Terrorist Financing
Agencies Can Improve Efforts to Deliver Counter-Terrorism-Financing Training and Technical Assistance Abroad Gao ID: GAO-06-632T April 6, 2006Disrupting terrorists' financing is necessary to impede their ability to organize, recruit, train, and equip adherents. U.S. efforts to strengthen domestic and global security include, among others, the provision of training and technical assistance in countering terrorist financing abroad. An interagency Terrorist Financing Working Group (TFWG), chaired by the U.S. Department of State (State), coordinates the delivery of this training and technical assistance to "priority" countries--those considered most vulnerable to terrorist financing schemes--as well as to other vulnerable countries. In addition, the Department of the Treasury (Treasury) Office of Foreign Assets Control (OFAC) leads U.S. efforts to block access to designated terrorists' assets that are subject to U.S. jurisdiction. In response to multiple congressional requesters, GAO examined U.S. efforts to combat terrorist financing abroad, publishing the report in October 2005. In this testimony, GAO discusses the report's findings about challenges related to (1) TFWG's coordination of the counter-terrorism-financing training and technical assistance abroad and (2) Treasury's measurement of results and provision of information needed to assess OFAC's efforts to block terrorist assets.
Under State's leadership, TFWG has coordinated the interagency delivery of counter-terrorism-financing training and technical assistance--for example, providing training and placing resident advisors--in more than 20 priority countries as well as other vulnerable countries. However, TFWG's effort has been hampered by the absence of a strategic and integrated plan. GAO found that the effort lacks three elements that are critical to strategic planning for operations within and across agencies: (1) Key stakeholder acceptance of roles and practices; (2) strategic alignment of resources with countries' needs and risks; and (3) a process to measurement the effort's results For example, two key TFWG stakeholders, State and Treasury, disagree about the extent of State's leadership as chair of TFWG. GAO recommended that State and Treasury, with other government agencies, implement an integrated strategic plan that addresses these challenges and sign a Memorandum of Agreement to improve coordination of counter-terrorism-financing training and technical assistance abroad. State and Treasury responded that they are taking several steps to improve the interagency process, but they did not address all of GAO's recommendations. OFAC undertakes a number of efforts related to the blocking of terrorists' assets. For example, OFAC compiles evidence as a basis for designating terrorist groups and individuals. However, GAO found limitations regarding Treasury's measurement of results and provision of information about FAC's efforts. Inadequate measures. At the time of GAO's review, Treasury lacked adequate measures to assess the results of OFAC's efforts. OFAC was in the process of developing new measures, which it recently completed. Although GAO has not reviewed them, these measures may enable officials overseeing OFAC to ascertain the strengths and weaknesses of its efforts as well as hold OFAC managers accountable. GAO recommended that, in addition, Treasury develop an OFAC-specific strategic plan that describes, among other things, how its performance measures relate to general program goals and objectives. As of March 30, Treasury had not yet finalized the strategic plan. Insufficient information. Treasury's yearly report to Congress on terrorist assets blocked does not provide sufficient information for Congress to assess OFAC's progress. For instance, the report shows the total dollar value of blocked terrorist assets held under U.S. jurisdictions but does not show changes from amounts of assets blocked in previous years. GAO recommended that Treasury provide information on such changes, along with other key performance metrics, in its annual Terrorist Assets Report. Treasury responded that it would discuss with Congress recrafting the report to address congressional interests.
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-06-632T, Terrorist Financing: Agencies Can Improve Efforts to Deliver Counter-Terrorism-Financing Training and Technical Assistance Abroad
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Testimony:
Before the Committee on Financial Services, Subcommittee on Oversight
and Investigations, House of Representatives:
United States Government Accountability Office:
GAO:
For Release on Delivery Expected at 10:00 a.m. EDT:
Thursday, April 6, 2006:
Terrorist Financing:
Agencies Can Improve Efforts to Deliver Counter-Terrorism-Financing
Training and Technical Assistance Abroad:
Statement of the Honorable David M. Walker, Comptroller General of the
United States:
GAO-06-632T:
GAO Highlights:
Highlights of GAO-06-632T, a testimony to the Subcommittee on Oversight
and Investigations, Committee on Financial Services, House of
Representatives:
Why GAO Did This Study:
Disrupting terrorists‘ financing is necessary to impede their ability
to organize, recruit, train, and equip adherents. U.S. efforts to
strengthen domestic and global security include, among others, the
provision of training and technical assistance in countering terrorist
financing abroad. An interagency Terrorist Financing Working Group
(TFWG), chaired by the U.S. Department of State (State), coordinates
the delivery of this training and technical assistance to ’priority“
countries”those considered most vulnerable to terrorist financing
schemes”as well as to other vulnerable countries. In addition, the
Department of the Treasury (Treasury) Office of Foreign Assets Control
(OFAC) leads U.S. efforts to block access to designated terrorists‘
assets that are subject to U.S. jurisdiction.
