreements (TIFA), which typically serve
as pre-cursors to an FTA, in place with most Arab countries. We are also aiming to conclude a TIFA with Afghanistan. The
U.S. is working with countries in both the Middle East and South Asia, such as Saudi Arabia and Afghanistan, to assist
them in their efforts to join the World Trade Organization and become more fully integrated into the global trading
system.
Bilateral Investment Treaties (BITs) are another tool to promote the adoption of market-oriented economic policies that
can promote growth and new employment opportunities. Historically, investors in many countries in the Middle East and
South Asia have too often faced discrimination or otherwise been treated in a biased and nontransparent manner by host
governments. As a result, foreign investors have turned elsewhere. Our bilateral investment treaties address this
problem by assuring that certain core investment protections are available to investors, and by providing access to an
independent, non-political mechanism for investors to enforce those protections. We have held two rounds of BIT
negotiations with Pakistan since February, with a further round likely in August. Saudi Arabia has expressed interest in
exploratory discussions on possible BIT negotiations, and we have also identified Algeria as a possible BIT candidate.
Capacity Building On the technical assistance front, the interagency Terrorist Finance Working Group (TFWG), chaired by
the State Department, has provided over $11.5 million in Foreign Assistance funding to provide technical assistance and
training to develop and reinforce counterterrorist financing/anti-money laundering (CTF/ AML) regimes of frontline
states, many of which are in the Middle East and South Asia regions. To date, over twenty U.S. Government offices and
agencies participating in the TFWG, which include the Justice, Treasury and Homeland Security Departments and financial
regulatory agencies, have provided assistance to eighteen countries on five different continents including Saudi Arabia,
the UAE, Kuwait, Qatar, Jordan and Egypt in the Middle East and Bangladesh and Pakistan in South Asia regions. These
comprehensive training and technical assistance programs include legislative drafting, financial regulatory training,
Financial Intelligence Unit (FIU) development, law enforcement training, and prosecutorial/judicial development.
We have provided several countries in the Gulf and South Asia with different types of training related to sound
counterterrorist finance practices, including the detection of trade-based money laundering (moving money for criminal
purposes by manipulation of trade documents), customs training, anti-terrorist finance techniques and case studies for
bank examiners, and general financial investigative skills for law enforcement/counterterrorist officials. Our
international partners have welcomed this type of training, and we plan to provide it to other vulnerable jurisdictions
in other regions.
Burden sharing with our key coalition partners is an emerging success story. For instance, the Governments of
Australia, New Zealand and the United Kingdom, as well as the EU, and the Asian Development Bank, have significant
technical assistance initiatives underway in countries such as the Philippines, Indonesia, Pakistan, Malaysia, and
Egypt. We have also funded the UN Global Program Against Money Laundering to place a yearlong mentor in the Philippines
to assist with further development of its FIU. Despite its importance in the overall counterterrorism effort, and all
the discussions about it, relatively few dollars are devoted to training and technical assistance for AML and CTF.
Congress could strengthen this tool by fully supporting the Administration's funding request for this crucial task.
Areas of Focused Cooperation The Administration is actively involved in combating terrorist financing through
partnerships we have established throughout the Middle East and South Asia. These activities rely on the full range of
tools in our toolkit.
Saudi Arabia We are working on this approach with many countries, but I want to highlight for you the range of
activities in Saudi Arabia, where we have used each of these elements in a process steered by the NSC-led Terrorist
Finance PCC. We have instituted a regular high-level diplomatic effort to urge enhanced emphasis by the Saudis on
combating terrorist finance. Homeland Security Advisor Frances Townsend has traveled regularly to Saudi Arabia to engage
with the highest-level Saudi authorities on this issue. The U.S. Ambassador to Saudi Arabia and his staff also reinforce
these messages in their daily dialogue with a wide range of Saudi officials.
We have jointly designated, with the Saudis, over a dozen Saudi-related entities and multiple individuals under UNSCR
1267.
As part of a State-led interagency assistance program, Federal banking regulators have provided specialized anti-money
laundering and counter terrorist financing training to their Saudi counterparts.
