Terrorist Financing
Better Strategic Planning Needed to Coordinate U.S. Efforts to Deliver Counter-Terrorism Financing Training and Technical Assistance Abroad Gao ID: GAO-06-19 October 24, 2005Terrorist groups need significant amounts of money to organize, recruit, train, and equip adherents. U.S. disruption of terrorist financing can raise the costs and risks and impede their success. This report (1) provides an overview of U.S. government efforts to combat terrorist financing abroad and (2) examines U.S. government efforts to coordinate training and technical assistance. We also examined specific accountability issues the Department of the Treasury faces in its efforts to block terrorists' assets held under U.S. jurisdiction.
U.S. efforts to combat terrorist financing abroad include a number of interdependent activities--terrorist designations, intelligence and law enforcement, standard setting, and training and technical assistance. First, the U.S. government designates terrorists and blocks their assets and financial transactions and supports similar efforts of other countries. Second, intelligence and law enforcement efforts include operations, investigations, and exchanging information and evidence with foreign counterparts. Third, U.S. agencies work through the United Nations and the Financial Action Task Force on Money Laundering to help set international standards to counter terrorist financing. Fourth, the U.S. government provides training and technical assistance directly to vulnerable countries and works with its allies to leverage resources. The U.S. government lacks an integrated strategy to coordinate the delivery of counter-terrorism financing training and technical assistance to countries vulnerable to terrorist financing. Specifically, the effort does not have key stakeholder acceptance of roles and procedures, a strategic alignment of resources with needs, or a process to measure performance. First, the Department of Treasury does not accept the Department of State leadership or the State-led Terrorist Financing Working Group's (TFWG) procedures for the delivery of training and technical assistance abroad. While supportive of the Department of State's role as coordinator of TFWG efforts, the Department of Justice officials confirmed that roles and procedures were a matter of disagreement. Second, the U.S. government does not have a clear presentation and objective assessment of its resources and has not strategically aligned them with its needs for counter-terrorist financing training and technical assistance. Third, the U.S. government, including TFWG, lacks a system for measuring performance and incorporating results into its planning efforts. The Treasury faces two accountability issues related to its terrorist asset blocking efforts. First, Treasury's Office of Foreign Assets Control (OFAC) reports on the nature and extent of terrorists' U.S. assets do not provide Congress the ability to assess OFAC's achievements. Second, Treasury lacks meaningful performance measures to assess its terrorist designation and asset blocking efforts. OFAC is in the process of developing more meaningful performance measures aided by its early efforts to develop an OFAC-specific strategic plan. Officials stated that OFAC's new performance measures will be completed by December 1, 2005, and its strategic plan will be completed by January 1, 2006; however, they did not provide us with documentation of milestones or completion dates.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-06-19, Terrorist Financing: Better Strategic Planning Needed to Coordinate U.S. Efforts to Deliver Counter-Terrorism Financing Training and Technical Assistance Abroad
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Report to Congressional Requesters:
October 2005:
TERRORIST FINANCING:
Better Strategic Planning Needed to Coordinate U.S. Efforts to Deliver
Counter-Terrorism Financing Training and Technical Assistance Abroad:
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-06-19]:
GAO Highlights:
Highlights of GAO-06-19, a report to congressional requesters:
Why GAO Did This Study:
Terrorist groups need significant amounts of money to organize,
recruit, train, and equip adherents. U.S. disruption of terrorist
financing can raise the costs and risks and impede their success. This
report (1) provides an overview of U.S. government efforts to combat
terrorist financing abroad and (2) examines U.S. government efforts to
coordinate training and technical assistance. We also examined specific
accountability issues the Department of the Treasury faces in its
efforts to block terrorists‘ assets held under U.S. jurisdiction.
What GAO Found:
U.S. efforts to combat terrorist financing abroad include a number of
interdependent activities”terrorist designations, intelligence and law
enforcement, standard setting, and training and technical assistance.
First, the U.S. government designates terrorists and blocks their
assets and financial transactions and supports similar efforts of other
countries. Second, intelligence and law enforcement efforts include
operations, investigations, and exchanging information and evidence
with foreign counterparts. Third, U.S. agencies work through the United
Nations and the Financial Action Task Force on Money Laundering to help
set international standards to counter terrorist financing. Fourth, the
U.S. government provides training and technical assistance directly to
vulnerable countries and works with its allies to leverage resources.
The U.S. government lacks an integrated strategy to coordinate the
delivery of counter-terrorism financing training and technical
assistance to countries vulnerable to terrorist financing.
Specifically, the effort does not have key stakeholder acceptance of
roles and procedures, a strategic alignment of resources with needs, or
a process to measure performance. First, the Department of Treasury
does not accept the Department of State leadership or the State-led
Terrorist Financing Working Group‘s (TFWG) procedures for the delivery
of training and technical assistance abroad. While supportive of the
Department of State‘s role as coordinator of TFWG efforts, the
Department of Justice officials confirmed that roles and procedures
were a matter of disagreement. Second, the U.S. government does not
have a clear presentation and objective assessment of its resources and
has not strategically aligned them with its needs for counter-terrorist
financing training and technical assistance. Third, the U.S.
government, including TFWG, lacks a system for measuring performance
and incorporating results into its planning efforts.
The Treasury faces two accountability issues related to its terrorist
asset blocking efforts. First, Treasury‘s Office of Foreign Assets
Control (OFAC) reports on the nature and extent of terrorists‘ U.S.
assets do not provide Congress the ability to assess OFAC‘s
achievements. Second, Treasury lacks meaningful performance measures to
assess its terrorist designation and asset blocking efforts. OFAC is in
the process of developing more meaningful performance measures aided by
its early efforts to develop an OFAC-specific strategic plan. Officials
stated that OFAC‘s new performance measures will be completed by
December 1, 2005, and its strategic plan will be completed by January
1, 2006; however, they did not provide us with documentation of
milestones or completion dates.
What GAO Recommends:
GAO recommends 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. Congress should also
consider requiring the Secretaries of State and the Treasury to report
the status of that implementation. State disagreed with our
recommendations for an integrated strategy and Memorandum of Agreement.
Treasury did not directly address these recommendations. While Treasury
did not disagree with implementing an integrated strategic plan, it
limited the plan‘s coverage to priority countries. We make additional
recommendations to Treasury concerning Treasury‘s terrorist asset
blocking efforts with which Treasury did not agree.
www.gao.gov/cgi-bin/getrpt?GAO-06-19.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Loren Yager at (202) 512-
4347 or yagerl@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
U.S. Efforts to Combat Terrorist Financing Abroad Include a Number of
Interdependent Activities:
U.S. Government Lacks Integrated Strategy to Coordinate the Delivery of
Training and Technical Assistance:
Treasury Faces Two Accountability Issues Related to Its Terrorist Asset
Blocking Efforts:
Conclusions:
Recommendations for Executive Action:
Matter for Congressional Consideration:
Agency Comments and Our Evaluation:
Appendixes:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: Key International Counter-Terrorism Financing and Anti-
Money Laundering Efforts:
Appendix III: Terrorist Financing Working Group Membership and Program
Development Process:
TFWG Membership:
TFWG Program Development Process:
Appendix IV: Key U.S. Counter-Terrorism Financing and Anti-Money
Laundering Training and Technical Assistance for Vulnerable Countries:
Appendix V: Comments from the Department of Justice:
GAO Comments:
Appendix VI: Comments from the Department of State:
GAO Comments:
Appendix VII: Comments from the Department of the Treasury:
GAO Comments:
Appendix VIII: GAO Contact and Staff Acknowledgments:
Abbreviations:
ADB: Asian Development Bank:
CTC: Counter-Terrorism Committee:
FATF: Financial Action Task Force:
FinCEN: Financial Crimes Enforcement Network:
FIU: Financial Intelligence Unit:
FSRB: FATF-Style Regional Body:
GPRA: Government Performance and Results Act:
ILEA: International Law Enforcement Academy:
IMF: International Monetary Fund:
NSC: National Security Council:
OFAC: Office of Foreign Assets Control:
OPDAT: Office of Overseas Prosecutorial Development, Assistance and
Training:
OTA: Office of Technical Assistance:
TFFC: Terrorist Financing and Financial Crimes:
TFWG: Terrorist Financing Working Group:
UN: United Nations:
Letter:
October 24, 2005:
The Honorable Charles E. Grassley:
Chairman:
Caucus on International Narcotics Control:
United States Senate:
The Honorable Susan M. Collins:
Chairman:
Committee on Homeland Security and Governmental Affairs:
United States Senate:
The Honorable Richard J. Durbin:
United States Senate:
After the September 11, 2001, attacks, the United States and its allies
quickly recognized the urgent need to detect, dismantle, and deter
terrorist financing networks around the world. Disrupting terrorist
financing can raise the terrorists' costs and risks of gathering and
moving assets and is necessary to impede their ability to carry out
significant operations. Terrorist financiers operate more easily in
countries with systems that enable them to hide their efforts without
difficulty. As the United Nations reports, more than ever before,
security threats are interrelated and a threat to one country is a
threat to all.[Footnote 1] No country by its efforts alone can make
itself invulnerable to today's threats. It is in every country's
interest, accordingly, to cooperate with other countries to address
their most pressing threats, because doing so will maximize the chances
of reciprocal cooperation to address its own threat priorities.
You asked us to address specific U.S. efforts to combat terrorist
financing abroad as a follow-up to our previous work[Footnote 2] on the
nature and extent of terrorists' use of alternative financing
mechanisms.[Footnote 3] In this report, we (1) provide an overview of
U.S. government efforts to combat terrorist financing abroad and (2)
examine U.S. government efforts to coordinate the delivery of training
and technical assistance to vulnerable countries. In addition, you
requested that we examine specific accountability issues the Department
of the Treasury (Treasury) faces in its efforts to block terrorists'
assets held under U.S. jurisdiction.
In conducting our review, we examined documentation and interviewed
officials from U.S. agencies, including the Departments of State, the
Treasury, Justice, Homeland Security, and Defense, as well as from the
intelligence community. We also assessed information from the United
Nations (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.[Footnote 4] At these
locations, we assessed information from government, law enforcement,
nongovernmental organizations, regional organizations, and donor
government officials, as well as U.S. embassy officials. Although we
requested a meeting, we did not obtain access to the National Security
Council (NSC), which is responsible for the overall coordination of the
interagency framework for combating terrorism including the financing
of terrorist operations. However, the U.S. agencies provided the
necessary information that we needed to conduct our work and support
our findings, conclusions, and recommendations. We performed our work
from April 2004 to July 2005 in accordance with generally accepted
government auditing standards. For further details about our scope and
methodology, see appendix I.
Results in Brief:
U.S. government efforts to combat terrorist financing abroad include a
number of interdependent activities--terrorist designations,
intelligence and law enforcement, standards setting, and training and
technical assistance. First, the U.S. government designates terrorists
and blocks their assets and financial transactions and supports similar
efforts of other countries. Second, U.S. intelligence and law
enforcement conduct operations, investigations, and exchange
information and evidence with each other and their respective
counterparts abroad. Third, U.S. agencies work primarily through two
international entities, the UN and the intergovernmental FATF on Money
Laundering, to help set international standards to counter terrorist
financing efforts. Fourth, the U.S. government provides training and
technical assistance directly to vulnerable countries and works with
its allies to leverage resources for those efforts.
The U.S. government lacks an integrated strategy to coordinate the
delivery of counter-terrorism financing training and technical
assistance to countries it deems vulnerable to terrorist financing.
Specifically, the effort does not have key stakeholder acceptance of
roles and procedures, a strategic alignment of resources with needs, or
a process to measure performance. First, Treasury, a key stakeholder,
does not accept the Department of State's (State) position that it
leads all U.S. counter-terrorism financing training and technical
assistance efforts to vulnerable countries. State's position is based
on NSC guidance. Moreover, disagreements continue between some Treasury
and State officials concerning State-led Terrorist Financing Working
Group (TFWG) coordination for the delivery of training and technical
assistance to priority countries--about two dozen of the most
vulnerable countries. While supportive of a State role as coordinator
of TFWG efforts, the Department of Justice (Justice) confirms that
State's position as lead of training and technical assistance to
countries beyond those listed as priority lacks recognition in
practice. Further, Treasury does not agree with the TFWG procedures for
coordinating the delivery of training and technical assistance abroad.
Justice officials noted that having procedures that differ for TFWG
priority countries and other vulnerable countries has created problems.
Second, the U.S. government has not strategically aligned its resources
with its needs to deliver counter-terrorism training and technical
assistance to vulnerable countries. The U.S. government does not have a
clear presentation of what funding is available for counter-terrorism
financing training and technical assistance and TFWG has not assessed
the suitability of available U.S. and international resources. Third,
the U.S. government, including TFWG, does not have a system in place to
measure the performance results of its delivery of training and
technical assistance to vulnerable countries and to incorporate this
information into its planning efforts.
Treasury faces two accountability issues related to its terrorist asset
blocking efforts. First, federal law requires Treasury to provide
annual reports to Congress that describe the nature and extent of the
terrorists' assets held in the United States; however, these reports do
not provide the reader the ability to assess achievements made. These
reports are prepared by Treasury's Office of Foreign Assets Control
(OFAC). Second, Treasury lacks meaningful performance measures to
assess its terrorist designation and asset blocking efforts. While
Treasury has developed some limited performance measures, OFAC
officials acknowledged that the measures could be improved and
contribute to Treasury's overall goal of disrupting and dismantling
terrorist financing networks. OFAC officials said they have initiated
efforts to develop more meaningful performance indicators aided by
efforts to develop an OFAC-specific strategic plan. In Treasury's
technical comments on our draft report, officials stated that they
expect OFAC's new performance measures to be completed by December 1,
2005, and its new strategic plan to be completed by January 1, 2006;
however, they did not provide us with documentation of milestones or a
completion date.
In this report we recommend 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 to coordinate the delivery of training and
technical assistance that includes stakeholder involvement, an
alignment of resources with needs, and a process to measure performance
and use results. We further recommend that the secretaries of State and
of the Treasury enter into a Memorandum of Agreement to ensure a
seamless campaign in providing counter-terrorism financing training and
technical assistance programs to vulnerable countries. We also
recommend that the Secretary of the Treasury provide more complete
information on the nature and extent of asset blocking in the United
States in its annual Terrorist Assets Report to Congress and complete
its efforts to develop an OFAC-specific strategic plan and meaningful
performance measures by January 1, 2006, and December 1, 2005,
respectively, to guide and assess its asset blocking efforts. In
addition, Congress should consider requiring that the Secretary of
State and the Secretary of the Treasury submit an annual report to
Congress on the status of the development and implementation of the
integrated strategic plan and Memorandum of Agreement for the delivery
of training and technical assistance.
State disagreed with our recommendations for the development and
implementation of an integrated strategy and Memorandum of Agreement
concerning the coordination of the delivery of training and technical
assistance, stating that they already have documents that serve as an
integrated strategy and an interagency agreement. Treasury did not
directly address our recommendation for an integrated strategic plan or
a Memorandum of Agreement. Treasury proposed a new title, "Integrated
U.S. Strategic Plan Needed to Improve the Coordination of
Counterterrorism Finance Training and Technical Assistance to Certain
Priority Countries," which suggests agreement with the recommendation,
but limits coverage of the integrated strategic plan to cover certain
priority countries. Further, Justice stated that the fact that it was
not included as an equal partner with State and Treasury in the
recommendation and the Memorandum of Agreement was a critical omission.
We do not agree that the documentation State provided constituted an
integrated strategy because the effort, in practice, does not have key
stakeholder buy-in on roles and practices, a strategic alignment of
resources with needs, or a system to measure performance and use
results and thus, an integrated strategy is still needed. Moreover, we
continue to believe that the recommendation and Memorandum of Agreement
should be directed to the Secretaries of Treasury and State because
these agencies both primarily fund and support these efforts.
Additionally, in response to our recommendation that the Secretary of
the Treasury provide more complete information on the nature and extent
of asset blocking in the United States in its annual Terrorist Assets
Report to Congress, Treasury responded in its technical comments that
we should "instead recommend that Congress consider discontinuing the
requirement that Treasury produce the annual report altogether." We
continue to believe that the reports, with incorporated changes, would
be useful to policy makers and program managers in examining their
overall achievements of U.S. efforts to block terrorists' assets.
Background:
Funds that support terrorist activity may come from illicit activities,
such as counterfeit goods, contraband cigarettes, and illicit drugs,
but are also generated through means such as fundraising by legal non-
profit entities. According to State, it is the terrorists' use of
social and religious organizations and, to a lesser extent, state
sponsorship, which differentiates their funding sources from those of
traditional transnational organized criminal groups. While actual
terrorist operations require only comparatively modest funding,
international terrorist groups need significant amounts of money to
organize, recruit, train, and equip new adherents and to otherwise
support their activities.
Simply, the financing of terrorism is the financial support, in any
form, of terrorism or of those who encourage, plan, or engage in
it.[Footnote 5] Some international experts on money laundering continue
to find that there is little difference in the methods used by
terrorist groups or criminal organizations in attempting conceal their
proceeds by moving them through national and international financial
systems. These experts simply define the term "money laundering" as the
processing of criminal proceeds to disguise their illegal origin in
order to legitimize their ill-gotten gains. Disguising the source of
terrorist financing, regardless of whether the source is of legitimate
or illicit origin, is important to terrorist financiers. If the source
can be concealed, it remains available for future terrorist financing
activities.
The President established a Policy Coordination Committee under the
auspices of NSC to ensure the proper coordination of counter-terrorism
financing activities and information sharing among all agencies
including the departments of Defense, Justice, Homeland Security,
State, and the Treasury, as well as the intelligence and enforcement
community. Treasury's OFAC is the lead U.S. agency for administering
economic sanctions, including blocking the assets of terrorists
designated either by the United States unilaterally, bilaterally, or as
a result of UN Security Council Resolution designations.[Footnote 6]
The international community has acted on many fronts to conduct anti-
money laundering and counter-terrorism financing efforts. For example,
the UN has adopted treaties and conventions that once signed, ratified,
and implemented by member governments have the effect of law and
enhance their ability to combat money laundering and terrorist
financing. FATF, an intergovernmental body, has set internationally
recognized standards for developing anti-money laundering and counter-
terrorism financing regimes and conducting assessments of countries
abilities to meet these standards. In addition, the Egmont Group serves
as an international network fostering improved communication,
information sharing, and training coordination for 101 Financial
Intelligence Units (FIU) worldwide.[Footnote 7] See appendix II for
more information on key international entities and efforts.
Countries vulnerable to terrorist financing activities generally lack
key aspects of an effective counter-terrorism financing regime.
According to State officials, a capable counter-terrorism financing
regime consists of five basic elements: an effective legal framework,
financial regulatory system, FIU, law enforcement capabilities, and
judicial and prosecutorial processes. To strengthen anti-money
laundering and counter-terrorism efforts worldwide, international
entities such as the UN, FATF, World Bank and the IMF, as well as the
U.S. government, agree that each country should implement practices and
adopt laws that are consistent with international standards.[Footnote
8]
U.S. Efforts to Combat Terrorist Financing Abroad Include a Number of
Interdependent Activities:
U.S. government agencies participate in a number of interdependent
efforts to address the transnational challenges posed by terrorist
financing, including terrorist designations, intelligence and law
enforcement, international standard setting, and training and technical
assistance.