In response to multiple congressional requesters, GAO examined U.S.
efforts to combat terrorist financing abroad, publishing the report in
October 2005. In this testimony, GAO discusses the report‘s findings
about challenges related to (1) TFWG‘s coordination of the counter-
terrorism-financing training and technical assistance abroad and (2)
Treasury‘s measurement of results and provision of information needed
to assess OFAC‘s efforts to block terrorist assets.
What GAO Found:
Under State‘s leadership, TFWG has coordinated the interagency delivery
of counter-terrorism-financing training and technical assistance”for
example, providing training and placing resident advisors”in more than
20 priority countries as well as other vulnerable countries. However,
TFWG‘s effort has been hampered by the absence of a strategic and
integrated plan. GAO found that the effort lacks three elements that
are critical to strategic planning for operations within and across
agencies:
* Key stakeholder acceptance of roles and practices
* Strategic alignment of resources with countries‘ needs and risks
* A process to measurement the effort‘s results
For example, two key TFWG stakeholders, State and Treasury, disagree
about the extent of State‘s leadership as chair of TFWG. GAO
recommended that State and Treasury, with other government agencies,
implement an integrated strategic plan that addresses these challenges
and sign a Memorandum of Agreement to improve coordination of counter-
terrorism-financing training and technical assistance abroad. State and
Treasury responded that they are taking several steps to improve the
interagency process, but they did not address all of GAO‘s
recommendations.
OFAC undertakes a number of efforts related to the blocking of
terrorists‘ assets. For example, OFAC compiles evidence as a basis for
designating terrorist groups and individuals. However, GAO found
limitations regarding Treasury‘s measurement of results and provision
of information about OFAC‘s efforts.
* Inadequate measures. At the time of GAO‘s review, Treasury lacked
adequate measures to assess the results of OFAC‘s efforts. OFAC was in
the process of developing new measures, which it recently completed.
Although GAO has not reviewed them, these measures may enable officials
overseeing OFAC to ascertain the strengths and weaknesses of its
efforts as well as hold OFAC managers accountable. GAO recommended
that, in addition, Treasury develop an OFAC-specific strategic plan
that describes, among other things, how its performance measures relate
to general program goals and objectives. As of March 30, Treasury had
not yet finalized the strategic plan.
* Insufficient information. Treasury‘s yearly report to Congress on
terrorist assets blocked does not provide sufficient information for
Congress to assess OFAC‘s progress. For instance, the report shows the
total dollar value of blocked terrorist assets held under U.S.
jurisdictions but does not show changes from amounts of assets blocked
in previous years. GAO recommended that Treasury provide information on
such changes, along with other key performance metrics, in its annual
Terrorist Assets Report. Treasury responded that it would discuss with
Congress recrafting the report to address congressional interests.
www.gao.gov/cgi-bin/getrpt?GAO-06-632T.
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]
Madame Chairwoman and Members of the Subcommittee:
Thank you for inviting me here today to discuss GAO's findings on
certain U.S. government counter-terrorism-financing efforts as well as
various recommendations we have made for improving the management and
oversight of these efforts. We appreciate the opportunity to contribute
to the record that this panel has created on the subject. Madame
Chairwoman, we also recognize and appreciate your consistent attention
to issues related to the financing of terrorism. For example, you
cofounded the bipartisan Congressional Anti-Terrorist Financing Task
Force in 2004 to bolster efforts to shut down terrorist funding
networks. You also coauthored recent legislation to create a
certification regime, led by the Department of the Treasury, that would
annually report to Congress the efforts of other countries to combat
terror funding and would impose sanctions on countries that fail to
perform up to standard. Thank you for your leadership in this area.