Demonstrating its commitment to address systemic factors contributing to the flow of funds to terrorists, Saudi Arabia
is working to establish a Charities Commission to regulate all charitable donations leaving the Kingdom. Saudi Arabia
has made important changes to its banking and charity systems to help strangle the funds that support al Qaida. Saudi
Arabia's new banking regulations place strict controls on accounts held by charities. Saudi Arabia has also ordered an
end to the collection of donations at mosques and instructed retail establishments to remove charity collection boxes
from their premises. These steps have been extremely challenging for the Saudi government, but they have been ordered
because it understands that terrorists are more likely to use funds collected anonymously and without an audit trail
than those that move through regular banking channels. We believe that Saudi actions have, in fact, significantly
reduced the flow of cash from Saudi Arabia to al Qaida and other terrorist groups in the region.
The Saudi Government has continued to publicize counterterrorism efforts and to speak out denouncing terrorism. The
declaration from the February 2005 International Counterterrorism Conference, hosted by the Saudi Government, in Riyadh
stated that there can be no justification for terrorism and called for greater religious tolerance. Homeland Security
Advisor Townsend led a large U.S. interagency delegation to the conference and spoke at the plenary session, emphasizing
the need to block the financing of terrorism. I participated in the working group on terrorist finance. The Saudi
Government plans to establish an international counterterrorism center in Riyadh which can further international efforts
at curbing all aspects of terrorism, including terrorist finance. We plan to continue to work with the Saudis on ways to
make this center most effective. On the issue of greater religious tolerance, the Saudi Government, on its own
initiative, recently completed a comprehensive revision of textbooks to "remove objectionable language," and these new
textbooks are now being used in Saudi schools. In 2005, the Saudis intensified their wide-ranging anti-terror public
relations campaign. The campaign condemns terrorism and encourages moderation through statements by politicians and
religious leaders. A mix of television programs, advertisements, and billboards depict the graphic results of terrorism
to send a strong anti-terror message to the Saudi public. For the last four years, the State Department has sponsored
special International Visitors programs for Saudi religious educators, to expose them to the nature of U.S. religious
diversity and the role of religion in U.S. society. Two groups of ten had visited so far in fiscal year 2005, with
another group of ten scheduled in the fall.
Saudi Arabia has been working with us for a year and a half in the context of the Joint Task Force on Terrorist
Financing, led on the U.S. side by the FBI. As part of the State-led interagency counterterrorist financing assistance
program, experts from the FBI and IRS have completed a training module designed to strengthen the financial
investigative capabilities of the Saudi security forces, with more advanced courses to follow. The Department of
Homeland Security's Bureau of Immigration and Customs Enforcement (ICE) will provide a week of cash courier-related
training to Saudi customs officials starting July 16. That being said, this remains a work in progress. We have reason
to believe that the new task force on terrorist financing will be effective, but we need to see results.
We believe the Saudi Arabian Government is implementing its new charity regulations, but there too, we continue to
stress in our discussions with the Saudis the need for full implementation, including a fully functioning Charities
Commission. Additionally, appropriate regulatory oversight of organizations headquartered in the Kingdom such as the
World Muslim League, the International Islamic Relief Organization (IIRO) and the World Assembly of Muslim Youth (WAMY)
is absolutely necessary. The Saudi government is working to train personnel to staff its nascent Financial Intelligence
Unit (FIU) and we will encourage the Saudi FIU to join the Egmont Group in 2006. On June 19, a Ministry of Interior
spokesman announced that a "special department for tracing illegal financial activities in the Kingdom" (the FIU) will
be completed soon. The September 2003 FATF mutual assessment of Saudi Arabia found that the Kingdom has taken essential
steps - closer bank supervision, tighter banking laws, enhanced oversight - critical to curbing terrorist financing and
money laundering. On June 14, for example, the Council of Ministers adopted a recommendation that private donations to
beneficiaries outside the Kingdom be channeled only through the National Commission for Relief and Charitable Work
Abroad. There is more to do, and we will continue to press ahead with our efforts with the Saudi Arabian Government and
with other governments in the region.
Beyond these activities, the Saudis are also continuing to fight terrorism on the ground. On June 28, Saudi Arabia
issued a new list of 36 "most wanted" terrorists in the Kingdom. At least one has been killed and one has surrendered
since the list was released.