U.S. Government Agencies Use Designations to Disrupt Terrorist
Networks:
U.S. agencies participate in global efforts to publicly designate
individuals and groups as terrorists and block access to their assets.
According to Treasury officials, international cooperation to designate
terrorists and block their assets is important because most terrorist
assets are not within U.S. jurisdiction and may cross borders.
According to U.S. government officials, public designations discourage
further financial support and encourage other governments to more
effectively monitor the activities of the designated individual or
organization. Importantly, designations may lead to the blocking of
terrorist assets, thereby impeding terrorists' ability to raise and
move funds and possibly forcing terrorist to use more costly, less
efficient, more transparent, and less reliable means of financing.
U.S. agencies led by State have worked with the UN to develop and
support UN Security Council resolutions to freeze the assets of
designated terrorists. For example, in October 1999, the Security
Council adopted UN Security Council Resolution 1267, which called on
all member states to freeze the assets of the Taliban, and in December
2000, the Security Council adopted Resolution 1333, imposing targeted
sanctions against Osama bin Laden and al Qaeda. Then, in response to
the attacks of September 11, 2001, the UN Security Council adopted
Resolution 1373, which required all UN member states to freeze funds
and other financial assets or economic resources of persons who commit
or attempt to commit, participate in, or facilitate terrorist acts.
Later in January 2002 the UN Security Council adopted Resolution 1390,
which consolidated the sanctions contained in Resolutions 1267 and 1333
against the Taliban, Osama bin Laden, and al Qaeda. In July 2005, the
Security Council adopted Resolution 1617, which extends sanctions
against al Qaeda and the Taliban and strengthens previous related
resolutions. The UN has listed over 300 individuals and over 100
entities for worldwide asset blocks. Additionally, State's Bureau of
International Organization Affairs ensures designations related to al
Qaeda, the Taliban, or Osama bin Laden are made worldwide obligations
through the UN Security Council Resolution 1267 Committee and helped to
craft and aided the adoption of UN Security Council Resolution 1373 and
assisted in the creation of the UN Counterterrorism Committee to
oversee its implementation. The United States has also participated in
bilateral efforts to designate terrorists. For example, as of July
2005, the United States and Saudi Arabia jointly designated over a
dozen Saudi-related entities and multiple individuals as terrorists or
terrorist supporters, according to State.
U.S. agencies including the Departments of Homeland Security (Homeland
Security), Justice, State, and Treasury, and other law enforcement and
intelligence agencies have implemented an interagency process to
coordinate designating terrorists and blocking their assets. For
example, State's Economic Bureau coordinates policy implementation at
the working level, largely through the network of Terrorism Finance
Coordinating Officers located at embassies worldwide. Through this
interagency coordination, the agencies work together to develop
adequate evidence to target individuals, groups, or other entities
suspected of terrorism or terrorist financing. As the lead agency for
the blocking of assets of international terrorist organizations and
terrorism-supporting countries, Treasury's OFAC compiles the evidence
needed to support terrorist designations conducted under the Secretary
of the Treasury's authority. State's Office of the Coordinator for
Counterterrorism follows the same process for terrorist designations
conducted under the Secretary of State's authority.[Footnote 9] State's
Bureau of International Organization Affairs may present this evidence
to the UN for consideration by its members. According to a senior State
official, the agencies work together on a regular basis to examine and
evaluate new names and targets for possible designation and asset
blocking and to consider other actions such as diplomatic initiatives
with other governments and exchanging information on law enforcement
and intelligence efforts.[Footnote 10]
U.S. Government Agencies Conduct Intelligence and Law Enforcement
Activities Across Borders:
The U.S. strategy to combat terrorist financing abroad includes law
enforcement techniques and intelligence operations aimed at identifying
criminals and terrorist financiers and their networks across borders in
order to disrupt and dismantle their organizations. Such efforts
include intelligence gathering, investigations, diplomatic actions,
sharing information and evidence, apprehending suspects, criminal
prosecutions, asset forfeiture,[Footnote 11] and other actions designed
to identify and disrupt the flow of terrorist financing. According to
State, in order to achieve results, the intelligence community, law
enforcement, and the diplomatic corps must develop and exploit
investigative leads, employ advanced law enforcement techniques, and
increase cooperation between domestic and foreign financial
investigators and prosecutors.
U.S. intelligence and law enforcement agencies work together and with
foreign counterparts abroad, sometimes employing interagency or
intergovernmental investigative taskforces.[Footnote 12] U.S. agencies
work domestically and through their embassy attachés or officials or
send agents on temporary duty to work with their foreign counterparts
on matters of terrorist financing, including investigations. The
Federal Bureau of Investigation is the lead domestic law enforcement
agency on counter-terrorism financing and makes extensive contributions
to law enforcement efforts abroad, including through their legal
attachés. Homeland Security's Bureau of Immigration and Customs
Enforcement attachés and agents conduct work in trade-based money
laundering and transporting of cash across borders. The Internal
Revenue Service's Criminal Investigation Division has an expertise in
nonprofit organizations. The Drug Enforcement Administration focuses on
the narcotics trafficking nexus. Moreover, Treasury's Financial Crimes
Enforcement Network (FinCEN) is the U.S. government's FIU and, as such,
serves as the U.S. government's central point for the collection,
analysis, and dissemination of financial intelligence to authorized
domestic and international law enforcement and other authorities.
Financial intelligence is sent through secured lines among the FIUs
belonging to the Egmont Group and shared with law enforcement as part
of these investigations.
U.S. Government Agencies Are Active Participants in International
Standards Setting Efforts:
The U.S. government has taken an active role in the development and
implementation of international standards to combat terrorist
financing. The UN conventions and resolutions and FATF recommendations
on money laundering and terrorist financing have set the international
standards for countries to develop the legal frameworks, financial
regulation, financial intelligence unit, law enforcement, and
judicial/prosecutorial elements of an effective counter-terrorist
financing regime. Importantly, international cooperation is a
cornerstone of these international standards.
The United States has signed each of the relevant UN conventions and
implemented its obligations pursuant to UN Security Council Resolutions
related to anti-money laundering and counter-terrorism financing.
According to State and Justice officials, they have provided training
on implementing the conventions, and State officials have drafted UN
Security Council Resolutions concerning terrorist financing. For
example, according to State, officials from Treasury and State met with
the UN Security Council Resolution 1267 Committee in January 2005 to
detail U.S. implementation of the resolution's asset freeze, travel
ban, and arms embargo provisions and proposed several ideas aimed at
reinforcing current sanctions including enhancing the sanctions list,
promoting international standards, and improving bilateral and
multilateral cooperation.
The U.S. government also plays a major role within FATF to draft and
support international standards to combat terrorist financing.
Treasury's Office of Terrorism and Financial Intelligence chairs the
U.S. delegation to the FATF and has chaired or co-chaired several FATF
working groups, such as the FATF Working Group on International
Financial Institution Issues and the FATF Working Group on Terrorist
Financing. Treasury also develops U.S. positions, represents the United
States at FATF meetings, and implements actions domestically to meet
the U.S. commitment to the FATF. Other components within Treasury, such
as FinCEN, and other U.S. government agencies, including Homeland
Security, Justice, and State, and the federal financial regulators, are
also represented in the U.S. delegation to FATF. For example, according
to department officials, the Department of Justice provided the initial
draft for the original eight FATF special recommendations on terrorist
financing. Additionally, Homeland Security gave significant input into
Special Recommendation IX on Cash Couriers due to the department's
expertise on detection of criminals' cross-border movements of cash.
Moreover, the U.S. government supports efforts to ensure that countries
take steps to meet FATF standards. As a member of FATF, the United
States participates in mutual evaluations in which each member's
compliance with the FATF recommendations is examined and assessed by
experts from other member countries.[Footnote 13] Treasury also leads
U.S. delegations to FATF-style regional bodies to assist their efforts
to support implementation of FATF recommendations and conduct mutual
evaluations.
U.S. Government Agencies Provide Training and Technical Assistance to
Vulnerable Countries:
The U.S. strategy to combat terrorist financing abroad includes efforts
to provide training and technical assistance to countries that it deems
vulnerable to terrorist financing and focuses on the five basic
elements of an effective anti-money laundering/counter-terrorism
financing regime (legal framework, financial regulation, FIU, law
enforcement, and judicial and prosecutorial processes). According to
State, its Office of the Coordinator for Counterterrorism is charged
with directing, managing, and coordinating all U.S. government
agencies' efforts to develop and provide counter-terrorism financing
programs. The NSC established the State-led interagency TFWG to
coordinate the delivery of training and technical assistance to the
countries most vulnerable to terrorist financing.[Footnote 14] These
countries are known as priority countries of which there are currently
about two dozen.[Footnote 15] According to State's Office of the
Coordinator for Counterterrorism, foreign allies inundated the U.S.
government with requests for assistance; therefore, TFWG developed a
process to prioritize the use of limited financial and human resources.
Although other vulnerable countries may be assisted through other U.S.
government programs as well as through TFWG, according to State, based
on NSC guidance, overall coordination is to take place through the TFWG
process. (See appendix III for TFWG membership and process.) TFWG
schedules assessment trips, reviews assessment reports, evaluates
training proposals, and assigns resources for training. According to
State officials, the U.S. government has conducted 19 needs assessment
missions and provided training and technical assistance in at least one
of the five areas of an anti-money laundering/counter-terrorist
financing regime to over 20 countries.
U.S. offices and bureaus, primarily within the departments of the
Treasury, Justice, Homeland Security, and State, and the federal
financial regulators provide training and technical assistance to
countries requesting assistance through various programs using a
variety of methods primarily funded by State and Treasury. Methods
include training 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 for a range of subject areas related to building effective
counter-terrorism and anti-money laundering regimes. For example,
Justice provides technical assistance on drafting legislation that
criminalizes terrorist financing and anti-money laundering. Treasury's
Office of Technical Assistance (OTA) provides assistance to strengthen
the financial regulatory regimes of countries. In addition, Treasury's
FinCEN provides training and technical assistance including assistance
in the development of FIUs, information technology assessments, and
specialized analytical software and analyst training for foreign FIUs.
(See appendix IV for key U.S. counter-terrorism financing and anti-
money laundering training and assistance for vulnerable countries.)
According to State, the U.S. government has also worked with
international donors and organizations to leverage resources to build
counter-terrorism financing regimes in vulnerable countries. According
to State officials, they have worked with the United Kingdom,
Australia, Japan, the European Union, the Organization of American
States, the Asian Development Bank (ADB), IMF, and the World Bank on
regional and country-specific projects. According to State, they have
also funded the UN Global Program Against Money Laundering to place a
mentor in one country for a year to assist with further development of
its FIU. Similarly, Treasury officials said the department funded a
resident advisor to the ADB as part of the Cooperation Fund for the
Regional Trade and Financial Security Initiative. Treasury officials
also state they have coordinated bilateral and international technical
assistance with the FATF and the international financial institutions,
such as the World Bank and IMF, which encompassed the drafting of legal
frameworks, building necessary regulatory and institutional systems,
and developing human expertise. According to State officials, efforts
to share identified priorities and coordinate assistance by the major
donor countries took a step forward at the June 2003 G-8 Summit with
the establishment of the Counter-Terrorism Action Group, of which the
United States is a member. The Counter-Terrorism Action Group has
partnered with the FATF, providing that organization with a list of
countries to which its members are interested in providing counter-
terrorism financing assistance, so that the FATF could assess their
technical assistance needs. FATF delivered those assessments to the
Counter-Terrorism Action Group in 2004 and, according to State
officials, the donors are now beginning to follow through with
assistance programs.
U.S. Government Lacks Integrated Strategy to Coordinate the Delivery of
Training and Technical Assistance:
The U.S. government lacks an integrated strategy to coordinate the
delivery of counter-terrorism financing training and technical
assistance to countries vulnerable to terrorist financing. The effort
does not have key stakeholder buy-in on roles and practices, a
strategic alignment of resources with needs, or a process to measure
and improve performance. As a result, the effort lacks effective
leadership and consistent practices, an optimal match of resources to
needs, and feedback on performance into the decision-making process.
U.S. Effort Lacks Buy-in from Key Stakeholder on Roles and Procedures:
U.S. interagency efforts to coordinate the delivery of counter-
terrorism financing training and technical assistance lack key
stakeholder involvement and acceptance of roles and procedures. As a
result, the overall effort lacks effective leadership, which leads to
less than optimal delivery of training and technical assistance to
vulnerable countries, according to agency officials. We have previously
found that building a collaborative management structure across
participating organizations is an essential foundation for ensuring
effective collaboration; and strong leadership is critical to the
success of intergovernmental initiatives.[Footnote 16] Moreover,
involvement by leaders from all levels is important for maintaining
commitment.
Treasury, a key stakeholder, does not accept State's position that
State leads all U.S. counter-terrorism financing training and technical
assistance efforts and disagreements continue between some Treasury and
State officials concerning current TFWG coordination efforts. According
to State officials, State leads the U.S. effort to provide counter-
terrorism financing training and technical assistance to all countries
the U.S. government deems vulnerable to terrorist financing. State
bases its position on classified NSC documents focused primarily on
TFWG, State documents, and authorizing legislation. Treasury, an agency
that also funds as well as provides training and technical assistance,
asserts that State overstates its role; according to Treasury, State's
role is limited to coordinating other U.S. agencies' provision of
counter-terrorist financing training and technical assistance in
commonly agreed upon TFWG priority countries, and that there are
numerous other efforts outside of States' purview.[Footnote 17]
Justice, an agency that provides training and technical assistance and
receives funding from State,[Footnote 18] states that it respects the
role that State plays as the TFWG chairman and coordinator and states
that all counter-terrorism financing training and technical assistance
efforts should be brought under the TFWG decision-making process. While
supportive, Justice's statement demonstrates that the span of State's
role lacks clarity and recognition in practice. Two senior Treasury OTA
officials said they strongly disagree with the degree of control State
asserts over decisions at the State-led TFWG regarding the delivery of
training and technical assistance. According to a Treasury Terrorist
Financing and Financial Crimes (TFFC) Senior Policy Advisor who attends
TFWG, in practice the TFWG process is broken and State creates
obstacles rather than coordinates efforts. According to officials from
State's Office of the Coordinator for Counterterrorism, who chair TFWG,
the only problems are the lack of Treasury's TFFC and OTA officials'
acceptance of State's leadership over counter-terrorism financing
efforts and separate OTA funding.
Legislation authorizing the Departments of State and Treasury to
conduct counter-terrorism financing training and technical assistance
activities does not explicitly designate a lead agency. State derives
its authority for these activities from the International Security and
Development Cooperation Act of 1985,[Footnote 19] which mandates that
the Secretary of State "coordinate" all international counter-terrorism
assistance. Treasury's primary authority for its assistance programs
derives from a 1998 amendment to the Foreign Assistance Act of
1961,[Footnote 20] which authorized the Secretary of the Treasury,
after consultation with the Secretary of State and the Administrator of
the U.S. Agency for International Development, to establish a program
to provide economic and financial technical assistance to foreign
governments and foreign central banks. This provision further mandates
that State provide foreign policy guidance to the Secretary of the
Treasury to ensure that the program is effectively integrated into the
foreign policy of the United States.
State and Treasury officials also disagree on procedures and practices
for the delivery of counter-terrorism financing 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 were only pertinent to the
TFWG priority countries and that there is no formal mandate or process
to provide technical assistance to countries outside the priority list.
Moreover, Justice officials told us that having procedures and
practices for TFWG priority countries that differ from those for other
vulnerable countries creates problems. This issue is further
complicated by the lack of consistent and clear delineation between the
countries covered by TFWG and other vulnerable countries also receiving
counter-terrorism financing and anti-money laundering assistance funded
through State and Treasury.[Footnote 21] Treasury officials told us
that TFWG procedures and practices are overly structured and
impractical and have not been updated to incorporate stakeholder
concerns and that the overall process does not function as it should.
State and Treasury officials cited numerous examples of disagreements
on procedures and practices. For example:
* State and Treasury officials disagree on the use of OTA funding and
contractors. According to Treasury officials, OTA funding should
primarily be used to support intermittent and long-term resident
advisors, who are U.S. contractors, to provide technical
assistance.[Footnote 22] According to State officials, OTA should
supplement State's program, which primarily funds current employees of
other U.S. agencies.
* State, Justice, and Treasury officials disagree on whether it is
appropriate for U.S. contractors to provide assistance in legislative
drafting efforts on anti-money laundering and counter-terrorism
financing laws. State officials cited NSC guidance that current Justice
employees should be primarily responsible for working with foreign
countries to assist in drafting such laws and voiced strong resistance
to use of contractors. Justice officials strongly stated that
contractors should not assist in drafting laws and gave several
examples of past problems when USAID and OTA contractor assistance led
to problems with the development of foreign laws. In two examples,
Justice officials stated that USAID and OTA contractor work did not
result in laws meeting FATF standards. In another example, Justice
officials reported that a USAID contractor assisted in drafting an anti-
money laundering law that had substantial deficiencies and as a result
Justice officials had to take over the drafting process. According to
OTA officials, their contractors provide assistance in drafting laws in
non-priority countries and OTA makes drafts available to Justice and
other U.S. agencies for review and comment and ultimately the host
country itself is responsible for final passage of a law that meets
international standards.[Footnote 23]
* Treasury and State officials disagree on the use of confidentiality
agreements[Footnote 24] between contractors and the foreign officials
they advise. State officials said OTA's use of confidentiality
agreements impedes U.S. interagency coordination. State officials said
the issue created a coordination problem in one country because a
poorly written draft law could not be shared with other U.S. agencies
for review and resulted in the development of an ineffective anti-money
laundering law. Moreover, State officials said the continued practice
could present future challenges. However, according to Treasury
officials, this was an isolated case involving a problem with the
contract and they said they have taken procedural steps to ensure the
error is not repeated.
* State and Treasury officials disagree on the procedures for
conducting assessments of country's needs for training and technical
assistance. Moreover, Treasury stated that their major concern is with
State's coordination process for the delivery and timing of assistance.
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.[Footnote 25] This is
complicated when a vulnerable country becomes a priority country. For
example, in November 2004 Treasury conducted an OTA financial
assessment in a nonpriority frontline country and subsequently reached
agreement with that country's central bank minister to put a resident
advisor in place to set up a FIU.[Footnote 26] However, in May 2005,
State officials denied clearance for Treasury official's visit to the
country, which has created a delay of 2.5 months (as of the end of July
2005). Treasury officials provided documentation to show that State was
aware of their intention to visit the country in November 2004 to
determine counter-terrorism and financial intelligence technical
assistance needs, the official leading the segment of work was part of
a larger on-going OTA effort in country, and that Treasury kept TFWG
informed of the results of OTA's work and continuing efforts. State
officials expressed concern that the country had recently become a
priority country. According to State TFWG officials, Treasury work
needed to be delayed until a TFWG assessment could be completed.
However, the U.S. embassy requested that Treasury proceed with its
placement of a resident advisor and that the TFWG assessment be
delayed.