As you have stated on prior occasions, Madame Chairwoman, disrupting
terrorist financing can raise terrorists' costs and risks of gathering
and moving assets and is necessary to impede their ability to carry out
significant operations. The United Nations (UN) reports that more than
ever before, security threats are interrelated; a threat to one country
can be a threat to all, and no country by its efforts alone can make
itself invulnerable. It is in every country's interest, accordingly, to
cooperate both internally and with other countries in addressing threat
priorities.
In GAO's October 2005 report on U.S. efforts to counter terrorist
financing abroad, we noted that the United States plays an active and
ongoing role in building international support for measures to combat
terrorist financing.[Footnote 1] For example, the U.S. government has
participated in efforts to develop and implement international
standards to combat terrorist financing, sometimes leading these
efforts. The United States also conducts various intelligence and law
enforcement activities designed to identify and disrupt the flow of
terrorist financing abroad. These activities include, among others,
gathering intelligence and sharing information with other countries.
Further, the United States provides training and technical assistance
to help countries that are vulnerable to terrorist financing establish
effective counter-terrorism-financing regimes. To coordinate the
delivery of this training and assistance to about two dozen "priority
countries"--those considered most vulnerable--as well as to other
vulnerable countries, the National Security Council (NSC) established
the interagency Terrorist Finance Working Group (TFWG), whose members
include, among others, the Department of State (State), which chairs
the group; the Treasury; and the Department of Justice (Justice).
In addition, the United States has participated in global efforts to
publicly designate individuals and groups as terrorists and to block
access to their assets. U.S. officials have worked with members of the
UN to develop and support UN Security Council resolutions to freeze the
assets of designated individuals or groups that conduct or facilitate
terrorist acts. The United States successfully participated in
bilateral efforts with Saudi Arabia and jointly designated more than a
dozen Saudi-related entities and multiple individuals as terrorists or
terrorist supporters. Officials of the Department of the Treasury
(Treasury) have stated that public designations discourage further
financial support and encourage other governments to more effectively
monitor the activities of the designated individuals or groups.
Treasury's Office of Foreign Assets Control (OFAC) serves as the lead
U.S. agency for blocking the assets of terrorists designated by the
United States unilaterally or bilaterally or as a result of UN Security
Council Resolutions.
As our October 2005 report showed, much has been accomplished. However,
our report also noted various challenges that could negatively affect
the results of some of these efforts as well as U.S. agencies'--and
Congress's--accountability for, and oversight of, these efforts. Today,
as requested, I will discuss our report's findings and recommendations
regarding challenges related to:
* TFWG's efforts to coordinate interagency delivery of counter-
terrorism-financing training and technical assistance abroad and:
* Treasury's use of performance measures and provision of information
necessary to assess OFAC's efforts to block terrorist assets.
In discussing these challenges, I will address the need for more
strategic and integrated planning that focuses on achieving results in
connection with U.S. counter-terrorism-financing activities rather than
on the activities themselves. Such planning should include a risk
management element--a systematic process for assessing threats and
taking appropriate steps to deal with them.
GAO's mission is to help Congress improve the performance and ensure
the accountability of the federal government for the benefit of the
American people. We have been actively involved in improving the
federal government's performance in the critically important area of
homeland security, including providing numerous products related to
counter-terrorism financing. We have also been privileged to actively
support Congress and the 9/11 Commission by providing details about key
personnel, testifying before Congress and the 9/11 Commission, and
sharing our research, products, and experiences. In addition, GAO is an
active member of the International Organization of Supreme Audit
Institutions (INTOSAI),[Footnote 2] a professional organization of
national supreme audit institutions that provides its members
opportunities to share knowledge and experiences about the challenges
in today's global environment, to ensure that government auditing
continuously progresses with new developments. GAO also serves on an
INTOSAI task force on international anti-money laundering that aims to
design and promote policies, strategies, and actions to enable INTOSAI
members to strengthen their anti-money laundering capabilities.