Other Gulf States The governments of the Arabian Peninsula are themselves on the front lines in the war on terrorism,
and have become essential partners of the United States in countering the threat of terrorism in the region. We have
developed highly cooperative and mutually beneficial relations with the Gulf States in the areas of law enforcement,
intelligence sharing, and terrorist finance. However, there is still more that can be done. We will continue high-level
engagement and will focus on sustaining the capacity of these governments to effectively address the terrorist threat.
Our efforts to combat the financing of terrorism are working, and now al Qaida and other terrorist groups are
increasingly resorting to cash couriers to move their funds across borders to fund their terrorist activities. The USG
is working with the governments in the Gulf to combat the illicit use of cash couriers, which is especially pertinent to
these cash-based economies. We have recently provided training to the Saudi Customs Service to identify cash couriers.
We look forward to supporting these governments as they enhance their cash courier regulations. Additionally, FATF
issued Special Recommendation IX in October 2004, under which member countries should ensure that they have measures in
place to detect, and appropriately sanction, those moving currency if suspected of money laundering or terrorist
financing.
The Gulf States have made significant progress to improve their ability to combat terrorist financing and have worked
closely with us in this area. These nations have diligently implemented UNSC sanctions.
Kuwait formed a ministerial committee to develop strategies to combat terrorism and extremism, and forbade Kuwaiti
Ministries and other institutions from extending official invitations to twenty-six Saudi clerics who reportedly signed
a statement in support of Jihad in Iraq. There are regular consultations between U.S. and Kuwaiti officials on ways to
strengthen measures to combat money laundering and terrorist finance. During a recent visit to Kuwait by Treasury Deputy
Assistant Secretary Daniel Glaser, the Kuwaitis discussed some of the additional measures they are taking to combat
terrorist financing. The GOK has formed a working group to draft a new piece of legislation that would specifically
criminalize terrorist finance and strengthen Kuwait's anti-money laundering/terrorist finance (AML/TF) regime. The
legislation is intended to address weaknesses in Kuwait's current anti-terrorist finance legal regime (absence of a law
specifically criminalizing terrorist finance; prohibition of direct information-sharing by the Financial Intelligence
Unit (FIU) without prior case-by-case approval of the Public Prosecutor's Office; lack of restrictions on cash
couriers). The USG has offered, and the GOK has accepted, USDOJ Office of Overseas Prosecutorial Development,
Assistance, and Training (OPDAT) assistance in reviewing Kuwait's legislation. GOK officials have also indicated that
they may ask the IMF and FinCEN for assistance. The Embassy is also working with the Department of Justice, the Federal
Reserve and other agencies on a counterterrorism training package for the Government of Kuwait.
In November 2004, Bahrain hosted the inaugural meeting of the Middle East and North Africa (MENA) FATF, which will
promote the implementation of the FATF Recommendations to combat money laundering and terrorist finance. In April 2005,
Bahrain hosted a two-day plenary session of the MENAFATF followed by a two-day anti-money laundering/counterterrorist
finance workshop co-hosted by the World Bank and IMF.
The UAE aggressively enforces anti-money laundering regulations and in 2004 enacted legislation criminalizing terror
finance. In April, the UAE hosted the third international conference where ways to prevent use of the hawala (informal
money transfer) system by terrorist financiers was discussed. We sent U.S. delegates and a speaker to this conference,
and over 400 participants from 74 different countries attended. Conference attendees included representatives from
financial institutions, Central Banks, law enforcement agencies, FATF, the IMF, and the World Bank, as well as other
international officials involved in regulating money transfer systems. The government registers hawala dealers.
Oman has implemented a tight anti-money laundering regime that monitors unusual transactions. Financial institutions
plan to verify customer identities using sophisticated biometrics technology.
Qatar has enacted laws to combat terrorist financing and to monitor all domestic and international charity activities.
Yemen routinely cooperates with U.S. law enforcement and took action against al Qaida by arresting several individuals
suspected of al Qaida ties and prosecuting the perpetrators of several terrorist acts, including the 2002 attack on the
USS Cole.
We have conducted Anti-Terrorism Assistance (ATA) programs with all of the Arabian Peninsula states.
Now that MENAFATF is set up, it needs to become an effective, practicing institution. Members of MENAFATF should all
set up operational FIUs, conduct mutual assessments, establish best practices and meet overall FATF standards.