U.S. Effort Does Not Strategically Align Resources with Need:
The U.S. government does not strategically align its resources with its
mission to deliver counter-terrorism financing training and technical
assistance. For strategic planning to be a dynamic and inclusive
process, alignment of resources is a critical element.[Footnote 27]
However, the U.S. government has no clear presentation of its available
resources. Further, neither the U.S. government nor TFWG has made a
systematic and objective assessment of the full range of available U.S.
and potential international resources. As a result, decision-makers do
not know the full range of resources available to match to the needs
they have identified in priority countries and to determine the best
match of remaining resources to needs for other vulnerable countries.
U.S. government does not have clear presentation of budget resources
available:
Because funding is embedded with anti-money laundering and other
programs, the U.S. government does not have a clear presentation of the
budget resources that the departments of State and the Treasury
allocate for training and technical assistance to counter terrorist
financing. State and Treasury receive separate appropriations that can
be used for training and technical assistance either by the agencies
themselves, by funding other agencies, or by funding contractors. State
primarily transmits its training and technical assistance funds to
other agencies while Treasury primarily employs short and long term
advisors through personal service contracts.[Footnote 28] Although
various officials told us that funding for counter-terrorism financing
training and technical assistance is insufficient, the lack of a clear
presentation of available budget resources makes it difficult for
decision-makers to determine the actual amount allocated to these
efforts.[Footnote 29]
State officials told us that they have two primary funding sources for
State counter-terrorism financing training and technical assistance
programs:
* Non-Proliferation, Anti-Terrorism, Demining, and Related Programs
funding, which State's Office of the Coordinator for Counterterrorism
uses to provide counter-terrorism financing training and technical
assistance to TFWG countries. Based on our analysis of State records,
budget authority for this account included $17.5 million for counter-
terrorism financing training and technical assistance for fiscal years
2002 to 2005.[Footnote 30]
* International Narcotics Control and Law Enforcement funding, which
State's Bureau of International Narcotics Control and Law Enforcement
uses to provide counter-terrorism financing and anti-money laundering
training and technical assistance to a wide range of countries,
including seven priority countries between fiscal years 2002 and 2005,
as well to provide general support to multilateral and regional
programs. Based on our analysis of State records, budget authority for
this account included about $9.3 million for anti-money laundering,
counter-terrorism financing, and related multilateral and regional
activities for fiscal years 2002-2005.[Footnote 31]
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.[Footnote 32]
Treasury officials told us that OTA's counter-terrorism financing
technical assistance is funded through its Financial Enforcement
program. Based on our analysis of Treasury records, Treasury OTA
received budget authority totaling about $30.3 million for all
financial enforcement programs for fiscal years 2002 to 2005. Counter-
terrorism financing technical assistance and training funding is
embedded within this program and cannot be segregated from anti-money
laundering and other anti-financial crime technical assistance. One OTA
official told us that as much as one third of the funds may be spent on
programs countering financial crimes other than terrorist financing in
any given year.
U.S. government does not have a systematic and objective assessment of
suitability of available U.S. resources to meet needs:
The U.S. government, including the TFWG, has not made a systematic and
objective assessment of the suitability of available resources.
According to State and Treasury officials, no systematic analysis has
been done to evaluate the effectiveness of contractors and current
employees in delivering various types of counter-terrorism training and
technical assistance. Decisions at TFWG appear to be made based on
anecdotal information rather than transparent and systematic
assessments of resources. According to the State Performance and
Accountability Report for fiscal year 2004, a shortage of anti-money
laundering experts continues to create bottlenecks in meeting
assistance needs of requesting nations, including priority countries.
State co-chairs of TFWG repeated this concern to us. According to State
officials, U.S. technical experts are particularly stretched because of
their frequent need to split their time between assessment, training,
and investigative missions. Moreover, officials from State's Office of
the Coordinator for Counterterrorism cited the lack of available staff
as a reason for their slow start in disbursing funding at TFWG's
inception.[Footnote 33]
Treasury agrees with State that there may be a shortage of anti-money
laundering experts in the U.S. government agencies who are available to
provide technical assistance in foreign countries, however, according
to Treasury there is not a shortage of U.S. experts who are recent
retirees from the same U.S. government agencies. According to OTA
officials, OTA can provide contractors, who are primarily recently
retired U.S. government employees with years of experience from the
same agencies that provide training to priority countries through State
funding.[Footnote 34] However, State officials stated strong opinions
that current U.S. government employees are better qualified to provide
counter-terrorism financing training and assistance than contractors.
State added that it is TFWG's policy that current U.S. government
experts should be used whenever possible, and that, when they are not
available, the use of contractors in those instances should be
coordinated with the expert agency or office. State officials cited
several examples of priority and non-priority countries in which they
felt that the work of OTA's resident advisors did not result in
improvements. However, State officials praised the work of one OTA
resident advisor in a priority country as a best practice, and other
agency and foreign officials supported this view. Further, one State
official commended the quality of OTA's law enforcement technical
assistance. Nonetheless, State officials repeatedly stated that they
need OTA funding and not OTA-contracted staff to meet current and
future needs.[Footnote 35]
A senior OTA official said that OTA has sought actively to provide
programs in more priority countries, but State, as chair of the TFWG,
has not supported their efforts. Specifically, as a portion of funds
that OTA has obligated for financial enforcement related assistance
between fiscal years 2002 and 2005, OTA has obligated approximately 11
percent to priority countries.[Footnote 36] State officials said that
they welcomed more OTA participation in priority countries as part of
the mix of applicable resources; however, they questioned whether OTA
consistently provides high-quality assistance. Without a systematic
assessment of the suitability of resources, the decision-makers do not
have good information to consider when determining the best mix of
government employees and contractors to meet needs.
TFWG has not made a systematic and objective assessment of potential
international resources to meet needs:
TFWG has a stated goal to encourage allies and international entities
to contribute resources to help build the counter-terrorism financing
capabilities of vulnerable countries and coordinate training and
technical assistance activities, but it has not developed a specific
strategy to do so. No one office or organization has systematically
consolidated and synthesized available information on the counter-
terrorism financing training and technical assistance activities of
other countries and international entities and integrated this
information into its decision-making process. State and Treasury
officials stated that instead they have an ad hoc approach to working
with allies and international entities on resource sharing for training
and technical assistance. Resource sharing is not considered a priority
at TFWG meetings because U.S. officials state that interagency issues
take higher priority and little time is left to discuss international
activities. At one TFWG meeting, U.S. agency officials discovered that
different countries and organizations were putting resources into a
priority country without any central coordination. TFWG found that
Australia was already providing assistance to the FIU in this priority
country and cancelled the assistance it was planning to provide in this
area. Without a systematic way to consolidate, synthesize, and
integrate information about international activities 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.
U.S. Government Lacks System to Measure Performance and Incorporate
Results:
The U.S. government, including TFWG, does not have a system in place to
measure the performance results of its efforts to deliver training and
technical assistance and to incorporate this information into
integrated planning efforts. Without such a system the U.S. government
cannot ensure that its efforts are on track. In August 2004, we found
no system in place to measure the performance of U.S. training and
technical assistance to combat terrorist financing. According to an
official from Justice's Office of Overseas Prosecutorial Development,
Assistance and Training (OPDAT), an interagency committee led by OPDAT
was set up to develop a system to measure results. In November 2004,
OPDAT had an intern set up a database to track training and technical
assistance provided through TFWG and related assistance results for
priority countries. 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.[Footnote 37]
OPDAT asked agencies to provide statistics on programs, funding, and
other information, including responding to questions concerning results
by function which 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, little progress has been made in further development of the
performance measures as the responsible OPDAT official told us they
were waiting to hire the next intern to input the data. As of July
2005, a year later, at our exit meetings with OPDAT and the State TFWG
chairs, OPDAT was still waiting for an intern to be hired to complete
the project. Further, OPDAT and State officials confirmed that the
system had not yet been approved or implemented by TFWG and, therefore,
TFWG did not have a system in place to measure the performance results
of its training and technical assistance efforts and incorporate this
information into its planning.
Treasury Faces Two Accountability Issues Related to Its Terrorist Asset
Blocking Efforts:
Treasury faces two accountability issues related to its terrorist asset
blocking efforts. First, Treasury's OFAC reports on the nature and
extent of terrorists' U.S. assets do not provide Congress the ability
to assess OFAC's achievements. Second, Treasury lacks meaningful
performance measures to assess its terrorist designation and asset
blocking efforts. While Treasury has developed some limited performance
measures, OFAC officials acknowledged that the measures could be
improved and are in the process of developing more meaningful
performance measures aided by the development of an OFAC-specific
strategic plan.
Treasury Reports Do Not Provide a Clear Explanation of the Nature and
Extent of Asset Blocking:
Treasury's annual reports to Congress on terrorists' assets do not
provide a clear description of the nature and extent of terrorists'
assets held in the United States. Federal law 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."[Footnote 38] Each year Treasury's OFAC provides Congress
with a Terrorist Assets Report that offers a year-end snapshot of
dollar amounts held in U.S. jurisdiction for two types of entities:
international terrorists and terrorist organizations and terrorism-
supporting governments and regimes. In 2004 OFAC reported that the
United States blocked almost $10 million in assets belonging to seven
international terrorist organizations and related designees.[Footnote
39] 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.[Footnote 40]
While each annual report provides year-end statistics for each of the
different entities, they do not provide a clear description of the
nature and extent of assets held in the United States.[Footnote 41] The
reports do not make a comparison of blocked assets over the years or
offer explanations for many of the significant shifts between
years.[Footnote 42] For example, the 2004 report stated that the United
States held $3.9 million in al Qaeda assets, but it did not state that
this represented a 400 percent increase in the value of al Qaeda assets
held by the United State in 2003 or offer an explanation for this
increase. In addition, the reports for years 2000 to 2004 offer no
explanation for the decline in the value of U.S.-held Iranian
government assets, which decreased from $347.5 million in 2000 to $82
million in 2004. While the 2000 report showed that the U.S. blocked
$283,000 of Hizballah assets, future reports did not name Hizballah
again or explain the status of these blocked assets. Senior OFAC
officials acknowledge that the Terrorist Asset Reports do not provide a
clear description of the nature and extent of assets blocked and is not
useful to assessing progress on asset blocking.
Treasury's Performance Measures Do Not Adequately Assess Terrorist
Designation and Asset Blocking Efforts:
Treasury lacks effective performance measures to assess its terrorist
designation and asset blocking efforts and demonstrate how these
efforts contribute to Treasury's goals of disrupting and dismantling
terrorist financial infrastructures and executing the nation's
financial sanctions policies. Among the performance measures in
Treasury's 2004 Performance and Accountability Report that are related
to designations and asset blocking are:
* An increase in the number of terrorist finance designations for which
other countries join the United States,
* An increase in the number of drug trafficking and terrorist-related
financial sanctions targets identified and made public,[Footnote 43]
and:
* An estimated number of sanctioned entities no longer receiving funds
from the United States.[Footnote 44]
Treasury officials recognize that these measures do not adequately
assess progress made in designating terrorists and blocking their
assets. In addition, they note that these measures do not help assess
how efforts to designate terrorists and block their assets contribute
to Treasury's overall goals of disrupting and dismantling terrorists'
financial infrastructure and executing the nation's financial sanctions
policies. First, these measures 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, though OFAC
officials acknowledged that they could have reported the data
separately. Second, Treasury officials said that progress on asset
blocking cannot simply be measured by totaling an amount of blocked
assets at the end of the year, as the amounts may vary over the year as
assets are blocked and unblocked. Third, Treasury has not developed
measures to track other activities and benefits related to terrorist
designations and asset blocking. For example, according to Treasury
officials, Treasury's underlying research to identify terrorist
entities and their support systems is used to aid U.S. financial
regulators, law enforcement, and other officials. However, Treasury
does not have measures to track the use of this research when used for
other agency activities, such as law enforcement investigations.
Treasury officials also stated that terrorist designations have a
deterrent value by discouraging further financial support. Measuring
effectiveness in terms of deterrence can be very difficult, in part
because the direct impact on unlawful activity is unknown, and in part
because precise metrics are hard to develop for illegal and clandestine
activities. According to Treasury officials, measuring effectiveness
can also be difficult because many of these efforts run across U.S.
government agencies and foreign governments and are highly sensitive.
Treasury's annual report and strategic plan, however, do not address
the deterrent value of designations or discuss the difficulties in
measuring its effectiveness. According to the Government Performance
and Results Act (GPRA) of 1993, 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.[Footnote 45]
OFAC officials told us that they are in the process of developing
better measures for assessing its efforts related to designations and
asset blocking (both quantitative and qualitative) and achievements
made. In addition, OFAC officials are in the process of developing a
strategic plan to guide OFAC's efforts. This strategic planning effort
will help OFAC develop measures to assess how their activities,
including terrorist designations and asset blocking, contribute to
Treasury's goals of disrupting and dismantling the financial
infrastructure of terrorists and executing the nation's financial
sanctions policies.[Footnote 46] According to GPRA, executive agency
strategic plans should include a comprehensive mission statement, a set
of general goals and objectives and an explanation of how they are to
be achieved, and a description of how performance goals and measures
are related to the general goals and objectives of the program. OFAC
officials said they have initiated efforts to develop an OFAC-specific
strategic plan and performance measures. In their technical comments in
response to our draft report, officials stated that the new performance
measures will relate to OFAC's research, outreach, and sanctions
administration. Additionally, officials stated that they expect OFAC's
new performance measures to be completed by December 1, 2005, and its
new strategic plan to be completed by January 1, 2006. However, OFAC
officials did not provide us with documentation to demonstrate that
they have established milestones or a completion date to accomplish
these projects.
Conclusions:
Without a strategy that integrates the funding and delivery of training
and technical assistance by State and Treasury's OTA, the U.S.
government will not maximize the use of its resources in the fight
against terrorist financing. Meanwhile, due to disagreements over
leadership and procedures, some energy and talent of staff are wasted
trying to resolve interagency disputes. By making decisions based on
anecdotal and informal information rather than transparent and
systematic assessments, managers cannot effectively address problems
before they grow and become crises. Moreover, given the scarce
expertise available to address counter-terrorism financing, by not
focusing efforts on how all available U.S. and international resources
can be integrated into a U.S. strategy the U.S. government may miss
opportunities to leverage resources. Finally, without dedicating
resources to complete a performance measurement system, the State-led
TFWG effort does not have the information needed for optimal
coordination and planning.
The lack of accountability for Treasury's designations and asset
blocking program creates uncertainty about the department's progress
and achievements. U.S. officials with oversight responsibilities need
meaningful and relevant information to ascertain the progress,
achievements, and weaknesses of U.S. efforts to designate terrorists
and dismantle their financial networks as well as hold managers
accountable. Meaningful information may also help these officials
understand the importance of asset blocking in the overall U.S. effort
to combat terrorist financing as well as make resource allocation
decisions across programs. The development of a strategic plan for OFAC
could help facilitate the development of meaningful performance
measures.
Recommendations for Executive Action:
To ensure that U.S. government interagency efforts to provide counter-
terrorism financing training and technical assistance are integrated
and efficient, particularly with respect to priority countries, we
recommend 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 does the following:
* designates leadership and provides for stakeholder involvement;
* includes a systematic and transparent assessment of U.S. government
resources;
* delineates a method for aligning the resources of relevant U.S.
agencies to support the mission; and:
* provides processes and resources for measuring and monitoring
results, identifying gaps, and revising strategies accordingly.
To ensure a seamless campaign in providing counter-terrorism financing
training and technical assistance programs to vulnerable countries, we
recommend 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. The agreement
should specify:
* the roles of each department, bureau, and office with respect to
conducting needs assessments and delivering training and technical
assistance;
* methods to resolve disputes concerning OTA's use of confidentiality
agreements in its contracts when providing counter-terrorism financing
and anti-money laundering assistance; and:
* coordination of funding and resources for counter-terrorism financing
and anti-money laundering training and technical assistance.
To ensure that policy makers and program managers are able to examine
the overall achievements of U.S. efforts to block terrorists' assets,
we also recommend that the Secretary of the Treasury provide in its
annual Terrorist Assets Report to Congress more complete information on
the nature and extent of asset blocking in the United States.
Specifically, the report should include such information as the
differences in amounts blocked between the years, when and why assets
were unfrozen, the achievements and obstacles faced by the U.S.
government, and a classified annex if necessary. In addition, as part
of the Treasury's ongoing strategic planning efforts, we recommend that
the Secretary of the Treasury complete efforts to develop an OFAC-
specific strategic plan and meaningful performance measures by January
1, 2006, and December 1, 2005 respectively, to guide and assess its
asset blocking efforts.
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 in obtaining a systematic assessment of U.S.
resources dedicated to this endeavor, Congress should consider
requiring the Secretary of State and the Secretary of the Treasury to
submit an annual report to Congress on the status of the development
and implementation of the integrated strategic plan and Memorandum of
Agreement.
Agency Comments and Our Evaluation:
We provided draft copies of this report to the Departments of Defense,
Homeland Security, Justice, State, and Treasury for review. We received
comments from the Departments of Justice, State, and the Treasury (see
apps. V, VI, and VII). We did not receive agency comments from the
Departments of Defense or Homeland Security.
State did not agree with our recommendation that the Secretaries of
State and Treasury, in consultation with the NSC and relevant
government agencies, develop and implement an integrated strategic plan
to coordinate the delivery of training and technical assistance abroad.
State asserted that it has an integrated strategic plan and believes
that a series of NSC documents and State's Office of the Coordinator
for Counterterrorism's Bureau Performance Plan serve this purpose. We
reviewed the NSC documentation which included minutes, an agreement,
and conclusions, all of which serve as the NSC guidance for the TFWG.
We also reviewed State's Office of the Coordinator for
Counterterrorism's Bureau Performance Plan which we found included the
Bureau's objectives and performance measures for counterterrorist
financing programs. We do not agree that this NSC guidance and Bureau
performance plan constitute an integrated strategy that addresses the
issues raised in this report because the effort, in practice, does not
have key stakeholder buy-in on roles and practices, a strategic
alignment of resources with needs, or a system to measure performance
and use results and thus, an integrated strategy is still needed. It is
also noteworthy that Treasury did not state in their comments that an
integrated strategic plan existed or was in place, and they did not
highlight these specific documents as serving this purpose.
Treasury did not directly address our recommendation for an integrated
strategic plan and proposed a new title, "Integrated U.S. Strategic
Plan Needed to Improve the Coordination of Counterterrorism Finance
Training and Technical Assistance to Certain Priority Countries," which
suggests agreement with the recommendation, but limits coverage of the
integrated strategic plan to cover certain priority countries. Treasury
also stated its agreement with the need for performance measures. It is
useful to note that Treasury repeatedly placed the focus of efforts for
improvement on priority countries and, as noted in its technical
comments, does not recognize State's leadership over the delivery of
training and technical assistance other than to priority countries. For
example, in Treasury's technical comments Treasury stated that "State's
role is coordinating each U.S. government agency's personnel and
expertise to allow them to deliver the needed training in commonly
agreed upon priority countries." This comment further supports the need
to better integrate efforts. Justice stated that with its role and
expertise in providing training and technical assistance the fact that
it was not included as an equal partner with State and Treasury in the
recommendation was a critical omission. We note that Justice is one of
a number of agencies referred to as relevant government agencies in the
recommendation. Justice receives funding from State and, according to
Justice, State has been supportive of Justice's training and technical
assistance efforts.