In preparing our October 2005 report, we examined documentation and
interviewed officials from State, Treasury, Justice, and the
Departments of Homeland Security and Defense as well as from the
intelligence community. We also assessed information from the UN,
Financial Action Task Force (FATF) on Money Laundering, World Bank, and
International Monetary Fund (IMF). We conducted field work in Pakistan,
Indonesia, and Paraguay, where we assessed information from government,
law enforcement, nongovernmental organizations, regional organizations,
and donor government officials as well as from U.S. embassy officials.
We performed our work for the report from April 2004 to July 2005. In
addition, for this testimony, we obtained information in March 2006
from State and Treasury on their actions to implement our
recommendations. All work was conducted in accordance with generally
accepted government auditing standards.
Summary:
Although the U.S. government provides a range of training and technical
assistance to countries it deems vulnerable to terrorist financing, it
does not have a strategic and integrated plan to coordinate the
delivery of this assistance. The training and technical assistance
coordinated by TFWG include, among other activities, training courses
and the placement of intermittent or long-term resident advisors.
However, we found that the interagency effort lacks three elements that
GAO has previously identified as critical to effective strategic
planning for operations within and across agencies: key stakeholder
acceptance of roles and procedures, a strategic alignment of resources
with needs and risks, and a process to measure results.[Footnote 3]
* Key stakeholder acceptance of roles and procedures. State and
Treasury disagree about roles and procedures related to the delivery of
counter-terrorism-financing training and technical assistance. Among
these disagreements, Treasury does not accept State's assertion of
leadership over the delivery of all U.S. counter-terrorism-financing
training and technical assistance to vulnerable countries and
criticizes the range of control that State exerts as chair of TFWG.
Consequently, the overall effort lacks effective leadership, resulting
in less than optimal delivery of training and technical assistance. For
example, in May 2005, State denied a Treasury official entry into a
priority country to help set up a financial intelligence unit
(FIU)[Footnote 4] at the central bank minister's request. State
officials told us that because the country had been designated as a
priority country after Treasury began preliminary work there, State
wanted to conduct a TFWG assessment before allowing Treasury to
continue its work.[Footnote 5] At the U.S. Embassy's request, State
delayed the assessment and Treasury's work proceeded, but the Treasury
official's entry into the country was delayed several months.
* Strategic alignment of resources with needs. The U.S. government,
including TFWG, has not systematically assessed the allocation of its
resources for counter-terrorism-financing training and technical
assistance. For example, the government has no clear record of the
funding that key agencies allocate for the training and assistance and
has not systematically assessed the availability and suitability of the
agencies' human capital resources or of international resources. As a
result, government decision-makers are limited in their ability to
strategically align available resources with the needs and relative
risks of priority countries and other vulnerable countries.
* Performance measurement process. The U.S. government, including TFWG,
has not established a system to measure the results of its counter-
terrorism-financing training and technical assistance. In addition, a
database that Justice created in November 2004 to track the results of
training and assistance delivered to priority countries was, as of July
2005, not yet functional. As a result, the government is unable to
systematically consider the past performance of these efforts when
strategizing for the future.
In our October 2005 report, we recommended that the Secretaries of
State and the Treasury, in consultation with the NSC and other
government agencies, implement an integrated strategic plan and sign a
Memorandum of Agreement to improve coordination of counter-terrorism-
financing training and technical assistance. In their March 2006
letters to Congress regarding their responses to our recommendations,
State and Treasury describe, in general terms, steps they are taking to
improve the interagency process--for example, working with one another
and with other TFWG members to review and revise TFWG procedures--that
may provide a basis for improving stakeholder acceptance of roles and
procedures. However, the letters do not provide any information
regarding steps to systematically assess or align U.S. resources with
country needs or to measure results of the training and technical
assistance, and they do not address our recommendation of a Memorandum
of Agreement.