Jordan
The government of Jordan has cooperated with us on a wide range of terrorist finance issues, including designations at
the UN. We urge passage of the new anti-money laundering legislation, which will strengthen significantly Jordan's legal
basis for tackling the financing of terrorism and its international cooperation on AML and counter-terrorism financing
cases.
Syria In May 2004, Treasury designated the Commercial Bank of Syria (CBS) as a "primary money laundering concern"
pursuant to Section 311 of the USA PATRIOT Act and proposed to implement a special measure against the bank. Since then,
we have worked with the Syrian government and the CBS to strengthen their anti-money laundering controls and their
cooperation with the U.S. on money laundering and terrorist financing issues. We have not implemented the special
measure, which would require U.S. financial institutions to sever their correspondent relationships with CBS, pending an
assessment of Syrian progress toward resolving U.S. concerns. In addition, the Syrians joined us on the submission of
Sulayman Khalid Darwish to the UN 1267 Committee.
However, the Syrian government needs to do more to address U.S. concerns about Syria's continued efforts to influence
Lebanese political developments, its pursuit of WMD, and the use of Syrian territory by those supporting terrorism and
the insurgency in Iraq. On June 9, the Treasury Department designated a Syrian-based entity and its two managers
pursuant to EO 13315, which is aimed at blocking the property of the former Iraqi regime or those who acted for on its
behalf. On June 29, the Treasury Department designated another Syrian entity pursuant to its newly-issued Executive
Order on WMD Proliferation Financing. On June 30, the Treasury Department designated two Syrians for an assets freeze
pursuant to the provision in EO 13338 that is aimed at financially isolating those individuals and entities contributing
to the Syrian government's military and security presence in Lebanon. South Asia
South Asia, and especially Pakistan, is a priority region for counterterrorist financing, due to the presence of al
Qaida and other terrorist groups, porous borders, and cash-based economies that often operate through informal
mechanisms, such as hawala. All countries in the region need to improve their terrorist financing regimes to meet
international standards, including the establishment of functioning Financial Intelligence Units. Both political will
and technical assistance are needed to make this region a more effective partner.
Turning to Pakistan specifically, we welcome the concrete actions it has taken to implement its obligations under UN
Security Council Resolutions, including the freezing of over $10 million of al Qaida assets. Pakistan has also
apprehended terrorists, including Abu Farraj Al Libbi, al Qaida's operational leader. We are encouraged by Pakistan's
concern about the infiltration of terrorist groups into charitable organizations, and would welcome the opportunity to
provide technical assistance to help Pakistan meet international standards on preventing abuse of its non-profit sector.
We have provided Pakistan assistance on drafting an anti-money laundering/ counterterrorist financing (AML/CTF) law
that meets international standards, but this legislation is still awaiting parliamentary consideration. As soon as a law
that meets international standards is enacted, we will be able to accelerate training efforts, including assistance for
the establishment of a Financial Intelligence Unit (FIU). In the absence of an anti-money laundering and
counterterrorism financing law, the State Bank of Pakistan has introduced FATF-compliant regulations in know-your-
customer policy, record retention, due diligence of correspondent banks, and reporting suspicious transactions. Also in
compliance with FATF recommendations, the Securities and Exchange Commission of Pakistan has applied know-your-customer
regulations to stock exchanges, trusts, and other non-bank financial institutions. All settlements exceeding Rs 50,000
($840) must be performed by check or bank draft, as opposed to cash.
Afghanistan recently passed anti-money laundering and counterterrorist financing legislation, and many efforts are
being made to strengthen police and customs forces. However, there remain few resources and little expertise to combat
financial crimes, or to produce meaningful financial intelligence, and they have requested the U.S. for assistance in
building capacity to do so. Arrangements are underway to send an assessment team. The most fundamental obstacles
continue to be legal, cultural and historical factors that many times conflict with more Western-style proposed reforms
to the financial sector generally.