State did not agree with our recommendation that the Secretaries of
State and Treasury enter into a Memorandum of Agreement concerning
counter-terrorism financing and anti-money laundering training and
technical assistance. State stated that they have an interagency
agreement. Based on our review, the classified document serving as an
interagency agreement lacks clarity, familiarity, and buy-in from all
levels of leadership within TFWG, particularly Treasury. State added
that if there were to be a Memorandum of Agreement, they believe it
should include all agencies engaged in providing training and technical
assistance, not just State and Treasury. Treasury did not address this
recommendation. However, Treasury stated that it wished to improve the
effectiveness of U.S. technical assistance to combat terrorist
financing particularly with respect to certain priority countries and
stated that they would welcome suggestions as to how Treasury, together
with relevant U.S. government agencies, can better achieve that goal.
Justice again stated that the report's critical flaw is omitting
Justice from equal standing with State and Treasury. Justice noted that
it is a key player and therefore should be involved in all interagency
deliberations and decisions. We continue to believe that the Memorandum
of Agreement should include the Secretaries of State and Treasury.
State and Treasury both primarily fund and support U.S. government anti-
money laundering and counter-terrorist financing training and technical
assistance programs, and in Treasury's case also provides considerable
training and technical assistance abroad through current U.S.
government employees and contractors. It is important that their
programs and funding are integrated to optimize results. Other agencies
are important stakeholders as they are recipients of this funding and
support and should benefit from improved coordination between these two
agencies.
In response to our recommendation that the Secretary of the Treasury
provide more complete information on the nature and extent of asset
blocking in the United States in its annual Terrorist Assets Report to
Congress, Treasury responded in its technical comments that we should
"instead recommend that Congress consider discontinuing the requirement
that Treasury produce the annual report altogether." Treasury officials
also stated that the Terrorist Assets Reports, "based upon the input of
numerous government agencies, provides a snapshot of the known assets
held in the United States by terrorist-supporting countries and
terrorist groups at a given point in time. These numbers may fluctuate
during each year and between years for a number of policy-permissible
reasons. The amount of assets blocked under a terrorism sanctions
program is not a primary measure of a terrorism sanctions program's
effectiveness, and countries that have been declared terrorist
supporting, and whose assets are not blocked by a sanctions program,
are already weary of holding assets in the United States." Moreover, in
its technical comments Treasury states that Terrorist Assets Reports
were "not mandated or designed as an accountability measure for OFAC's
effectiveness in assisting U.S. persons in identifying and blocking
assets of persons designated under relevant Executive orders relating
to terrorism." We acknowledge that the language in the mandate for the
Terrorist Assets Reports did not explicitly designate the reports as an
accountability measure; however, nothing in the statutory language or
in the congressional intent underlying the mandate precludes Treasury
from compiling and reporting information in the manner in which we have
suggested in this report. Furthermore, we believe that inclusion of
comparative information and additional explanation regarding
significant shifts between years will enhance program reporting and
congressional oversight. Justice did not comment on this
recommendation. State commented that this recommendation was incomplete
in that it makes no mention of State's role in blocking assets and
promoting international cooperation to achieve it; however, we did not
include State in this recommendation because it is the Secretary of the
Treasury who is responsible for producing the annual Terrorist Assets
Reports.
Treasury's technical comments state that "OFAC officials have advised
that OFAC's new performance measures are expected to be completed by
December 1, 2005, and its new strategic plan is expected to be
completed by January 1, 2006." We modified our recommendation to
incorporate this new information. State suggested in its technical
comments that we revise this recommendation to read, "In addition, we
recommend that the Secretary of the Treasury, in consultation with the
Departments of State and Justice and the other departments and agencies
represented on the Terrorist Finance Policy Coordination Committee,
establish milestones for developing a strategic plan and meaningful
performance measures to guide and asses its asset blocking process." We
did not include the Secretary of State or the Attorney General in this
recommendation because the scope of this objective focused solely on
the accountability issues Treasury faces in its efforts to block
terrorists' assets. However, we recognize that State has an important
role in targeting individuals, groups, or other entities suspected of
terrorism or terrorist financing and added language to the section of
the report on terrorist designations to clarify the roles of the
multiple agencies involved in this effort.
Treasury's comments also suggested that we replace, in its entirety,
our report's third objective on the accountability of Treasury's
terrorist asset blocking efforts with revised text that Treasury
officials had prepared. We reviewed the revised text and noted that
many of Treasury's points were already covered in our report. In some
cases we added technical information to our report to help clarify the
challenges that Treasury faces in assessing the impact of terrorist
designation activities.
None of these agencies provided comments on our matter for
congressional consideration.
As agreed with your offices, unless you publicly announce the contents
of this report earlier, we plan no further distribution until 30 days
from the report date. At that time, we will send copies to the Attorney
General, the Secretary of Defense, the Secretary of the Homeland
Security, the Secretary of State, the Secretary of the Treasury, and
interested congressional committees. We also will make copies available
to others upon request. In addition the report will be available at no
charge on the GAO Web site at http://www.gao.gov.
If you or your staff have any questions about this report, please
contact me at (202) 512-4347 or [Hyperlink, yagerl@gao.gov]. Contact
points for our Offices of Congressional Relations and Public Affairs
may be found on the last page of this report. GAO staff who made major
contributions to this report are listed in appendix VIII.
Signed by:
Loren Yager:
Director, International Affairs and Trade:
[End of section]
Appendixes:
Appendix I Objectives, Scope, and Methodology:
Chairman of the Senate Caucus on International Narcotics Control,
Charles E. Grassley; Senator Richard J. Durbin; and Chairman of the
Senate Committee on Homeland Security and Governmental Affairs, Senator
Susan M. Collins, asked us to (1) provide an overview of U.S.
government efforts to combat terrorist financing abroad and (2) examine
U.S. government efforts to coordinate the delivery of training and
technical assistance to vulnerable countries. In addition, they
requested that we examine specific accountability issues the Department
of the Treasury (Treasury) faces in its efforts to block terrorists'
assets held under U.S. jurisdiction.
To provide an overview of U.S. government efforts to combat terrorist
financing abroad we reviewed documents and interviewed officials of
U.S. agencies and departments and their bureaus and offices. We
reviewed legislation, strategic plans, performance plans, and other
agency documents, as well as relevant papers, studies, CRS and our own
work to identify specific agency responsibilities and objectives. We
assessed this information to identify key efforts and obtain further
details and clarification and then validated and deconflicted
information across agencies and departments in the United States and
overseas in Indonesia, Pakistan, and Paraguay. We based country
selection on Department of State (State) reporting of a nexus of
terrorist financing, State reporting of assistance to the country, and
the use of alternative financing mechanisms in the country. In each
country, we discussed key challenges with responsible foreign and U.S.
embassy officials, as well as with international entity officials.
We grouped the different types of responsibilities into four categories
(designations, intelligence and law enforcement, standards setting, or
training) and validated these categories during meetings with U.S.
government officials. Our scope and methodology were limited by lack of
complete access to sensitive and classified information. We reviewed
documents or interviewed officials from the following U.S. departments
and agencies:
* the Central Intelligence Agency;
* the Department of Defense (Defense Intelligence Agency);
* the Department of Homeland Security (Immigration and Customs
Enforcement and Customs and Border Protection);
* the Department of Justice (Bureau of Alcohol, Tobacco, Firearms, and
Explosives; Criminal Division's Asset Forfeiture and Money Laundering
Section, Counter Terrorism Section, and Office of Overseas
Prosecutorial Development, Assistance and Training; Drug Enforcement
Administration; Federal Bureau of Investigation);
* the Department of State (Bureau of Economic and Business Affairs;
Bureau for International Narcotics and Law Enforcement Affairs; Office
of the Coordinator for Counterterrorism; Bureau of International
Organizations; U.S. Mission to the United Nations; U.S. Agency for
International Development; U.S. Missions to Indonesia, Pakistan, and
Paraguay);
* the Department of the Treasury (Office of Technical Assistance,
Office of Foreign Assets Control, Financial Crimes Enforcement Network,
the Office of Terrorist Financing and Financial Crime, IRS's Criminal
Investigation Division).
We also verified U.S. government efforts through documentation or
interviews with officials from international entities including the
Financial Action Task Force on Money Laundering, the International
Monetary Fund (IMF), the World Bank, the United Nations (UN), and the
Organization of American States.
To examine U.S. government efforts to coordinate the delivery of
training and technical assistance to vulnerable countries, we examined
relevant laws; reports to Congress; National Security Council (NSC)
guidance; strategic plans; policies and procedures; budget and
expenditure information; agency and international entity training data,
documents, and reports; contractor resumes; communications between
embassies and agencies; interagency communications; web site
information; and GAO criteria for strategic planning, collaboration,
and performance results.[Footnote 47] In conjunction we interviewed
U.S. agency officials involved in the Terrorist Financing Working Group
(TFWG), U.S. officials involved in the delivery of training and
technical assistance abroad, and others with a stake in counter-
terrorism financing training and technical assistance, including
officials of international entities, foreign government officials, and
experts. We also observed a TFWG meeting. We requested an interview
with the NSC, but the NSC declined our request. We assessed U.S.
efforts to coordinate its efforts to deliver training and technical
assistance to vulnerable countries using applicable elements of a sound
strategic plan and identified those areas in which the U.S. effort is
lacking.
We assessed documentation and interviewed officials from:
* the Department of Homeland Security (Immigration and Customs
Enforcement);
* the Department of Justice (Criminal Division's Asset Forfeiture and
Money Laundering Section, Counter Terrorism Section, and Office of
Overseas Prosecutorial Development, Assistance and Training; Federal
Bureau of Investigation);
* the Department of State (Bureau for International Narcotics and Law
Enforcement Affairs, Office of the Coordinator for Counter-terrorism,
Bureau of International Organizations, U.S. Mission to the United
Nations, U.S. Agency for International Development; three U.S.
embassies abroad):
* the Department of the Treasury (Office of Technical Assistance,
Office of Foreign Assets Control, Financial Crimes Enforcement Network,
the Executive Office for Terrorist Financing and Financial Crime, IRS's
Criminal Investigation Division);
* the Financial Action Task Force on Money Laundering (FATF);
* International financial institutions including the International
Monetary Fund (IMF), World Bank, Asian Development Bank (ADB); and
Inter-American Development Bank;
* the United Nations (UN), including the Counter Terrorism Committee
and relevant UN Security Council resolutions sanctions committees and
monitoring mechanisms; and:
* the Organization of American States.
To examine specific issues the U.S. government faces in holding
Treasury accountable for its efforts to block terrorists' assets held
in the United States, we interviewed officials from the Department of
the Treasury's Office of Foreign Assets Control (OFAC) in Washington,
D.C. We reviewed applicable laws, regulations, and executive orders to
determine reporting requirements. In addition, we examined OFAC's
annual Terrorist Assets Reports for calendar years 1999 to 2004. Our
examination focused on comparing the nature and extent of blocked
assets by year for OFAC's three programs targeting international
terrorists and terrorist organizations and five programs targeting
terrorism-supporting governments and regimes to understand how OFAC
communicated changes in an organization or country's blocked assets
over time. We also compared and contrasted the performance measures for
designation and asset blocking included in Treasury's Strategic Plan
for fiscal years 2003-2008 with those indicated in its Annual
Performance and Accountability Report fiscal years 2003 and 2004. We
reviewed testimony and speeches by OFAC and other Treasury officials,
as well as information from OFAC's website, to learn more about key
issues and progress made on designating terrorists and blocking their
assets. We reviewed relevant information from the Congressional
Research Service and our own work. To assess the extent that Treasury's
performance measures for designating terrorists and blocking assets
focused on factors critical to assessing performance, we reviewed a
range of our previous reports examining factors that were necessary
components for meaningful measures.[Footnote 48]
We performed our work from March 2004 through July 2005 in accordance
with generally accepted government auditing standards.
[End of section]
Appendix II: Key International Counter-Terrorism Financing and Anti-
Money Laundering Efforts:
Entity and importance: International standard-setters.
Entity and importance: United Nations (UN): Of the key international
entities, the UN has the broadest range of membership and the ability
to adopt treaties or international conventions that have the effect of
law in a country once signed and ratified, depending on a country's
constitution;
Efforts: International standard-setters: United Nations Convention
Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances
(1988) (The Vienna Convention): Defines concept of money laundering.
Most widely accepted definition. Calls upon countries to criminalize
the activity. Limited to drug trafficking as predicate offense[A] and
does not address the preventative aspects.
Efforts: International standard-setters: Entity and importance:
International Convention Against Transnational Organized Crime (2000)
(The Palermo Convention): Came into force in September 2003. Obligates
ratifying countries to criminalize money laundering via domestic law
and include all serious crimes as predicate offenses of money
laundering, whether committed in or outside of the country, and permit
the required criminal knowledge or intent to be inferred from objective
facts; establish regulatory regimes to deter and detect all forms of
money laundering, including customer identification, recordkeeping, and
reporting of suspicious transactions; authorize the cooperation and
exchange of information among administrative, regulatory, law
enforcement, and other authorities, both domestically and
internationally; consider the establishment of a financial intelligence
unit to collect, analyze, and disseminate information; and promote
international cooperation.
Efforts: International standard-setters: Entity and importance:
International Convention for the Suppression of the Financing of
Terrorism (1999): Came into force in 2002. Requires ratifying countries
to criminalize terrorism, terrorist organizations, and terrorist acts.
Unlawful for any person to provide or collect funds with the intent
that the funds be used for, or knowledge that the funds be used to
conduct certain terrorist activity. Encourages states to implement
measures that are consistent with FATF Recommendations.
Efforts: International standard-setters: Entity and importance:
Security Council Resolutions 1267 and 1390: Adopted October 15, 1999
and January 16, 2002, respectively. Obligates member states to freeze
assets of individuals and entities associated with Osama bin Ladin or
members of al Qaeda or the Taliban that are included on the
consolidated list maintained and regularly updated by the UN 1267
Sanctions Committee.
Efforts: International standard-setters: Entity and importance:
Security Council Resolution 1373: Adopted September 28, 2001, in direct
response to events of September 11, 2001. Obligates countries to
criminalize actions to finance terrorism and deny all forms of support,
freeze funds or assets of persons, organizations, or entities involved
in terrorist acts; prohibit active or passive assistance to terrorists;
and cooperate with other countries in criminal investigations and
sharing information about planned terrorist acts.
Efforts: International standard-setters: Entity and importance:
Security Council Resolution 1617: Adopted July 29, 2005. Extended
sanctions against al Qaeda, Osama bin Laden, and the Taliban, and
strengthened previous related resolutions.
Efforts: International standard-setters: Entity and importance:
Convention Against Corruption (2003) Not yet in force--First legally
binding multilateral treaty to address on a global basis the problems
relating to corruption. As of July 11, 2005, 29 countries had become
parties to the Convention (30 are required for the Convention to enter
into force). Requires parties to institute a comprehensive domestic
regulatory and supervisory regime for banks and financial institutions
to deter and detect money laundering. Regime must emphasize
requirements for customer identification, record keeping, and
suspicious transaction reporting.
Efforts: International standard-setters: Entity and importance: Global
Program Against Money Laundering: research and assistance project
offering technical expertise, training, and advice to member countries
on anti-money laundering and counter-terrorism financing upon request
to raise awareness; help create legal frameworks with the support of
model legislation; develop institutional capacity, in particular with
the creation of financial intelligence units; provide training for
legal, judicial, law enforcement, regulators and private financial
sectors including computer-based training; promote regional approach to
addressing problems; maintain strategic relationships; and maintain
database and perform analysis of relevant information.
Efforts: International standard-setters: Entity and importance:
Financial Action Task Force on Money Laundering (FATF): Formed in 1989
by the G-7 countries,[A] FATF is an intergovernmental body comprised of
31 member jurisdictions and two regional organizations whose purpose is
to develop and promote policies, both at the national and international
levels, to combat money laundering and the financing of terrorism. Its
mission expanded to include counter- terrorism financing in October
2001. FATF has developed multiple partnerships with international and
regional organizations in order to constitute a global network of
organizations against money laundering and terrorist financing.: The
Counter Terrorism Committee (CTC): Established via Security Council
Resolution1373 to monitor the performance of the member countries in
building a global capacity against terrorism. Countries submit a report
to the CTC on steps taken to implement resolution's measures and report
regularly on progress. CTC asked each country to perform a self-
assessment of existing legislation and mechanism to combat terrorism in
relation to Resolution 1373. CTC identifies weaknesses and facilitates
assistance, but does not provide direct assistance.
Entity and importance: Financial Action Task Force on Money Laundering
(FATF): Formed in 1989 by the G-7 countries,[A] FATF is an
intergovernmental body comprised of 31 member jurisdictions and two
regional organizations whose purpose is to develop and promote
policies, both at the national and international levels, to combat
money laundering and the financing of terrorism. Its mission expanded
to include counter-terrorism financing in October 2001. FATF has
developed multiple partnerships with international and regional
organizations in order to constitute a global network of organizations
against money laundering and terrorist financing;
Efforts: International standard-setters: The 40 Recommendations on
Money Laundering: Constitute a comprehensive framework for anti-money-
laundering designed for universal application. Permit country
flexibility in implementing the principles according to the country's
own particular circumstances and constitutional requirements. Although
not binding as law, have been widely endorsed by international
community and relevant organizations as the international standard for
anti-money laundering.
Efforts: International standard-setters: Entity and importance: The
Special Recommendations on Terrorist Financing: FATF adopted eight
special recommendations and recently added a ninth. FATF members use a
self-assessment questionnaire of their country's actions to come into
compliance. The nine deal with both formal banking and non-banking
systems: Ratification and implementation of UN instruments; Criminalize
the financing of terrorism and associated money laundering; Freeze and
confiscate terrorist assets; Reporting suspicious transactions related
to terrorism; International co-operation; Impose anti-money laundering
requirements on alternative remittance systems; Strengthen customer
identification measures in international and domestic wire transfers;
Ensure that non-profit organizations are not misused; Detecting and
preventing cross-border transportation of cash by terrorists and other
criminals.
Efforts: International standard-setters: Entity and importance: The Non-
Cooperative Countries and Territories (NCCT) List: One of FATF's
objectives is to promote the adoption of international anti-money
laundering/counter-terrorism financing standards by all countries.
Thus, its mission extends beyond its own membership, although FATF can
only sanction its member countries and territories. Thus, in order to
encourage all countries to adopt measures to prevent, detect, and
prosecute money launderers (i.e., to implement the 40 Recommendations)
FATF adopted a process to identify non-cooperative countries and
territories that serve as obstacles to international cooperation in
this area and place them on a public list. An NCCT country is
encouraged to make rapid progress in remedying its deficiencies or
counter-measures may be imposed which may include specific actions by
FATF member countries. Most countries make a concerted effort to be
taken off the NCCT list because it causes significant problems to their
international business and reputation.