Treasury's OFAC undertakes a number of activities as part of its
terrorist asset blocking efforts. We found in October 2005, however,
that Treasury lacked meaningful performance measures and that
sufficient information was not available for Congress and decision-
makers to assess the results of these efforts. Although Treasury had
developed some limited performance measures, OFAC officials
acknowledged that these measures were not specific to terrorist
financing, were not designed to show progress, and did not track
related activities and results. The officials reported that they were
in the process of developing more meaningful performance measures as
well as an OFAC-specific strategic plan. In addition, OFAC's annual
Terrorist Assets Report to Congress regarding the nature and extent of
terrorists' U.S. assets does not provide the information needed to
assess results that have been achieved. Although it shows the amount of
assets blocked each year, it does not show changes from amounts of
assets blocked in previous years or explain such changes. We noted in
our report that this information, along with other key performance
metrics, could help Congress assess results related to OFAC's asset
blocking efforts. We recommended that Treasury complete its efforts to
develop an OFAC-specific strategic plan and performance measures and
that the annual Terrorist Assets Report include more complete
information about blocked assets. OFAC officials told us in March 2006
that OFAC had developed new performance measures to assess its role in
administering and enforcing economic sanctions against terrorists;
however, we have not reviewed the new measures. According to OFAC
officials, its strategic plan has not yet been finalized. In its March
2006 letter, Treasury reported that it would work with Congress to
discuss recrafting the Terrorist Assets Report to address congressional
interests.
Background:
The financing of terrorism is the financial support, in any form, of
terrorism or of those who encourage, plan, or engage in it.[Footnote 6]
Terrorist financing may derive from licit activities, such as
fundraising by charities, or from illicit activities, such as selling
counterfeit goods, contraband cigarettes, and illegal drugs.[Footnote
7] Disguising the source of terrorist financing, whether licit or
illicit, is important to terrorist financiers: if the source can be
concealed, it remains available for future terrorist financing
activities. Some international experts on money laundering find that
there is little difference in the methods used by criminal
organizations or terrorist groups to conceal their proceeds by moving
them through national and international financial systems.[Footnote 8]
FATF, an intergovernmental body, sets internationally recognized
standards for developing anti-money laundering and counter-terrorism-
financing regimes and assesses countries' abilities to meet these
standards. To strengthen anti-money-laundering and counter-terrorism-
financing worldwide, international entities such as the UN, FATF, World
Bank, and IMF, as well as the U.S. government, agree that each country
should implement practices and adopt laws that are consistent with
international standards.[Footnote 9] The U.S. government has worked
with international donors and organizations--for example, the United
Kingdom, Australia, Japan, the European Union, FATF, UN, the
Organization of American States, the Asian Development Bank, IMF, and
the World Bank--to build counter-terrorism-financing regimes in
vulnerable countries.
U.S. offices and bureaus--primarily within the Departments of State,
the Treasury, Justice, and Homeland Security--and the federal financial
regulators[Footnote 10] provide training and technical assistance,
chiefly funded by State and Treasury, to countries deemed vulnerable to
terrorist financing. One of TFWG's functions is to prioritize the
delivery of such assistance to countries that it deems most vulnerable.
To identify priority countries, TFWG considers intelligence community
analysis of countries' vulnerabilities to terrorist financing,
importance to U.S. security, and capacity to absorb U.S. assistance.
NSC guidance for TFWG states that delivery of assistance to other
vulnerable countries--that is, those that have not been designated as
priority--may proceed so long as it is possible without adversely
affecting the delivery of assistance to priority countries. Other
vulnerable countries receive counter-terrorism-financing training and
technical assistance through other U.S. government programs as well as
through TFWG. (See app. 1 for TFWG membership and process.)
U.S. Government Lacks an Integrated Strategy to Coordinate the Delivery
of Training and Technical Assistance:
Although the U.S. government provides a range of training and technical
assistance to countries it deems vulnerable to terrorist financing, it
lacks an integrated strategy to coordinate the delivery of this
assistance. Specifically, the effort lacks key stakeholder acceptance
of roles and practices, a strategic alignment of resources with needs,
and a process to measure results--three elements that previous GAO work
has identified as critical to effective strategic planning within and
across agencies. GAO recommended that the Secretaries of State and the
Treasury implement an integrated strategic plan and a Memorandum of
Agreement for the delivery of training and technical assistance.
According to March 2006 correspondence from State and Treasury, the
departments have taken several steps to enhance interagency
coordination.