In India, the Prevention of Money Laundering Act (PMLA) became effective on July 1. The Act provides the statutory
basis for the Financial Intelligence Unit (FIU) to perform its functions. It criminalizes money laundering and requires
banks and other financial institutions and intermediaries to report individual transactions valued over $23,000 to the
FIU. Two accounts belonging to terrorist individuals/entities have been identified, but the Government of India (GOI)
has not frozen any assets to date. It is aware of the UN 1267 Committee list, however, and has conducted investigations.
India has indicated that it wants to join FATF. However, at a recent FATF Plenary meeting in Paris, concerns were raised
regarding India's ability to provide effective international cooperation in a timely manner, and to extend mutual legal
assistance. The GOI maintains tight controls over charities, which are required to register with the government. The
November 2004 amendment of the 1967 Unlawful Activities (Prevention) Act criminalized terrorist financing.
Speaking generally, South Asian countries lack sophisticated tools to combat the financing of terrorism. Not one
country in the region is a member of the Egmont Group of countries with operational FIUs, which is unusual given the
large numbers and regional spread of Egmont's membership. Anti-money laundering programs also tend to be absent or not
up to international standards. Nonetheless, there is a degree of interest in all countries of the region, and we have
seen some progress.
Efforts are underway to develop and implement international AML/CTF standards bilaterally and regionally through such
organizations such as the Asia Pacific Group on Money Laundering (APG). Bilaterally the U.S. has conducted training and
technical assistance assessments for most countries in South Asia. We have provided AML/CTF legal drafting assistance,
financial regulatory training, and FIU development support. In Bangladesh we support a Resident Legal Advisor to assist
authorities in drafting and implementing AML/CTF laws as well as providing specialized training for prosecutors and
other law enforcement officials.
Designations and Asset Freezes: Only Part of the Picture The international designations and asset freeze process has
helped us develop and deepen a set of invaluable long-term relationships with our interagency and international
partners. Through this collaborative international effort, we have built cooperation and the political will necessary to
fight terrorism, both through designations and asset freezes, as well as through operational law enforcement actions. As
described above, U.S. Government agencies meet regularly to identify, track and pursue terrorist financing targets and
to determine, on a case-by-case basis, which type of action is most appropriate. Designation for asset freezing should
not come at the expense of taking appropriate law enforcement action. On the contrary, the two approaches frequently
complement each other. There are cases where operational law enforcement action can be initiated quickly to trace,
prosecute and shut down terrorists. In other cases, for instance where long-term investigations are under way, the
better option may be to designate for asset freezing in order to stop the flow of money that might be used to carry out
terrorist activity until law enforcement actions can be taken.
We have used multilateral asset freezes, together with technical assistance and the FATF multilateral standard setting
process, as valuable devices to isolate terrorist financiers, drive them out of the formal financial system, and unite
the international community through collective action. In these cases, designations are preventative, making it harder
for terrorists and their supporters to operate. We continue to work together with our international partners to
strengthen the multilateral designation process. By carefully working with our allies, we seek to build international
consensus, thereby preventing unwanted delays in the process. We urge all foreign governments to fulfill their UN
obligations to freeze assets without delay. In cases where an individual or entity assumes a new name, we initiate
action to designate the alias, thwarting their efforts to simply continue "business as usual" under a new name. These
actions prevent open fundraising, diminish support to illicit charities, and act as an element of diplomacy to
demonstrate international resolve.
In the fight against global terrorism, the Administration must continue to use vigorously all of the tools at its
disposal - including designations/asset freezing, law enforcement/intelligence cooperation, and the establishment and
enforcement of international norms and standards. Given that the money that gets into the hands of terrorists flows
around the world, the only way we will be successful in drying up their financial resources is through continued, active
U.S. engagement with allies, friends, and other countries around the globe. We must continue to broaden and deepen our
efforts worldwide. These efforts have paid off and they will continue to do so.
The Department of State plays a pivotal role in, and adds great value to, this broadening and deepening of
international cooperation. Officers in our embassies and in Washington bring their experience to bear in judging the
best approach to a specific terrorist or group in a specific country or region. Their political, economic and cultural
expertise allows them to weigh the pros and cons of various approaches given the other political and economic dynamics
of the countries whose help we are enlisting in the war against terrorism. There are no "off-the-shelf" answers in this
field. Each case is different, and the State Department is uniquely placed to help weigh options and craft tailor-made
strategies to produce effective action.
Released on July 13, 2005
ENDS