Efforts: International standard-setters: Entity and importance:
Monitoring Member's Progress: Facilitated by a two-stage process: self
assessments and mutual evaluations. In the self-assessment stage, each
member annually responds to a standard questionnaire regarding its
implementation of the recommendations. In the mutual evaluation stage,
each member is examined and assessed by experts from other member
countries. Ultimately, if a member country does not take steps to
achieve compliance, membership in the organization can be suspended.
There is, however, a sense of peer pressure and a process of graduated
steps before these sanctions are enforced.
Efforts: International standard-setters: Entity and importance:
Methodology for Anti-money laundering/Counter-terrorist Financing
Assessments: FATF developed and adopted a comprehensive mutual
assessment methodology for the 40 and special recommendations based on
consultations with IMF, World Bank, and other standard setters, which
provides international agreement and cooperation among standard setters
and others for a methodology for assessing anti-money-
laundering/counter terrorist-financing regimes based on the 40 and
special recommendations.
Efforts: International standard-setters: Entity and importance:
International capacity-builders: Typologies Exercise: FATF issues
annual reports on developments in money laundering through its
typologies report, which keeps countries current with new techniques or
trends.
Entity and importance: International capacity-builders.
Entity and importance: International Monetary Fund (IMF) and World
Bank: World Bank helps countries strengthen development efforts by
providing loans and technical assistance for institutional capacity
building. The IMF mission involves financial surveillance and the
promotion of international monetary stability;
Efforts: International standard-setters: Research and Analysis and
Awareness-Raising: Conducted work on international practices in
implementing anti-money laundering and counter-terrorist financing
regimes; issued Analysis of the Hawala System discussing implications
for regulatory and supervisory response; and developed comprehensive
reference guide on anti-money-laundering/counter terrorist-financing
presenting all relevant information in one source. Conducted Regional
Policy Global Dialogue series with country, World Bank and IMF,
development banks, and FATF-style regional bodies covering challenges,
lessons learned, and assistance needed; and developed Country
Assistance Strategy that covers anti-money laundering and counter-
terrorism in greater detail in countries that have been deficient in
meeting international standards.
Efforts: International standard-setters: Entity and importance:
Assessments: Worked in close collaboration with FATF and FATF-style
regional bodies to a produce single comprehensive Methodology for anti-
money laundering/counter-terrorist financing assessments; and engaged
in a successful pilot program of assessments of country compliance with
FATF recommendations. In 2004, adopted the FATF 40 and special 9
recommendations as one of the 12 standards and codes for which Reports
on the Observance of Standards and Codes can be prepared and made anti-
money laundering/counter-terrorist financing assessments a regular part
of IMF/World Bank work. World Bank and IMF staff participated in 58 of
the 92 assessments conducted since 2002.
Efforts: International standard-setters: Entity and importance: Egmont
Group of Financial Intelligence Units: A forum for Financial
Intelligence Units (FIU) to improve support for their respective
national anti-money laundering and counter-terrorism financing
programs. In June 2005 there were 101 member countries. The group
fosters development of FIUs and the exchange of critical financial data
among the FIUs.: Training and Technical Assistance: Organized training
conferences and workshops, delivered technical assistance to individual
countries, and coordinated technical assistance. Substantially
increased technical assistance to member countries on strengthening
legal, regulatory, and financial supervisory frameworks for anti-money-
laundering/counter terrorist-financing. In 2002-2003 there were 85
country-specific technical projects benefiting 63 countries and 32
projects reaching more than 130 countries. Between January 2004 and
June 2005 the World Bank and IMF delivered an additional 210 projects.
In 2004, IMF and the World Bank decided to expand the anti-money
laundering/counter-terrorist financing technical assistance work to
cover the full scope of the expanded FATF recommendations following the
successful pilot program of assessments.
Entity and importance: Egmont Group of Financial Intelligence Units: A
forum for Financial Intelligence Units (FIU) to improve support for
their respective national anti-money laundering and counter-terrorism
financing programs. In June 2005 there were 101 member countries. The
group fosters development of FIUs and the exchange of critical
financial data among the FIUs;
Efforts: International standard- setters: The group is involved in
improving interaction among FIUs in the areas of communications,
information sharing, and training coordination. The Egmont Group's
Principles for Information Exchange Between Financial Intelligence
Units for Money Laundering Cases include conditions for the exchange of
information, limitation on permitted uses of information, and
confidentiality. Members of the Egmont Group have access to a secure
private website to exchange information. As of 2004, 87 of the members
were connected to the secure web. The group has produced a compilation
of one hundred sanitized cases about the fight against money laundering
from its member FIUs. Within the group there are five working groups--
Legal, Outreach, Training/Communications, Operations, and Information
Technology. The Egmont group is focusing on expanding its membership in
the Africa and Asia regions.
Entity and importance: Counterterrorism Action Group (CTAG): CTAG
includes the G-8 (Canada, France, Germany, Italy, Japan, Russia, the
United Kingdom, and the United States) as well as other states, mainly
donors, to expand counterterrorism capacity building assistance;
Efforts: International standard-setters: CTAG goals are to analyze and
prioritize needs and expand training and assistance in critical areas
including counter-terrorism financing and other counterterrorism areas.
CTAG also plans to work with the UN Counter-Terrorism Committee to
promote implementation of Security Council Resolution 1373. In 2004,
CTAG coordinated with FATF to obtain assessments of countries CTAG
identified as priorities.
Entity and importance: Regional entities.
Entity and importance: FATF-Style Regional Bodies (FSRBs): Modeled
after FATF, these groups have anti-money-laundering/counter terrorist-
financing efforts as their objectives; Efforts: International standard-
setters: FSRBs encourage implementation and enforcement of FATF's 40
recommendations and special recommendations. They administer mutual
evaluations of their members, which are intended to identify weaknesses
so that the member may take remedial action. They provide members
information about trends, techniques, and other developments for money
laundering in their typology reports. The size, sophistication, and the
degree to which the FSRBs can carry out their missions vary greatly.
The FSRBs are Asia/Pacific Group on Money Laundering, Caribbean
Financial Action Task Force, Council of Europe MONEYVAL, Eastern and
Southern African Anti-Money Laundering Group, Eurasian Group on
Combating Money Laundering and Financing of Terrorism, Financial Action
Task Force Against Money Laundering in South America, Middle East and
North Africa Financial Action Task Force, Inter-governmental Action
Group Against Money Laundering (West Africa).
Entity and importance: Organization of American States--CICAD: Regional
body for security and diplomacy in the Western Hemisphere with 34
member states; Efforts: International standard-setters: In 2004, the
commission amended model regulations for the hemisphere to include
techniques to combat terrorist financing, development of a variety of
associated training initiatives, and a number of anti-money
laundering/counter-terrorism meetings. Its Mutual Evaluation Mechanism
included updating and revising some 80 questionnaire indicators through
which the countries mutually evaluate regional efforts and projects.
Worked with International Development Bank and France to provide
training for prosecutors and judges. Based on agreement with Inter-
American Development Bank for nearly $2 million, conducting two-year
project to strengthen FIUs in eight countries. Evaluating strategic
plans and advising on technical design for FIUs in region.
Entity and importance: Asian Development Bank (ADB): Established in
1966, the ADB is a multilateral development finance institution
dedicated to reducing poverty in Asia and the Pacific. The bank is
owned by 63 members, mostly from the region and engages in mostly
public sector lending in its developing member countries; Efforts:
International standard-setters: According to the ADB, it was one of the
first multilateral development banks to address the money laundering
problem, directly and indirectly, through regional and country
assistance programs. The ADB Policy Paper, adopted on April 1, 2003,
has three key elements: (1) assisting developing member countries in
establishing and implementing effective legal and institutional systems
for anti-money laundering and counter-terrorism financing, (2)
increasing collaboration with other international organizations and aid
agencies, and (3) strengthening internal controls to safeguard ADB's
funds. The bank provides loans and technical assistance for a broad
range of development activities including strengthening and developing
anti-money laundering regimes.
Entity and importance: Industry sector standard-setters.
Entity and importance: Basel Committee on Banking Supervision:
Established by the central bank Governors of the Group of Ten countries
in 1974, formulates broad supervisory standards and guidelines and
recommends statements of best practice in the expectation that
individual authorities will take steps to implement them through
detailed arrangements - statutory or otherwise - which are best suited
to their own national systems; Efforts: International standard-
setters: Three of the Basel Committee's supervisory standards and
guidelines concern money laundering issues: (1) Statement on Prevention
of Criminal Use of the Banking System for the purpose of Money
Laundering (1988), which outlines basic policies and procedures that
bank managers should ensure are in place; (2) Core Principles for
Effective Banking Supervision (1997), which provides a comprehensive
blueprint for an effective bank supervisory system and covers a wide
range of topics including money laundering; and (3) Customer Due
Diligence (2001), which also strongly supports adoption and
implementation of the FATF recommendations.
Entity and importance: International Association of Insurance
Supervisors: Established in 1994, an organization of supervisors from
more than 100 different countries and jurisdictions that promotes
cooperation among regulators, sets international standards, provides
training, and coordinates with other financial sectors; Efforts:
International standard-setters: Anti-Money Laundering Guidance Notes
for Insurance Supervisors and Insurance Entities (2002) is a
comprehensive discussion on money laundering in the context of the
insurance industry. Guidance is intended to be implemented by
individual countries taking into account the particular insurance
companies involved, the products offered within the country, and the
country's own financial system. Consistent with FATF 40 Recommendations
and Basel Core Principles for Effective Banking Supervision. Paper was
updated as Guidance Paper on Anti-Money Laundering and Combating the
Financing of Terrorism (2004) with cases of money laundering and
terrorist financing. A document based upon these cases is posted on Web
site and updated, and new cases that might result from the FATF
typology project are to be added.
Entity and importance: International Organization of Securities
Commissions (IOSCO): Members regulate and administer securities and
laws in their respective 105 national securities commissions. Core
objectives are to protect investors; ensure that markets are fair,
efficient, and transparent; and reduce systematic risk; Efforts:
International standard-setters: Passed "Resolution on Money Laundering"
in 1992. Principles on Client Identification and Beneficial Ownership
for the Securities Industry (2004) is a comprehensive framework
relating to customer due diligence requirements and complementing the
FATF 40 recommendations. IOSCO and FATF have discussed further steps to
strengthen cooperation among FIUs and securities regulators in order to
combat money laundering and terrorist financing.
Source: GAO, using information from FATF, United Nations, U.S.
Department of State, U.S. Department of Treasury, and World Bank/IMF,
Egmont Group, Asian Development Bank, Basel Committee on Banking
Supervision, and CTAG.
[A] A predicate offense is the underlying crime that produces the
proceeds that are the subject of money laundering.
[B] G-7 is short for "Group of 7" whose members are Canada, France,
Germany, Japan, Italy, the United Kingdom, and the United States.
[End of table]
[End of section]
Appendix III: Terrorist Financing Working Group Membership and Program
Development Process:
According to the State, TFWG is made up of various agencies throughout
the U.S. government and convened in October 2001 to develop and provide
counter-terrorism finance training to countries deemed most vulnerable
to terrorist financing. TFWG is co-chaired by State's Office of the
Coordinator for Counterterrorism and the Bureau for International
Narcotics and Law Enforcement Affairs and meets on a bi-weekly basis 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 the TFWG include:
Department of State:
Office of the Coordinator for Counterterrorism:
Bureau for International Narcotics and Law Enforcement Affairs, Crime
Programs:
Regional bureaus:
Bureau for Economic and Business Affairs:
Bureau of Diplomatic Security Office of Antiterrorism Assistance:
United States Agency for International Development:
Department of the Treasury:
Terrorist Financing and Financial Crimes:
Office of Technical Assistance: Financial Crimes Enforcement Network:
Office of the Comptroller of the Currency:
Internal Revenue Service--Criminal Investigation:
Department of Justice:
Office of Oversea Prosecutorial, Development, Assistance and Training,
Asset Forfeiture, and Money Laundering Section:
Counter Terrorism Section:
Federal Bureau of Investigation:
Drug Enforcement Administration:
Department of Homeland Security:
Bureau of Customs and Border Protection:
Bureau of Immigration and Customs Enforcement:
Other Participants:
National Security Council:
Central Intelligence Agency:
Federal Deposit Insurance Corporation:
Federal Reserve Board:
TFWG Program Development Process:
According to State the process is as follows:
1. With input from the intelligence and law enforcement communities,
State, Treasury, and the Department of Justice (Justice), identify and
prioritize countries needing the most assistance to deal with terrorist
financing.
2. Evaluate priority countries' counter-terrorism finance and anti-
money laundering regimes with Financial Systems Assessment Team (FSAT)
onsite visits or Washington tabletop exercises. State-led FSAT teams of
6-8 members include technical experts from State, Treasury, Justice,
and other regulatory and law enforcement agencies. The FSAT onsite
visits take about one week and include in-depth meetings with host
government financial regulatory agencies, the judiciary, law
enforcement agencies, the private financial services sector, and non-
governmental organizations.
3. Prepare a formal assessment report on vulnerabilities to terrorist
financing and make recommendations for training and technical
assistance to address these weaknesses. The formal report is shared
with the host government to gauge its receptivity and to coordinate
U.S. offers of assistance.
4. Develop 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 trade-based
money laundering for over/under invoicing schemes for money laundering
or terrorist financing.
5. Provide sequenced training and technical assistance to priority
countries in-country, regionally, or in the United States.
6. Encourage burden sharing with our allies, international financial
institutions (e.g., IMF, World Bank, regional development banks), and
through international organizations such as the UN, United Nations, the
UN Counterterrorism Committee, FATF on Money Laundering, or the Group
of Eight (G-8) to capitalize on and maximize international efforts to
strengthen counter-terrorism finance regimes around the world.
[End of section]
Appendix IV: Key U.S. Counter-Terrorism Financing and Anti-Money
Laundering Training and Technical Assistance for Vulnerable Countries:
Department/agency: State, Justice, Homeland Security, and the Treasury;
Bureau/division/office: Multiple;
Description of effort: International Law Enforcement Academies (ILEAs).
Regional academies led by U.S. agencies partnering with foreign
governments to provide law enforcement training including anti-money
laundering and counter- terrorism financing. ILEAs in Gaborone,
Botswana; Bangkok, Thailand; Budapest, Hungary; and Roswell, New
Mexico, train over 2,300 participants annually on topics such as
criminal investigations, international banking and money laundering,
drug-trafficking, human smuggling, and cyber-crime.
Department/agency: Board of Governors of the Federal Reserve System;
Bureau/division/office: [Empty];
Description of effort: Provides financial regulatory training and
technical assistance to central banks, foreign banking supervisors, and
law enforcement officials in Washington, D.C. and abroad, and
participates in U.S. interagency assessments of foreign government
vulnerabilities.
Department/agency: Federal Deposit Insurance Corporation;
Bureau/division/office: [Empty];
Description of effort: Provides financial regulatory training through
seminars and regional conference presentations in Washington, D.C. and
abroad, and participates in U.S. interagency assessments of foreign
government vulnerabilities.
Department/agency: Homeland Security; Bureau/division/office: Bureau of
Customs and Border Protection and Bureau of Immigration and Customs
Enforcement;
Description of effort: Provides law and border enforcement training and
technical assistance to foreign governments, in conjunction with other
U.S. law enforcement agencies and the ILEAs. Participates in
assessments of foreign countries in the law and border enforcement
arena.
Department/agency: Justice; Bureau/division/office: Asset Forfeiture
and Money Laundering Section;
Description of effort: Assists in the drafting of money laundering,
terrorist financing, and asset forfeiture legislation compliant with
international standards for international and regional bodies and
foreign governments. Provides legal training and technical assistance
to foreign prosecutors and judges, in conjunction with Justice's Office
of Overseas Prosecutorial Development, Training and Assistance.
Sponsors conferences and seminars on transnational financial crimes
such as forfeiting the proceeds of corruption, human trafficking,
counterfeiting, and terrorism. Participates in U.S. interagency
assessments of countries' capacity to block, seize, and forfeit
terrorist and other criminal assets.
Bureau/division/office: Department/agency: Counter Terrorism Section;
Description of effort: Department/agency: Provides investigative and
prosecutorial training and technical assistance to foreign
investigators, prosecutors, and judges in conjunction with the Office
of Overseas Prosecutorial Development, Training, and Assistance and
other Department of Justice components.
Bureau/division/office: Department/agency: Drug Enforcement
Administration;
Description of effort: Department/agency: Provides law enforcement
training on international asset forfeiture and anti-money laundering to
foreign governments, in conjunction with other Department of Justice
components and through ILEAs.
Bureau/division/office: Department/agency: Federal Bureau of
Investigation;
Description of effort: Department/agency: Provides basic and advanced
law enforcement training to foreign governments on a bilateral and
regional basis and through ILEAs and the Federal Bureau of
Investigation's Academy in Quantico, Virginia. Developed a two-week
terrorist financing course that was delivered and accepted as the U.S.
government's model. Participates in U.S. interagency assessments of
countries' law enforcement and counter-terrorism capabilities.
Bureau/division/office: Department/agency: International Criminal
Investigative Training Assistance Program;
Description of effort: Department/agency: Provides law enforcement
training and technical assistance to foreign counterparts abroad in
conjunction with other Department of Justice components.
Bureau/division/office: Department/agency/State: Office of Overseas
Prosecutorial Development, Training and Assistance;
Description of effort: Department/agency/State: Provides legal and
prosecutorial training and technical assistance for criminal justice
sector counterparts abroad and through ILEAs in drafting anti-money
laundering and counter-terrorism financing statutes. Provides Resident
Legal Advisors to focus on developing counter-terrorism legislation
that criminalizes terrorist financing and achieves other objectives.
Conducts regional conferences on terrorist financing, including a focus
on charitable organizations. Participates in U.S. interagency
assessments to determine countries' criminal justice system
capabilities.
Department/agency: State; Bureau/division/office: Office of the
Coordinator for Counterterrorism and Bureau for International Narcotics
and Law Enforcement Affairs;
Description of effort: Coordinate and fund U.S. training and technical
assistance provided by other U.S. agencies to develop or enhance the
capacity of a selected group of more than two dozen countries whose
financial sectors have been used to finance terrorism. Also manage or
provide funding for other anti-money laundering or counter-terrorism
financing programs for Department of State, other U.S. agencies, IlEAs,
international entities, and regional bodies. Leads U.S. interagency
assessments of foreign government vulnerabilities.
Bureau/division/office: Diplomatic Security Anti-Terrorism Assistance
Programs;
Description of effort: Provides law enforcement training for foreign
counterparts and through ILEAs to develop the skills necessary to
investigate financial crimes.
Bureau/division/office: U.S. Agency for International Development;
Description of effort: Provides legal technical assistance to foreign
governments by drafting legislation that criminalizes terrorist
financing. Provides resident advisors to provide technical assistance
to judicial officials in their home country.
Department/agency: Treasury; Bureau/division/office: Financial Crimes
Enforcement Network;
Description of effort: Provides financial intelligence training and
technical assistance to a broad range of government officials,
financial regulators, law enforcement officers, and others abroad with
a focus on the creation and improvement of financial intelligence
units. FinCEN's IT personnel provide FIU technical assistance in two
primary areas: analysis and development of network infrastructures and
access to a secure web network for information sharing. Conducts
personnel exchanges and conferences. Partners with other governments
and international entities to coordinate training. Participates in
assessments of foreign governments' financial intelligence
capabilities.