U.S. Agencies Provide Wide Range of Training and Technical Assistance:
The training and technical assistance that U.S. agencies provide to
vulnerable countries are intended to help the countries develop the
five elements that, according to State, are needed for an effective
anti-money-laundering and counter-terrorism-financing regime: a legal
framework, a financial regulatory system, an FIU, law enforcement
capabilities, and judicial and prosecutorial processes. The training
and assistance are offered through courses, presentations at
international conferences, the use of overseas regional U.S. law
enforcement academies or U.S.-based schools, and the placement of
intermittent or long-term resident advisors.[Footnote 11] According to
State officials, at the time of our review, TFWG had coordinated the
delivery of training and technical assistance in at least one of these
five elements to more than 20 priority countries.
Key Stakeholders Disagree about Roles and Procedures:
U.S. agencies involved in providing counter-terrorism-financing
training and technical assistance disagree both about agencies' roles
relating to the coordination of the training and assistance efforts and
about training and assistance procedures and practices. Consequently,
the overall effort lacks effective leadership, resulting in less than
optimal delivery of training and technical assistance to vulnerable
countries.[Footnote 12]
State and Treasury disagree regarding State's role in coordinating the
training and technical assistance. According to State, its Office of
the Coordinator for Counterterrorism is charged with directing,
managing, and coordinating all U.S. agencies' efforts to develop and
provide counter-terrorism financing programs, including, but not
limited to, those in priority countries. Treasury, a key stakeholder,
asserts that there are numerous other efforts outside States' purview
and that State's role is limited to coordinating, as chair of TFWG, the
provision of such assistance in priority countries.[Footnote 13] In
addition, senior Treasury officials told us that they strongly disagree
with the degree of control State asserts over TFWG decisions and said
that State creates obstacles rather than coordinating efforts.
Officials from Justice, which provides training and technical
assistance[Footnote 14] and receives funding from State, told us that
they respect State's role as the TFWG chair and coordinator and said
that all counter-terrorism-financing training and technical assistance
efforts should be brought under the TFWG decision-making process. While
supportive of State's position, Justice's statement demonstrates that
State's role lacks clear definition and recognition in practice.
In addition, State and Treasury officials disagree about procedures and
practices for delivering the training and technical assistance. State
cited NSC guidance and an unclassified State document focusing on TFWG
as providing procedures and practices for delivering training and
technical assistance to all countries. Treasury officials told us that
the procedures and practices defined by NSC were pertinent only to the
TFWG priority countries and that TFWG has no formal mandate or process
to provide technical assistance to non-priority countries. Moreover,
Justice officials indicated that differences in the procedures and
practices for delivering training and technical assistance to priority
countries versus those for other vulnerable countries had created
problems.
State and Treasury officials cited numerous examples of their
disagreements on procedures and practices. For example:
* According to Treasury officials, funding provided by Treasury's
Office of Technical Assistance (OTA) should primarily support
intermittent and long-term resident advisors, who are U.S.
contractors.[Footnote 15] According to State officials, OTA should
instead supplement State's funding for counter-terrorism-financing
training and technical assistance, which primarily funds current
employees of other U.S. agencies.
* According to OTA officials, their contractors provide assistance in
drafting counter-terrorism-financing and anti-money-laundering laws in
non-priority countries and OTA provides the drafts to Justice and other
U.S. agencies for review and comment. State officials cited NSC
guidance that current Justice employees should be primarily responsible
for working with foreign countries to assist in drafting counter-
terrorism-financing and anti-money-laundering laws and voiced strong
resistance to use of contractors. Justice cited two examples in which
contractors' work resulted in laws that did not meet FATF standards.
According to OTA officials, the host country itself is ultimately
responsible for final passage of a law that meets international
standards.[Footnote 16]
* State officials said that OTA's use of confidentiality agreements
between contractors and the foreign officials they advise had impeded
U.S. interagency coordination in one country and that the continued
practice could present future challenges.[Footnote 17] However,
Treasury officials said that the incident was an isolated case
involving a contract problem and that procedural steps have been taken
to ensure the problem is not repeated.
* 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 18]
However, this procedure becomes complicated when a vulnerable country
is designated a priority country. For example, in November 2004,
Treasury conducted an OTA financial assessment in a vulnerable country
and subsequently reached agreement with the country's central bank
minister to install a resident advisor to set up an FIU. However, after
TFWG had changed the country's status to priority, State officials, in
May 2005, denied clearance for Treasury officials to visit the country
to arrange for the placement of a resident advisor; according to State
TFWG officials, State delayed the officials' visit until a TFWG
assessment could be completed. At our review's conclusion in July 2005,
Treasury's work had been delayed by 2.5 months. However, the U.S.
embassy requested that Treasury proceed with its visit and TFWG delay
its assessment.
U.S. Effort Does Not Strategically Align Resources with Related Needs
and Risks:
The U.S. government, including TFWG, has not strategically aligned its
resources with its mission to deliver counter-terrorism-financing
training and technical assistance.[Footnote 19] The U.S. government has
no clear record of the budgetary resources available for counter-
terrorism-financing assistance. Further, the government has not
systematically assessed the suitability and availability of U.S. human
capital resources or the potential availability of international
resources. As a result, decision makers do not know the full range of
resources available to meet the needs and address the related risks
they have identified in priority countries and to determine the best
match of remaining resources to other vulnerable countries' needs.
U.S. Government Lacks Clear Record of Budget Resources for Training and
Assistance:
State and Treasury do not have clear records of the funds that they
allocate for counter-terrorism-financing training and technical
assistance. Each agency receives separate appropriations that it can
use to fund training and technical assistance provided by themselves,
other agencies, or contractors. State primarily transmits its training
and technical assistance funds to other agencies, while Treasury
primarily employs short-and long-term advisors through
contracts.[Footnote 20] However, because funding for counter- terrorism-
financing training and assistance is mingled with funding given to the
agencies for anti-money-laundering training and assistance and other
programs, it is difficult for U.S. government decision-makers to
determine the actual amount allocated to these efforts.[Footnote 21]
State officials told us that funding for State counter-terrorism-
financing training and technical assistance programs derives from two
primary sources:
* Non-Proliferation, Anti-Terrorism, Demining, and Related Programs.
State's Office of the Coordinator for Counterterrorism uses funding
from this account to provide counter-terrorism financing training and
technical assistance to TFWG countries. Our analysis of State records
showed that budget authority for the account included $17.5 million for
counter-terrorism-financing training and technical assistance for
fiscal years 2002-2005.
* International Narcotics Control and Law Enforcement. State's Bureau
of International Narcotics Control and Law Enforcement uses funding
from this account to provide counter-terrorism-financing and anti-
money-laundering training and technical assistance to a wide range of
countries, including seven priority countries, during fiscal years 2002-
2005, as well to provide general support to multilateral and regional
programs. Our analysis of State records shows that budget authority for
this account included about $9.3 million for anti-money- laundering
assistance, counter-terrorism-financing training and assistance, and
related multilateral and regional activities for fiscal years 2002-
2005.[Footnote 22]
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 23]
Treasury officials told us that OTA's counter-terrorism-financing
technical assistance is funded through its Financial Enforcement
program. Our analysis of Treasury records showed that OTA received
budget authority totaling about $30.3 million for all financial
enforcement programs for fiscal years 2002-2005. However, because OTA
funding for counter-terrorism-financing training and technical
assistance is embedded with funding for anti-money-laundering
assistance, the exact amount allocated to countering terrorist
financing cannot be determined. One OTA official told us that in any
given year, as much as two-thirds of these program funds may be spent
on counter-terrorism-financing or anti-money-laundering assistance.
U.S. Government Has Not Assessed Human Capital Resources for Training
and Assistance:
The U.S. government, including TFWG, has not systematically assessed
the availability and suitability of the human capital resources used by
the agencies for counter-terrorism-financing training and technical
assistance. As a result, agency decision makers lack reliable
information to use in determining the optimal balance of government
employees and contractors to meet the needs and relative risks of
vulnerable countries.
According to State and Treasury officials, the effectiveness of
contractors and current employees in delivering the various types of
training and technical assistance has not been systematically
evaluated. Decisions at TFWG appear to be based on anecdotal
information rather than transparent and systematic assessments of
resources. In addition, according to the State Performance and
Accountability Report for fiscal year 2004, a shortage of anti-money-
laundering experts continues to hamper efforts to meet the needs of
nations that request assistance, including priority countries.