Bureau/division/office: Department/agency: Internal Revenue Service
Criminal Investigation Division;
Description of effort: Department/agency: Provides law enforcement
training and technical assistance to foreign governments and through
ILEAs to develop the skills necessary to investigate financial crimes.
Bureau/division/office: Department/agency: Office of the Comptroller of
the Currency;
Description of effort: Department/agency: Provides financial regulatory
training in Washington, D.C., and abroad for foreign banking
supervisors.
Bureau/division/office: Department/agency: Office of Technical
Assistance;
Description of effort: Department/agency: Provides a range of training
and technical assistance including intermittent and long- term resident
advisors to senior-level representatives in various ministries and
central banks on a range of areas including financial reforms related
to money laundering and terrorist financing. Conducts and participates
in assessments of foreign government anti-money laundering regimes for
the purpose of developing technical assistance plans.
Bureau/division/office: Department/agency/Bureau/division/office:
Office of Terrorist Financing and Financial Crime;
Description of effort: Department/agency;
Description of effort: Participates in U.S. interagency assessments of
countries' counter-terrorism financing and anti-money laundering
capabilities. Provides technical advice and practical guidance on how
the international anti-money laundering and counter-terrorist financing
standards should be adopted and implemented.
Source: GAO, using information from State, Treasury, Homeland Security,
and Justice, and the federal financial regulators.
[End of table]
[End of section]
Appendix V: Comments from the Department of Justice:
U.S. Department of Justice:
Criminal Division:
September 29, 2005:
Christine Broderick:
Assistant Director, International Affairs and Trade:
U.S. Government Accountability Office:
441 G Street, NW:
Washington, DC 20548:
Dear Ms. Broderick,
On August 26, 2005, the Government Accountability Office (GAO) provided
the Department of Justice (DOJ) an electronic copy of its draft report
entitled, "Terrorist Financing: Greater Strategic Planning and
Coordination Needed to Improve U.S. Government Efforts to Combat
Terrorist Financing Abroad." [Note 1] Several Department components
reviewed the draft report. The Criminal Division and FBI forwarded
minor comments and technical corrections to your staff electronically
and appreciate that these will be incorporated as appropriate. We
nevertheless have several larger substantive concerns with the report
as drafted.
Our foremost concern is that the report fails to recognize the
significant role that DOJ plays in providing international technical
assistance and training in the money laundering and terrorist financing
areas. Beyond that, we are dismayed that the draft report's focus on
the interaction of the Department of State (State) and the Department
of Treasury (Treasury) has obscured the enormous contributions of the
Terrorist Financing Working Group. The TFWG, in existence for almost
four years, has succeeded in assessing and identifying terrorist
financing deficiencies in priority countries, has avoided duplication
of USG agencies' efforts in providing assistance to remedy these
deficiencies, and has achieved considerable progress in even some of
the most intransigent states. We solicit your attention to these
important concerns.
DOD's role in providing international assistance to combat terrorism
and terrorist financing is well-recognized. Indeed, a high level inter-
departmental decision has assigned Justice primacy within the USG
interagency community in drafting foreign criminal laws (including
money laundering and terrorist financing), reviewing the legal
sufficiency of such laws, and providing prosecutorial training and
development for the TFWG countries. This, of course is logical because
as the Department with lead responsibility for the prosecution and
investigation of terrorism and terrorist financing offenses, see 18
U.S.C. § 2332b(f), DOJ is in the best position. to know what assistance
we require from our international counterparts and what capacities it
is critical that they possess to assist in the global tear on
terrorism_ The foreign recipients of technical assistance as well as
U.S. interests are best served when the agency with the particular
competence for the training and technical assistance is the one to
deliver (or to oversee the delivery of) the particular technical.
assistance.
As a result of its recognized prominence and expertise, DOJ has
received a significant portion of the total funding managed by the TFWG
and has completed the greatest number of programs. Unfortunately, DOD's
substantial - and acknowledged-role in providing assistance to combat
terrorism and terrorist financing is missed in the report's
recommendation that "the Secretary of State and the Secretary of the
Treasury, in consultation with the National Security Council and
relevant government agencies, develop and implement an integrated
strategic plan for the delivery of training and technical assistance."
Failing to recognize DOJ's key role and participation. (through the
Criminal Division, Asset Forfeiture Money Laundering and
Counterterrorism Sections, and the Office of Overseas Prosecutorial
Development, Assistance and Training, as well as through the FBI and
DEA) in the development of any such strategy is a critical omission. By
focusing on the disagreement over leadership and procedures and the
roles of the Departments of State and Treasury essentially to the
exclusion of the rest of the interagency community, GAO's report fails
to meet its own objectives of examining USG efforts as a whole to
coordinate anti-terrorism financing assistance.
The report's critical flaw in omitting DOJ is repeated in its
recommendation that "the Secretaries of State and Treasury enter into a
Memorandum of Agreement . In providing counter-terrorism financing
training and technical assistance programs to vulnerable countries."
Although congressional appropriations flow in the first instance to
State and Treasury, DOJ has been and is likely to continue to be the
primary supplier of expertise and technical assistance in the areas,
among others, of legislative drafting, law enforcement investigative
assistance, and development of prosecutors and the judiciary in the
terrorist financing. DOJ is a key player and therefore should be
involved in all interagency deliberations and decisions, particularly
those to develop strategies and set priorities for technical
assistance.
The TFWG has provided a workable interagency framework for developing
and coordinating technical assistance. In DOJ's view, effective
interagency coordination must respect, reflect, and implement each
participating agency's specific spills and expertise. At the core what
is needed is an overall coordinator whose authority is recognized and
respected by all component participants. Contrary to the impression
conveyed in the draft report, DOJ fully respects the honest broker role
that State plays as the TFWG Coordinator.
We do agree that the three departments - State, Justice; and Treasury -
must work together to bring all efforts in this arena under the TFWG
decision-.making process. In the:
TFWG forum, each agency's areas of expertise are recognized. By working
within that coordination structure, the United States can ensure the
delivery of the best available training and technical assistance to the
most vulnerable countries of the world.
We appreciate this opportunity to offer what we believe are
constructive and necessary comments to the draft report.
Signed by:
Mary Lee Warren:
Deputy Assistant Attorney General:
[1]We note that the report specifically addresses the planning and
coordination of USG international assistance efforts; which is a
narrower issue than the .report's title implies. DOJ recommends that
both the title and the introductory pages of the report be modified to
accurately reflect the more limited scope of the study.
The following are GAO's comments on the Department of Justice's letter
dated September 29, 2005.
GAO Comments:
1. Justice expressed concern that the draft report does not recognize
the significant role it plays in providing international training and
technical assistance in the money laundering and terrorist financing
areas. The report acknowledges the roles of multiple agencies,
including Justice, in delivering training and technical assistance to
vulnerable countries. Under the first objective we broadly describe the
U.S. efforts to provide training and technical assistance to vulnerable
countries and note that U.S. offices and bureaus, primarily within the
departments of the Treasury, Justice, Homeland Security, and State, and
the federal financial regulators, provide training and technical
assistance to countries requesting assistance through various programs
using a variety of methods funded primarily by the State and Treasury.
Moreover, appendix IV includes Table 2, which summarizes key U.S.
counter-terrorism financing and anti-money laundering training and
technical assistance programs for vulnerable countries and lists
contributions provided by Justice, as well as other relevant agencies.
2. Justice expressed dismay that the report focuses on the interaction
of State and Treasury rather than the accomplishments of the TFWG.
While a number of comments suggested including information indicative
of the successes of agency efforts to address terrorist financing
abroad, much of this information is outside of the scope of this
report. However, we have made a number of changes in response to these
comments. First, we have added information on the accomplishments of
U.S. agencies to the report. Second, we have adjusted our first
objective to clarify that we are providing an overview of U.S.
agencies' efforts to address terrorist financing abroad. Third, as we
note in other comments, we have adjusted the title of the report to
better reflect the focus of our work.
3. Justice notes that the report addresses a narrower issue than the
title implies. We agree. We have revised the title of the report to
focus on our key recommendation.
4. According to Justice, our report contains a critical flaw because it
does not recognize Justice as a key player nor does it place Justice on
equal standing with State and Treasury in the report's recommendation
and Memorandum of Agreement concerning training and technical
assistance. Justice noted that it should be involved in all interagency
deliberations and decisions. The report acknowledges the roles of
multiple important agencies, including Justice, in delivering training
and technical assistance to vulnerable countries. The report recommends
that the Secretaries of State and the Treasury, develop and implement
an integrated strategic plan in consultation with the NSC and relevant
government agencies, of which Justice is one (see comment 1). We
continue to believe that the Memorandum of Agreement should be limited
to the Secretaries of State and Treasury. State and Treasury both
primarily fund and support U.S. government anti-money laundering and
counter-terrorist financing training and technical assistance programs,
and in Treasury's case also provides considerable training and
technical assistance abroad through current U.S. government employees
and contractors. It is important that their programs and funding be
integrated to optimize results. Other agencies are important
stakeholders, as they are recipients of this funding and support and
should benefit from improved coordination between these two agencies.
Justice primarily receives funding from State and, according to
Justice, State has been supportive of Justice's training and technical
assistance efforts.
5. Justice states that contrary to the impression conveyed in the
draft, it fully respects the "honest broker role" that State plays as
the TFWG coordinator. We have added information from Justice to more
accurately portray Justice's support of State as TFWG coordinator in
the Highlights page, Results in Brief, and body of the report.
Additional Comments from the Department of Justice:
Justice provided information in its technical comments that we believe
are important to the key findings and recommendations in this report.
While we have addressed Justice's technical comments as appropriate, we
have reprinted and addressed specific technical comments below.
1. Justice technical comment (on our Highlights page):
"The draft Report reflects that "Justice officials confirmed that roles
and procedures [of the TFWG] were a matter of dispute." The context
suggests that DOJ [Department of Justice] does not accept the
leadership of the State Department. That is not an accurate statement.
DOJ strongly agrees that there needs to be a designated coordinator in
this TFWG process and supports that role being given to the State
Department, which has been an honest broker in the process and DOJ has
abided by its procedures. DOJ agrees with the observation that the
Treasury Department does not accept the State Department's leadership
or the procedures. . . ."
"Justice officials confirmed that roles and procedures were a matter of
dispute." It would be more accurate to replace dispute with
disagreement."
GAO response: Justice made these two comments concerning the statement
in the draft report that "Justice officials confirmed that roles and
procedures were a matter of dispute." We added language to show that
Justice is supportive of State's role as coordinator of TFWG efforts
and substituted the word "disagreement" for "dispute" when stating that
"Justice officials confirmed that roles and procedures were a matter of
disagreement."
2. Justice technical comment (on our second objective):
"The draft report references that AFMLS [Asset Forfeiture and Money
Laundering Section] stated that "the Department of State's leadership
role is limited to its chairmanship of TFWG—" To be clear, this
statement was not made to suggest that the TFWG be limited to priority
countries, but rather that differing standards on procedures
(particularly with DOJ leadership role in legislative drafting) for
priority countries and vulnerable countries creates problems."
GAO response: In response to this point, we removed the report's
reference to AFMLS and noted that Justice officials told us that having
procedures and practices for TFWG priority countries that differ from
those for other vulnerable countries creates problems.
[End of section]
Appendix VI: Comments from the Department of State:
Department of State:
Ms. Jacquelyn Williams-Bridgers:
Managing Director:
International Affairs and Trade:
Government Accountability Office:
441 G Street, N.W.
Washington, D.C. 20548-0001:
Dear Ms. Williams-Bridgers:
We appreciate the opportunity to review your draft report, TERRORIST
FINANCING Greater Strategic Planning and Coordination Needed to Improve
U.S. Government Efforts to Combat Terrorist Financing Abroad," GAO Job
Code 320249.
The enclosed Department of State comments are provided for
incorporation with this letter as an appendix to the final report.
If you have any questions concerning this response, please contact
Robert Stapleton, Policy Advisor, Office of the Coordinator of Counter-
Terrorism, at (202) 647-6487.
Sincerely,
Sid Kaplan (Acting):
cc: GAO - Kathleen Monahan S/CT - John Dinger State/OIG - Mark Duda:
Department Of State Comments On GAO Draft Report TERRORIST FINANCING -
Greater Strategic Planning And Coordination Needed To Improve U.S.
Efforts To Combat Terrorist Financing Abroad (GAO-06-19, GAO Code
320249):
Thank you for the opportunity to respond to the draft report Greater
Strategic Planning and Coordination Needed to Improve U.S. Government
Efforts to Combat Terrorist Financing Abroad. We appreciate that the
report acknowledges the many initiatives the Executive Branch has taken
to combat terrorist financing, and the success of these initiatives. We
note, however, that there other initiatives whose details are
classified that the GAO does not include in this report.
While we understand the nature of the report is to recommend
improvements to the interagency process, we are nonetheless
disappointed at the lack of examples of the the Administration's
success combating terrorism financing. We believe that readers will
find more useful a balanced report that not only mentions the areas
that GAO believes need improvement, but also better captures numerous
successes of which we are quite proud, especially those of the
Terrorist Finance Working Group (TFWG).
Without mentioning accomplishments, we don't believe the report
accurately portrays to its readers the overall effectiveness and
success of the Administration's CT finance programs. The TFWG targets
its training and technical assistance in the five areas that comprise
an effective anti-money laundering/counterterrorist finance (AML/CTF)
regime that meets international standards: legal framework, financial
regulation, financial intelligence unit, financial investigations, and
judges and prosecutors. There are currently 26 countries on the
priority list to receive training and technical assistance. Of those 26
countries, we are pleased that we have conducted 19 needs assessment
missions and provided training and technical assistance in at least one
area of an AML/CTF regime to over 20 countries. We have provided
technical assistance and training in at least 4 of the 5 areas that
comprise an effective AML/CTF regime to nine countries. We think it is
useful for readers to understand that due in part to technical
assistance training the TFWG provided, the Financial Action Task Force
(FATF) removed two countries from its Non-Cooperative Countries and
Territories List. All of these successes have prompted requests for
training and technical assistance from not only priority and frontline
countries, but also countries that are not on those lists. We believe
the draft report could much more accurately portray the strength of our
strategy to combat terrorism finance and all that we have done to
implement it.
The U.S. Government developed a number of aggressive policy initiatives
and actions in order to curb terrorist financing following the
terrorist attacks against the United States on September 11, 2001. It
was a focal point of our effort to prevent future terrorist attacks at
home and abroad. Our actions include blocking the property (including
assets) of terrorists and their supporters and providing training and
technical assistance to countries most vulnerable to terrorist
financing in an effort to "extend our borders." Central to these plans
is international cooperation and the State Department's leadership in
this arena.
We are proud of our coordinated effort to combat terrorist financing
and gratified that the GAO draft report recognizes our success in
several key areas. However, we are disappointed that the title,
conclusions and recommendations of the report regarding the delivery of
technical assistance do not accurately capture or portray all we have
achieved. We offer comments below keyed to the report's recommendations
and later general and technical comments which we believe provide
useful clarification and context.
Recommendation 1: The Secret of State and the Secretary of the
Treasury, in consultation with the National Security Council and
relevant government agencies, develop and implement an integrated
strategic plan.
We do not concur. Such a strategic plan already exists. In September
2002, the National Security Council Deputies' Committee adopted an
integrated strategy to coordinate the delivery of technical assistance
to combat terrorist financing abroad and designated the State
Department as the lead coordinator. This decision reaffirmed a December
2001 Deputies Committee decision that the State Department's Office of
the Coordinator for Counterterrorism (S/CT) should lead the effort to
prioritize and coordinate the USG's counterterrorism training and
assistance programs, including those pertaining to terrorist financing.
The Counterterrorism Security Group (CSG) reaffirmed this decision in
June 2002, as did the Treasury-chaired Terrorist Financing Policy
Coordination Committee in July 2002, and an ad-hoc senior working group
in August 2002. The strategy that emerged from this series of high-
level meetings and their conclusions directly supports the "enabling
weak states" objective of the National Strategy for:
Combating Terrorism. It is reflected in the S/CT's Bureau Performance
Plan, which also includes objectives and performance measures for
counterterrorist financing programs.
The integrated counterterrorism (CT) finance strategy tasks State with
leading the coordination of delivery of all capacity building programs
in the area of terrorism financing. In addition, it puts rightful and
special emphasis on targeting priority and frontline states vulnerable
to terrorist financing. It also provides guidance on implementation,
and establishes TFWG chaired by the Department of State's Office of the
Coordinator for Counterterrorism (S/CT} and Bureau of International
Narcotics and Law Enforcement Affairs (INL). The TFWG includes
representatives of all key stakeholders from the Departments of
Homeland Security, Justice, and Treasury, as well as financial
regulatory agencies, and the intelligence and law enforcement
communities.
In order to operationalize the strategy, State led the development in
the TFWG of a process to identify priority countries for assistance,
based on consideration of intelligence community analysis of the
vulnerabilities, importance to U.S. security, and capacity to absorb
U.S. assistance in key states of anti-money laundering/terrorist
financing concern. The TFWG process ensures that its actions are
coordinated with broader U.S. counterterrorism efforts in terms of
priorities and the most effective use of human and financial resources.
We believe that State has provided strong and necessary leadership to
implement the strategy. However, we emphasize that the process has been
inclusive, and all key agencies helped to develop and agreed to abide
by the integrated strategy. Key stakeholders also actively participate
in implementing the strategy, any disagreements that arise are resolved
and we expect the TFWG to continue and enhance its record of success
following this GAO report.
In addition to determining U.S. priorities under the strategy, the TFWG
carefully plans, discusses and coordinates important decisions related
to scheduling and implementing all counterterrorism finance foreign
assistance programs brought to it. If the country team, interagency and
host government agree on the implementation plan, the TFWG determines
the necessary funding for State to obligate to the agencies with the
appropriate counterterrorism finance and anti-money laundering
expertise. State carefully monitors and can account for all of the
funding Congress has appropriated for training programs coordinated
through the TFWG. State provided an accounting for such obligations and
expenditures to the Congress in a classified report in May 2004.
The TFWG has been very diligent in developing methods to measure its
success, and continues to discuss better methods and ways to measure
its progress. As an important part of that process, TFWG members
discuss issues regarding strategies developed for certain countries and
revise them according to reporting from posts and experts who have
conducted recent onsite missions.
Recommendation 2: The Secretaries of State and the Treasury enter into
a Memorandum of Agreement concerning counterterrorism financing and
anti-money laundering training and technical assistance.
We do not concur. There already is an interagency agreement on these
issues. Under the procedures approved by the Deputies Committee and
other guidance developed under the NSC, the interagency developed,
agreed to, and is implementing a strategy for leading and coordinating
the provision of training and technical assistance to combat terrorist
financing. The strategy outlines the roles of the agencies that
participate in the TFWG, and each participant recognizes these roles.
Experts from the various agencies comprise the assessment missions led
by the State Department, and each representative has the lead in
drafting the appropriate section as it relates to his/her area of
technical expertise.
There are established methods to resolve disputes that may arise during
the interagency process. The co-chairs, of the TFWG, or any of its
members, may raise an issue during a meeting. If the interested parties
cannot reach a consensus through the TFWG process, the parties can
raise the issue at the Training and Assistance Subgroup (TASG) of the
Counterterrorism Security Group (CSG) or their representatives can
discuss them at a CSG meeting. However, it is rare that the TFWG
process cannot resolve issues.
The primary responsibility of the TFWG is to coordinate all training
and technical assistance to ensure that the United States Government
effectively harnesses all its resources and capabilities and that the
money the Congress allocates for CTF training and technical assistance
is spent efficiently and effectively. A series of high-level groups and
a series of detailed documents thoroughly memorializes these issues.
Unfortunately many are not referenced or described in the report.
We do not believe any additional formal documents are necessary. If
there were to be such a document, we believe it should include all
agencies engaged in providing training and technical assistance, not
just State and Treasury.
Recommendation 3: The Secret of the Treasury provide in its annual
Terrorist Assets Report to Congress more complete information on the
nature and extent of asset blocking in the United States.
This recommendation is incomplete in that it makes no mention of the
State Department's important role in blocking assets and promoting
international cooperation to achieve it. In particular, we are
disappointed that the GAO report omits the State Department's role in
designations to combat terrorist financing. The Secretary of State
energetically exercises her designation authorities under the
Antiterrorism and Effective Death Penalty Act of 1996, Section 411 of
the USA PATRIOT ACT of 2001 (8 U.S.C. § 1182), Executive Order 12947,
and Executive Order 13224. The report makes no mention of those
important tools against terrorist financing.
State also plays an active role in building international support for
measures to combat terrorist financing including designations
promulgated by the Secretary of Treasury and Secretary of State. The
State Department's Economic Bureau (EB), coordinates policy
implementation at the working level, largely through the network of
Terrorism Finance Coordinating Officers (TFCOs) located at every
embassy worldwide. The Bureau of International Organization Affairs
(10) ensures designations related to al-Qaida, the Taliban, or Usama
bin Laden are made worldwide obligations through the UN 1267 Committee.
The Administration believes that it is crucial that the United States
wage a strong, effective and coordinated fight against terrorist
financing. That effort must and is bringing to bear the capabilities
and resources of all relevant agencies. We're proud of our success in
this key area. We hope these comments add useful information, context
and clarity to the GAO report.
General Comments:
In addition to our concerns with the recommendations we note above,
State is concerned with a number of issues within the report's
narrative. For example, we believe that a different title would more
accurately capture the report's research and findings. We believe that
the report's narrative acknowledges that many, in fact most, of the
USG's efforts to combat terrorist financing abroad are extremely
effective. Therefore, State suggests that the GAO create a new title
that better and positively describes the broad U.S. efforts to combat
terrorism overseas, or alternatively, that makes clear that any
critical comments are limited to the' provision of training and
technical assistance to combat terrorist financing abroad.
No interagency process is without flaws, but we believe there is much
evidence that the TFWG is one of the most successful examples of
interagency cooperation. Disagreements between members are usually
resolved amicably through the procedures established in the Deputies
Committee's Summary of Conclusions. We believe there is strong buy-in
to the strategy, grounded on all agencies' dedication to complete the
mission, ensure the success of our training and technical assistance,
and achieve our nation's goals. There are outside forces that can
interfere with the delivery of training and technical assistance and
prevent certain projects from occurring, such as a lack of political
will by the recipient nation or unexpected occurrences that would
endanger the safety of the participants of the mission. The TFWG
members address these issues during biweekly meetings to plan
accordingly and pool their resources to overcome whatever issues may
arise.
We understand the GAO's need for unclassified documentation to provide
the basis for the statements made by interagency participants and have
provided as much unclassified information as possible. We believe that
some gaps in the report are due to the inability of the interagency to
document the full scope of TFWG's success with unclassified material.
We regret if conclusions based on unclassified documents only do not
accurately portray the interagency process and leave room for incorrect
inferences by the consumers of this product. We hope that this
information provides a more positive and accurate portrait of the TFWG.
Finally, State would like to underscore again that we are perplexed by
the draft report's conclusion that the Administration lacks an
integrated strategy to combat terrorism financing. The NSC Deputies, in
a Summary of Conclusions that built on a series of high-level
interagency meetings and resulting documents, provides clear guidance
on how the USG should provide technical assistance and training to
combat terrorist financing. The members of TFWG have cooperatively
operationalized the Deputies' guidance. And, S/CT's Bureau Performance
plan further documents that strategy.
The following are GAO's comments on the Department of State's letter
dated October 3, 2005.
GAO Comments:
1. State noted in its comments that it does not believe the report
accurately portrays the overall effectiveness and success of the
Administration's counter-terrorism finance programs. While a number of
comments suggested including information indicative of the successes of
agency efforts to address terrorist financing abroad, much of this
information is outside of the scope of this report. However, we have
made a number of changes in response to these comments. First, we have
added information on the accomplishments of U.S. agencies to the
report. For example, we added information on the number of needs
assessment missions conducted and the number of countries receiving
training and technical assistance. Second, we have adjusted our first
objective to clarify that we are providing an overview of U.S.
agencies' efforts to address terrorist financing abroad. Third, as we
note in other comments, we have adjusted the title of the report to
better reflect the focus of our work.
2. State commented that it has an integrated strategic plan which is
evidenced through classified NSC Deputies Committee documentation and
the Department of States' Office of the Coordinator for
Counterterrorism's Bureau Performance Plan. We reviewed the NSC
Deputies Committee documentation, which includes minutes, an agreement,
and conclusions--all of which serve as the NSC guidance for the TFWG.
We also reviewed the performance plan, which includes the Office of the
Coordinator for Counterterrorism's objectives and performance measures
for counter-terrorist financing programs and provides some performance
indicators, such as the number of assessments and training plans
completed. Although some aspects of a strategic plan for delivering
training and technical assistance are included in these documents, we
do not agree that this guidance and performance plan includes the
elements necessary to constitute an integrated strategy for the
coordination of the delivery of training and technical assistance
abroad. In addition to not having a fully integrated strategy on paper,
the NSC guidance lacks clarity, particularly regarding coverage of non-
priority countries. The guidance also lacks familiarity and clear buy-
in among the pertinent levels of agencies. As a result, the documents
did not guide the actions of the agencies in actual practice.
3. State commented that "if the country team, interagency and host
government agree on an implementation plan, TFWG determines the
necessary funding for State to obligate to each agency with the
appropriate expertise." State added that it carefully monitors and can
account for all of the funding Congress has appropriated for training
programs coordinated through the TFWG, as provided in a classified
report. Our report did not specifically address TFWG-reported
obligations and expenditures, as this information focusing on priority
countries was classified. Our report focused on the lack of
transparency in the overall amount of funds available for all counter-
terrorism training and technical assistance programs within State and
the Treasury. Because funding is embedded with anti-money laundering
and other programs, the U.S. government does not have a clear
presentation of the budget resources that State and Treasury allocate
for training and technical assistance to counter-terrorist financing as
differentiated from other programs. Although various officials told us
that funding for counter-terrorism financing training and technical
assistance is insufficient, the lack of a clear presentation of
available budget resources makes it difficult for decision-makers to
determine the actual amount that may be allocated to these efforts.
4. We do not agree with State's comment that TFWG has been very
diligent in developing methods to measure its success. As of July 2005,
the U.S. government, including TFWG, did not have a system in place to
measure the results of its efforts to deliver training and technical
assistance and to incorporate this information into integrated planning
efforts. Our report acknowledges that an interagency committee was set
up to develop a system to measure results and other efforts were
undertaken to track training and technical assistance; however,
according to agency officials, these efforts have not yet resulted in
performance measures.
5. Based on our review of NSC and other documents provided by State,
the U.S. government lacks an integrated strategy to coordinate the
delivery of training and technical assistance. The classified document
serving as an interagency agreement lacks clarity as well as
familiarity and buy-in from all agencies and levels of leadership
within TFWG, particularly Treasury. The NSC guidance was agreed to at
the deputy level, and we found that many of the working level staff
were not familiar with the guidance or the interpretation of the
guidance and Treasury staff clearly did not have the same
interpretation as State staff.
6. State noted that there are established methods to resolve disputes
that arise through the interagency process and it is rare that the TFWG
process cannot resolve issues. While there are guidelines for resolving
disputes, in practice there are long-standing disagreements that have
not been resolved. Based on discussions with agency officials and
review of documentation, our report provides examples of long-standing
disagreements that have not been resolved such as the use of
contractors and procedures for conducting assessments of country's
needs for training and technical assistance.
7. State commented that it is the primary responsibility of the TFWG to
coordinate all training and technical assistance and notes the
existence of formal supporting documents. State commented that while it
does not believe additional formal documents are necessary, if a
Memorandum of Agreement concerning counter-terrorism financing and anti-
money laundering training and technical assistance were to be
developed, State commented that it should include all agencies involved
in providing training and technical assistance. Our review as well as
Treasury's technical comments clearly shows that Treasury does not
accept State's position that TFWG's primary responsibility is to
coordinate all counter-terrorist financing training and technical
assistance abroad. Treasury limits this role to priority countries.
Based on our review of NSC and other documents provided by State, the
U.S. government lacks an integrated strategy to coordinate the delivery
of training and technical assistance. The classified document, which
according to State serves as an interagency agreement, lacks clarity,
familiarity, and buy-in from all levels of leadership within TFWG,
particularly Treasury. State and Treasury both fund and support U.S.
government anti-money laundering and counter-terrorist financing
training and technical assistance programs, and Treasury also provides
considerable training and technical assistance abroad through
contractors and U.S. government employees. It is important that their
programs and funding are integrated to optimize results. Other agencies
are important stakeholders as they are recipients of this funding and
support and would benefit from improved coordination between these two
agencies.
8. State comments that our recommendation to the Secretary of the
Treasury regarding Treasury's annual Terrorist Assets Report to
Congress was incomplete because it makes no mention of State's role in
blocking assets. Specifically we recommend that Treasury provide more
complete information on the nature and extent of asset blocking in the
United States in its annual Terrorist Assets Report to Congress. We did
not incorporate the Secretary of State into this recommendation because
the scope of our request for our third objective focused solely on the
accountability issues Treasury faces in its efforts to block
terrorists' assets. State also expressed disappointment that our report
did not include details on State's role in terrorist designations.
While our report provides an overview of how U.S. government agencies
use designations to disrupt terrorist networks, we recognize that State
has an important role and added language to provide more detail on
State's role in targeting individuals, groups, or other entities
suspected of terrorism or terrorist financing.
9. In response to agency comments, we have revised the title of the
report to focus on our key recommendation.
10. The scope of our second objective was to examine U.S. efforts to
coordinate the delivery of training and technical assistance to
vulnerable countries. The effort does not have key stakeholder buy-in
on roles and practices, a strategic alignment of resources with needs,
or a system to measure performance and incorporate this information
into its planning efforts. According to agency officials, the lack of
effective leadership leads to less than optimal delivery of training
and technical assistance to vulnerable countries. Without a system to
measure performance, the U.S. government and TFWG cannot ensure that
its efforts are on track.
11. Although this report is based on unclassified information, GAO
reviewed all unclassified and classified information provided by State
in support of TFWG efforts. We believe that findings, conclusions, and
recommendations accurately portray the interagency process. Moreover,
we reviewed and incorporated additional information provided by State
subsequent to issuing our draft to the agencies for comment to ensure
that all available information was assessed.
[End of section]
Appendix VII: Comments from the Department of the Treasury:
Department of the Treasury:
Washington, D.C.
October 5, 2005:
Mr. Loren Yager:
Director:
International Affairs and Trade: Government Accountability Office: 441
G Street. N.W.
Washington, D.C. 20548-0001:
RE: Request for Comments on the draft GAO Report on Terrorist
Financing: Greater Strategic Planning and Coordination Needed to
Improve U.S. Government Efforts to Combat Terrorist Financing Abroad
(GAO-06-19):
Dear Mr. Yager:
Thank you for the invitation to respond to your office's draft report
entitled "Terrorist Financing: Greater Strategic Planning and
Coordination needed to Improve US. Government Efforts to Combat
Terrorist Financing abroad (GAO-06-19)." On behalf of the Treasury
Department, we would like to provide these general comments, and
transmit in the enclosed Annex more detailed commentary and information
related to your draft report.
The draft report's focus on the U.S. Government's (USG) coordination of
certain technical assistance and training to combat the financing of
terrorism (CFT) is of great interest to Treasury because of the close
relationship of such assistance and training with two core aspects of
Treasury's mission: (i) safeguarding the international financial system
from terrorist abuse, and (ii) providing comprehensive technical
assistance and training to facilitate the growth and development of
healthy financial systems abroad. The relationship between certain CFT
technical assistance and training coordination and these core aspects
of Treasury's mission is discussed in greater detail below. Treasury
also shares a common goal with the GAO in wishing to improve the
effectiveness of U.S. technical assistance to combat terrorist
financing, particularly with respect to certain priority countries. We
welcome suggestions as to how Treasury, together with other relevant
USG agencies, can better achieve that goal.
With this in mind, our first comment on your draft report concerns its
scope. The draft report establishes its goal as: (i) describing the
entire scope of USG efforts to combat terrorist `financing abroad; (ii)
examining in greater detail USG efforts to coordinate the delivery of
technical assistance and training to designated "priority" and certain
"vulnerable" countries; and (iii) examining the usefulness of the
annual report on terrorist assets (referred to as the "Terrorist Assets
Report " or "TAR") and performance measures to assess OFAC's terrorist
financing designation efforts. This is an extraordinarily broad range
of issues for the GAO to address in a single draft report.
With respect to the first objective, the draft report necessarily falls
considerably short in attempting to describe, in less than five pages,
the comprehensive efforts of the USG to combat terrorist financing
abroad. On a related but more fundamental level, the draft report fails
to place its second objective of examining aspects of certain technical
assistance and training provided to certain priority and vulnerable
countries against the larger backdrop of: (i) U.S. efforts to combat
terrorist financing abroad, and (ii) Treasury's broader technical
assistance mission in such priority and vulnerable countries. By
failing to establish this contest, the draft report implies that "U.S.
Government efforts to combat terrorist financing abroad" (the phrase
used in the title of the draft report) can be assessed by examining
U.S. coordination of CFT technical assistance and training in certain
priority and vulnerable countries (the actual focus of the draft
report).
Consistent with the primary focus of the draft report, Treasury
suggests modifying the title of the draft report along the lines of the
following: "Integrated U.S. Strategic Plan Needed to Improve the
Coordination of Counterterrorism Finance Training and Technical
Assistance to Certain Priority Countries." As such, the first section
of the draft report, with appropriate modifications, rather than
attempting to address the full range of distinct CFT initiatives, could
provide a useful introduction of the initiatives most relevant to the
particular technical assistance and training efforts that represent the
overwhelming focus of the draft report.
To help put this suggestion in perspective, consider how the
coordination of technical assistance to select priority countries fits
within the much broader strategy of Treasury and the USG to combat
terrorist financing abroad. This strategy, described initially as the
first of three fundamental goals in the 2003 National Money Laundering
Strategy (2003 NSMLS), includes the following core aims:
* Applying targeted financial sanctions against individuals and
entities comprising terrorist organizations and their support networks;
* Establishing international standards to combat terrorist financing;
* Ensuring global compliance with these international standards;
* Addressing terrorist financing mechanisms of particular concern;
* Facilitating international information sharing; and,
* Facilitating outreach and cooperation with the private sector and the
international financial community:
These strategic aims implicate Treasury's fundamental responsibilities.
As you are aware, the Congress and the Administration established last
year the Office of Terrorism and Financial Intelligence (TFI) as a
central pillar within Treasury to formulate and coordinate the
Department's CFT and anti-money laundering (AML) efforts, which include
working with the interagency community to advance each of the strategic
aims identified above.
The draft report focuses on only a small part of the efforts to combat
terrorist financing abroad. As explained in the 2003 NMLS, the
strategic aim delineated in the third bullet point above --ensuring
global compliance with international standards - has as one of its
three components providing capacity-building to key countries. It is
this component that is implicated (in part) by the technical assistance
and training to select priority and vulnerable countries that are the
focus of the draft, report. As such, the draft report focuses on one
aspect of a singular component of one of seven core strategic aims that
the USG has identified and is pursuing to combat terrorist financing
abroad. While the draft report describes some of these strategic aims
in briefly discussing U.S. efforts to combat terrorist financing
abroad, this discussion is incomplete and fails to puce the
coordination of CFT technical assistance to certain priority and
vulnerable countries in the context of the overall U.S. CFT strategy.
Moreover, the draft report's discussion of this issue mischaracterizes
the USG's relationship with international financial institutions--
namely, the International Monetary Fund and the World Bank. Treasury
bears a fundamental responsibility in managing this relationship which
is crucial towards advancing global compliance with international CFT
standards. These and other inaccuracies are more exhaustively covered
in the attached Annex.
The draft report's focus on coordinating CFT technical assistance and
training to certain priorities and vulnerable countries also fails to
place these efforts in the context of Treasury's broader technical
assistance and training mission in many of these countries, Treasury's
Office of International Affairs comprehensively manages this mission
through the Office of Technical Assistance (OTA) - to advance core
competency in the following strategic financial areas:
* Tax policy and administration;
* Government debt issuance and management;
* Financial institutions policy and regulation;
* Budget policy and management; and:
* Financial crime and enforcement.
OTA pursues these strategic aims through a multi-disciplined, macro-
economic approach to foreign technical assistance, typically advanced
by tong-term Treasury resident advisors to counterpart finance
ministries or central banks. These resident advisors are supplemented
by short-term experts and technicians to comprise specific teams
designed to promote the five core interests identified above.
OTA has dedicated specific resources since 1997 in its Financial
Enforcement Program (FEP) to providing technical assistance to combat
financial crimes, of which the CFT component has become more prominent
in recent years. OTA is unique in that all of its five technical
assistance teams, including FEP, work synergistically to ensure that
the economic reforms promoted by the USG are approached in a holistic,
comprehensive manner. Each team supports the work of the others so that
financial systems are comprehensively strengthened and protected.
Treasury's broad CFT and technical assistance interests, briefly
summarized above, drive the Department's participation in the State
Departments coordination of interagency and international CFT technical
assistance and training to certain priority countries. Treasury
believes that such efforts have been often successful. In contrast, the
draft report, while focusing on the difficulties of. and the inevitable
differences in viewpoints arising from, the interagency process, fails
to give due credit to the relevant Departments, and the USG as a whole,
for the successes that have been achieved through unprecedented
interagency coordination.
The enclosure provides some detailed responses to the text of the draft
report, as well as additional information which we think might help to
provide a more balanced understanding of the issues that are the focus
of the report. As a final comment with respect to the overall scope of
the draft. report, we noted earlier the report's third objective of
examining, on pages 18-20, the usefulness of Treasury's Annual Assets
Report. This section on accountability issues related to OFAC terrorist
blocking efforts appears somewhat incongruous in a report dedicated to
CFT technical assistance in training.
While you might wish to consider whether this forms an appropriate part
of the report, we have taken the liberty to suggest a revised text that
more accurately reflects Treasury's understanding of the nature of this
annual report; the challenges Treasury faces in assessing the impact of
economic sanctions on the Global War on Terrorism; and the status of
performance measures for OFAC. We recognize that OFAC's performance
measures, which relate to OFAC's internal administrative effectiveness
in implementing its terrorist sanctions programs, require adjusting.
OFAC is in the process of revising its performance indicators and has
established milestones for completing this process. If the section is
retained, we recommend that the revised text suggested in the attached
Annex be substituted for pages 18-20 of the draft report and that the
recommendations section of the report (pages 5 and 7) be modified
accordingly.
Treasury agrees that the GAO has raised a number of important questions
with respect to the coordination of CFT technical assistance and
training in priority countries. Although the USG devotes significant
resources to CFT assistance and training, competing demands upon scarce
CFT expertise do frame Treasury's view on issues such as its preference
for the use of contractors in certain situations. Treasury supports the
GAO's call for tracking USG CFT technical assistance and training
efforts to priority countries and developing performance measures to
assess and improve the effectiveness of these efforts. But expectations
must be tempered by a realistic understanding of the challenges in
working with foreign countries to develop and implement effective CFT
regimes.
Sincerely,
Signed by:
Stuart A. Levey:
Under Secretary:
Office of Terrorism and Financial Intelligence:
Department of the Treasury
Signed by:
Timothy D. Adams:
Under Secretary:
Office of International Affairs:
Department of the Treasury:
The following are GAO's comments on the Department of Treasury's letter
dated October 5, 2005.
GAO Comments:
1. Treasury notes in its comments that the report falls short in
describing the comprehensive efforts of the U.S. government efforts to
combat terrorist financing abroad. While a number of comments suggested
including information indicative of the successes of agency efforts to
address terrorist financing abroad, much of this information is outside
of the scope of this report. However, we have made a number of changes
in response to these comments. First, we have added information on the
accomplishments of U.S. agencies to the report. For example, we added
that Treasury has coordinated bilateral and international technical
assistance with the FATF and the international financial institutions,
such as the World Bank and International Monetary Fund, to draft legal
frameworks, build necessary regulatory and institutional systems, and
develop human expertise. Second, we have adjusted our first objective
to clarify that we are providing an overview of U.S. agencies' efforts
to address terrorist financing abroad. Third, as we note in other
comments, we have adjusted the title of the report to better reflect
the focus of our work.
2. Treasury suggests that the title of the draft report be modified to
be consistent with the primary focus of the report. We agree and have
revised the title of the report to focus on the key recommendations.
3. Treasury states that the report does not accurately characterize
Treasury's role in managing the U.S. government's relationship with
international financial institutions. We recognize that Treasury plays
an important role and added more examples of Treasury's relationship
with international financial institutions as provided in Treasury's
technical comments. For example, we added Treasury's relationship with
an intergovernmental body --the Financial Action Task Force--in setting
international standards for anti-money laundering and counter-
terrorism financing regimes. In addition, we added mentions of
Treasury's relationship with the Asian Development Bank, IMF and the
World Bank.
4. Treasury comments that the report focuses on the difficulties and
differences arising from the interagency process to coordinate training
and technical assistance to combat terrorist financing abroad and fails
to give due credit for the successes that have been achieved through
unprecedented interagency coordination. Our report concludes that the
U.S. government lacks an integrated strategy to coordinate the delivery
of training and technical assistance because key stakeholders do not
agree on roles and practices, there is not a clear presentation of what
funding is available for counter-terrorism financing training and
technical assistance, and a system has not been established to measure
performance and incorporate this information into its planning efforts.
Our report notes that, according to agency officials, the lack of
effective leadership leads to less than optimal delivery of training
and technical assistance to vulnerable countries. However, we have
included some interagency accomplishments such as numbers of
assessments in our description of training and technical assistance
efforts under objective 1. To best provide evidence of the
effectiveness of the U.S. government efforts, the U.S. government
should continue to develop a system to measure performance and
incorporate this information into its planning efforts.
5. In its comments, Treasury states that the report's third objective
on accountability issues appears somewhat incongruous in a report
dedicated to U.S. counter-terrorism training and technical assistance.
Our requesters asked us to address specific issues related to U.S.
efforts to combat terrorist financing abroad, including accountability
issues Treasury faces in its efforts to block terrorists' assets held
under U.S. jurisdiction, particularly with regard to the Treasury's
annual Terrorist Assets Reports.
6. We reviewed the revised text provided by Treasury for our report's
third objective on accountability issues the Department faces in its
efforts to block terrorists' assets held under U.S. jurisdiction. We
noted that we already cover many of Treasury's points in our report.
However, in some cases we incorporated technical information to help
clarify the challenges the department faces in assessing the impact of
terrorist designation activities. In addition, we updated the report to
reflect the most current status of Treasury's efforts to establish
performance measures for OFAC. Additionally, we acknowledge that the
language in the mandate for the Terrorist Assets Reports did not
explicitly design the reports as an accountability measure of the
Office of Foreign Assets Control's effectiveness in identifying and
blocking terrorist assets; however, nothing in the statutory language
or in the congressional intent underlying the mandate precludes
Treasury from compiling and reporting information in the manner in
which we have suggested in this report. Furthermore, we believe that
inclusion of comparative information and additional explanation
regarding significant shifts between years will enhance program
reporting and congressional oversight.
Additional Comments from the Department of the Treasury:
In addition, Treasury provided information in its technical comments
that we believe are important to the key findings and recommendations
in this report. While we have addressed Treasury's technical comments
as appropriate, we have reprinted and addressed specific technical
comments below.
1. Treasury technical comment (on our Results in Brief):
"The second paragraph of this section states, "First, although the
Department of State asserts that it leads the overall effort to deliver
training and technical assistance to all vulnerable countries, the
Department of Treasury does not accept State in this role." This
statement should be clarified to reflect that while Treasury does
acknowledge State's role, it believes that State's function is
necessarily one of coordination. State's role in this process is not to
actually "deliver" assistance. Rather, Treasury believes that State's
role is coordinating each USG agency's personnel and expertise to allow
them to deliver the needed training in commonly agreed upon priority
countries. Treasury also acknowledges that the draft report is helpful
in pointing out that this coordination can and should be improved to
facilitate more effective delivery of assistance in priority
countries."
GAO response: As Treasury states above, they believe that State's role
is limited to coordination for priority countries and does not accept
State's position that it leads all U.S. training and technical
assistance efforts to vulnerable countries, not just priority
countries. We have adjusted the language in our report and it now
reads, "First, Treasury, a key stakeholder, does not accept State's
position, based on statements in NSC guidance, that it leads all U.S.
counter-terrorism financing training and technical assistance efforts
to vulnerable countries."
2. Treasury technical comment (on our first objective):
"The first paragraph contains the following statement "According to the
Department of State, its Office of the Coordinator for Counterterrorism
is charged with directing, managing, and coordinating all U.S.
government agencies' efforts to develop and provide counter-terrorism
financing programs." This statement is inaccurately overbroad, as
Treasury (and likely other government agencies) has developed numerous
counterterrorist financing programs to advance the core strategic aims
identified in the 2003 NMLS [National Money Laundering Strategy]. It is
more accurate to say that the department of State coordinates the USG
provision of CFT [combat the financing of terrorism] technical
assistance and training to priority countries."
GAO response: GAO's draft statement was attributed to State and was
supported by State, so we did not change it in the report. Rather we
added the information provided by Treasury to the section on "U.S.
Effort Lacks Buy-in from Key Stakeholder on Roles and Procedures"
noting that Treasury asserts that State overstates its role and that
the role is limited to coordinating other U.S. agency's provision of
counter-terrorist financing training and technical assistance in
commonly agreed upon TFWG priority countries and notes that there are
numerous other efforts outside of States' purview.
3. Treasury technical comment (on our third objective):
"Substitute [text] with the following language: 'However, the TAR
[Terrorist Asset Report] was not mandated or designed as an
accountability measure for OFAC's effectiveness in assisting U.S.
persons in identifying and blocking assets of persons designated under
relevant Executive orders relating to terrorism. The report, as
mandated, was intended to provide only a snapshot view in time of
terrorist assets held in the United States by terrorist countries and
organizations.'"
GAO response: We acknowledge that the language in the mandate for the
Terrorist Assets Reports did not explicitly design the reports as an
accountability measure of the Office of Foreign Assets Control's
effectiveness in identifying and blocking terrorist assets; however,
nothing in the statutory language or in the congressional intent
underlying the mandate precludes Treasury from compiling and reporting
information in the manner in which we have suggested in this report.
Furthermore, we believe that inclusion of comparative information and
additional explanation regarding significant shifts between years will
enhance program reporting and congressional oversight.
4. Treasury technical comment:
"Substitute [text] with the following language: 'OFAC officials have
advised that OFAC's new performance measures are expected to be
completed by December 1, 2005, and its new strategic plan is expected
to be completed by January 1, 2006.'"
GAO response: We updated the report to reflect the most current status
of Treasury's efforts to establish performance measures for OFAC.
5. Treasury technical comment (on our third objective):
"In the second paragraph, the following language: "We also recommend
that the Secretary of Treasury provide more complete information on the
nature and extent of asset blocking in the United States in its
Terrorist Assets Report to Congress and establish milestones for
developing meaningful performance measures on terrorist designations
and asset blocking activities—." Should be replaced with the following
language:
. . . ."We also recommend Congress consider discontinuing the
requirement that Treasury produce the annual Terrorist Assets Report to
Congress. The report, based upon the input of numerous government
agencies, provides a snapshot of the known assets held in the United
States by terrorist-supporting countries and terrorist groups at a
given point in time. These numbers may fluctuate during each year and
between years for a number of policy-permissible reasons. The amount of
assets blocked under a terrorism sanctions program is not a primary
measure of a terrorism sanctions program's effectiveness, and countries
that have been declared terrorist supporting, and whose assets are not
blocked by a sanctions program, are already wary of holding assets in
the United States.'"
GAO response: We noted Treasury's position on this recommendation in
our report. However, we continue to believe that the annual Terrorist
Assets Report, with the incorporated changes, would be useful to
policymakers and program managers in examining their overall
achievements of the U.S. efforts to block terrorists' assets.
[End of section]
Appendix VIII: GAO Contact and Staff Acknowledgments:
GAO Contact:
Loren Yager, (202) 512-4347:
Acknowledgments:
In addition to the contact named above, Christine Broderick, Assistant
Director; Tracy Guerrero; Elizabeth Guran; Janet Lewis; and Kathleen
Monahan made key contributions to this report. Martin de Alteriis, Mark
Dowling, Jamie McDonald, and Michael Rohrback provided technical
assistance.
(320249):
FOOTNOTES
[1] A More Secured World: Our Shared Responsibility, United Nations,
December 2004.
[2] See GAO, Terrorist Financing: U.S. Agencies Should Systematically
Assess Terrorists' Use of Alternative Financing Mechanisms, GAO-04-163
(Washington, D.C.: Nov. 14, 2003).
[3] Alternative financing mechanisms are outside the mainstream
financial system and include the use of commodities (cigarettes,
counterfeit goods, illicit drugs, etc.), bulk cash, charities, and
informal banking systems.
[4] State identified these countries as major money laundering
countries among the 55 jurisdictions of primary concern in its March
2005 International Narcotics Control Strategy Report.
[5] World Bank and International Monetary Fund, Reference Guide to Anti-
Money Laundering and Combating the 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). The difficult issue
is that a universally accepted definition for "terrorism" has not been
established due to significant political and national implications that
differ from country to country. The United Nations continues to work to
gain worldwide consensus on the definition of terrorism.
[6] OFAC's mandate is to require all U.S. persons, including financial
institutions, to block targeted assets located in the United States or
under the control of a U.S. person outside of the United States.
[7] A 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.
[8] International standards are represented by the United Nations
International Convention for the Suppression of the Financing of
Terrorism and by the FATF's forty recommendations on money laundering
and nine special recommendations on terrorist financing.
[9] State and Treasury designations authorities are set forth in the
Antiterrorism and Effective Death Penalty Act of 1996, Section 411 of
the USA PATRIOT ACT of 2001, and relevant Executive orders [Executive
Order (E.O.) 13224, as amended by E.O. 13268, Blocking Property and
Prohibiting Transactions with Persons Who Commit, Threaten to Commit,
or Support Terrorism, and E.O. 12947, Prohibiting Transactions with
Terrorists Who Threaten to Disrupt the Middle East Peace Process.] U.S.
persons are prohibited from having dealings and must block the assets
within U.S. jurisdiction of terrorists and terrorist groups that are
designated by the departments of State and the Treasury, and those who
are owned or controlled by, acting for or on behalf of, or materially,
financially, or technologically assisting designated terrorists,
terrorist groups, or their supporters.
[10] According to a State official, designation and asset blocking do
not come at the expense of taking appropriate law enforcement action
but frequently complement each other. There are cases where in which
operational law enforcement action can be initiated quickly to track,
prosecute, and shut down terrorists. In other cases, for instance when
long-term investigations are under way, the better option may be to
designate for asset blocking until law enforcement actions can be
undertaken.
[11] According to Justice, asset forfeiture remains the most powerful
tool for disrupting and dismantling criminal enterprises of any nature,
including terrorist financing.
[12] Agencies include relevant bureaus, divisions, and offices of the
Departments of Defense, Homeland Security, Justice, State, and
Treasury, and the intelligence community.
[13] FATF mutual evaluations are conducted using a detailed methodology
to assess compliance with the FATF recommendations on money laundering
and terrorist financing. This methodology has been endorsed by the IMF,
World Bank, and other FATF-style regional bodies. Ultimately, if a
member country does not take steps to achieve compliance, membership in
the organization can be suspended.
[14] The TFWG is co-chaired by State's Office of the Coordinator for
Counterterrorism and the Bureau for International Narcotics and Law
Enforcement Affairs.
[15] The number of priority countries recently expanded from 19.
According to State, TFWG conducts a process to identify priority
countries for assistance based on consideration of intelligence
community analysis of the vulnerabilities, importance to U.S. security,
and capacity to absorb U.S. assistance in key states of anti-money
laundering/terrorist financing concern. According to NSC guidance, all
work in frontline countries is also to be coordinated within TFWG.
[16] 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.
[17] According to Treasury, Treasury has developed numerous counter-
terrorist financing programs to advance the core strategic aims
identified in the 2003 National Money Laundering Strategy.
[18] According to Justice, a high level inter-departmental decision has
assigned Justice the lead among the inter-agency community in drafting
foreign criminal laws, reviewing the legal sufficiency of such laws,
and providing prosecutorial training and development for the TFWG
countries.
[19] Pub. L. 99-83. Sec. 502, codified at 22 USC 2349aa-7. See also
Section 1(e) of the State Department Basic Authorities Act, as amended,
codified at 22 U.S.C. 2651a(e).
[20] Pub. L. 105-277 (Div. A, Title II, sec. 589). This provision has
been codified at 22 U.S.C. 2151aa.
[21] According to State officials, the number of TFWG priority
countries has grown and may change again in the future. During the
course of our review the number of priority countries increased from 19
to about two dozen. According to Treasury, U.S. agencies were providing
assistance under one set of procedures before these countries became
TFWG priority countries and were subject to TFWG procedures.
[22] According to Treasury officials, OTA funds other Treasury offices
conducting assessments or delivering training, such as TFFC and FinCEN
in conjunction with its programs. Also according to Treasury, OTA has
funded the expenses of other agencies to deliver technical assistance
when it was in support of an existing work plan and to meet performance
objectives.
[23] According to OTA officials, Justice and other U.S. agencies do not
always have the time and resources to comment on draft laws. Justice
officials agree, but maintained that this problem will only be resolved
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.
[24] When 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.
[25] A 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 non-government organizations.
[26] According to State TFWG officials, per NSC guidance, all work in
frontline countries is to be coordinated within TFWG and some frontline
countries are also priority countries. However, frontline countries are
not subject to the same procedures as priority countries which are the
main focus of TFWG, according to Department of State and Department of
the Treasury officials. According to State TFWG officials, frontline
countries contain terrorist cells.
[27] See GAO, Executive Guide: Effectively Implementing the Government
Performance and Results Act, GAO/GGD-96-118 (Washington, D.C.: June
1996).
[28] OTA 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.
[29] TFWG expenditures are classified.
[30] An official from State's Bureau of International Narcotics and Law
Enforcement Affairs Office told us that according to Office of the
Counterterrorism Coordinator officials, the fiscal year 2005 budget was
reduced by $300,000 giving a total of $17.2 for fiscal years 2002-2005.
[31] An 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.
[32] State'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.
[33] Department of State expenditures for priority countries are
classified.
[34] According to OTA officials, their contractors must have relevant
and recent active anti-money laundering experience, speak a foreign
language, and have overseas experience. Senior Department of the
Treasury officials support this claim and according to the NSC
guidance, contractor personnel are to be used to supplement U.S.
resources, with some caveats including that deference be given to those
U.S. government institutions with substantive equities in the outcome
of the missions.
[35] State 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.
[36] This analysis pertains to the nineteen countries originally
prioritized by the Terrorist Financing Working Group-it does not
include the seven additional countries added in March 2005.
[37] It became unclear at our meeting with OPDAT and State as to
whether the database should be classified. Justice had not classified
the database, because officials were under the impression that it was
only the ranking of priority countries that was classified, while State
maintained that it was the listing of priority countries that was
classified.
[38] Section 304 of Public Law 102-138 as amended by Public Law 103-236
(22 U.S.C. § 2656g) requires Treasury to 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.
[39] The 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.
[40] The 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.
[41] The Terrorist Assets Reports include information on "assets in the
United States," which include blocked assets held in the United States
and in U.S. jurisdiction and nonblocked assets of terrorist countries
and international terrorist designees. Nonblocked assets include those
assets belonging to entities under sanctions programs that do not
contain blocking provisions (Iran and Syria are the only two such
entities identified in the 2004 report).
[42] According to OFAC, amounts blocked for terrorist entities may
shift year to year for policy-acceptable 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.
[43] Treasury's 2004 Annual Performance and Accountability Report
states that Treasury proposes to discontinue the use of this indicator
in 2005.
[44] Sanctioned 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.
[45] Pub.L. No. 103-62 (August 3, 1993). According to GPRA, 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.
[46] Currently, OFAC's efforts are guided by Treasury's overall
strategic plan.
[47] See GAO, Executive Guide: Effectively Implementing the Government
Performance and Results Act, GAO/GGD-96-118 (Washington, D.C.: June
1996); and GAO, Electronic Government: Potential Exists for Enhancing
Collaboration on Four Initiatives, GAO-04-6, p. 21 (Washington, D.C.:
Oct. 10, 2003) for a discussion of key practices for interagency
collaboration.
[48] The GAO reports we reviewed include: GAO, Results-Oriented
Government: GPRA Has Established a Solid Foundation for Achieving
Greater Results, GAO-04-38 (Washington, D.C.: March 10, 2004) and GAO,
Agency Performance Plans: Examples of Practices That Can Improve
Usefulness to Decision makers, GAO/GGD/AIMD-99-69 (Washington, D.C.:
February 26, 1999).
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