According to State officials, U.S. technical experts are especially
overextended because of their frequent need to divide their time
between assessment, training, and investigative missions. Moreover,
officials from State's Office of the Coordinator for Counterterrorism
said that a lack of available staff had slowed the disbursement of
funding at TFWG's inception.[Footnote 24]
Although Treasury said that there may be a shortage of anti-money
laundering experts in the U.S. government who are available to provide
technical assistance in foreign countries, Treasury officials told us
that many such experts, recently retired from the same U.S. government
agencies, are available as contractors. A senior OTA official said that
OTA has actively sought to provide programs in more priority countries
but that State, as chair of TFWG, has not supported OTA's efforts.
Specifically, our analysis showed that OTA obligated about $1.1 million
of its financial enforcement program funding in priority countries, in
part to place resident advisors, in fiscal years 2002-2005.[Footnote
25] State officials said that they welcomed more OTA participation in
priority countries as a component of applicable resources; however,
they questioned whether OTA consistently provides high-quality
assistance. At the same time, State officials repeatedly stated that
they needed OTA funding, not OTA-contracted staff, to meet current and
future needs.[Footnote 26]
U.S. Government Has Not Assessed Potential International Resources:
The U.S. government, including TFWG, has not systematically
consolidated and synthesized available information on other countries'
and international entities' counter-terrorism-financing training and
technical assistance activities or integrated this information into a
decision-making process. Further, TFWG has not developed a strategy for
encouraging allies and international entities to contribute resources
to help vulnerable countries build counter-terrorism-financing
capabilities and coordinate training and technical assistance
activities--one of TFWG's stated goals. State and Treasury officials
told us that, instead, they take an ad hoc approach to working with
allies and international entities on coordinating resources for
training and technical assistance. These officials also noted that at
TFWG meetings, interagency issues are given higher priority than
international resource sharing. Without a systematic way to assess
information about international activities and to consolidate,
synthesize, and integrate this information into the U.S. interagency
decision-making process, the U.S. government cannot easily capitalize
on opportunities for resource sharing with allies and international
entities.
U.S. Government Lacks System to Measure Performance and Incorporate
Results:
The U.S. government, including TFWG, has not established a system to
measure the results of its training and technical assistance efforts
and to incorporate this information into its integrated planning
efforts. According to an official from Justice's Office of Overseas
Prosecutorial Development, Assistance and Training (OPDAT), OPDAT led
an interagency effort to develop a system for measuring the results of
training and technical assistance provided through TFWG and related
assistance results for priority countries. In November 2004, OPDAT
assigned an intern to set up a database to track such results. Because
the database was not accessible to all TFWG members, OPDAT planned to
serve as the focal point for entering the data collected by TFWG
members.[Footnote 27]
OPDAT asked agencies to provide statistics on programs, funding, and
other information, including responding to questions concerning results
that corresponded to the five elements of an effective counter-
terrorism-financing regime. OPDAT also planned to track key
recommendations for training and technical assistance and progress made
in priority countries as provided in FATF and TFWG assessments.
However, as of July 2005, OPDAT was still waiting to hire an intern to
complete the project. OPDAT and State officials confirmed that the
system had not yet been approved or implemented by TFWG.
GAO Recommended Actions to Improve Interagency Coordination, and
Agencies Are Taking Steps:
To ensure that U.S. government interagency efforts to provide counter-
terrorism-financing training and technical assistance are integrated,
efficient, and effective, 'particularly with respect to priority
countries, we recommended in our report that the Secretary of State and
the Secretary of the Treasury, in consultation with NSC and relevant
government agencies, develop and implement an integrated strategic plan
for the U.S. government that:
* designates leadership and provides for key stakeholder involvement;
* includes a systematic and transparent assessment of the allocation of
U.S. government resources;
* delineates a method for aligning the resources of relevant U.S.
agencies to support the mission based on key needs and related risks;
and:
* provides processes and resources for measuring and monitoring
results, identifying gaps, and revising strategies accordingly.
We also recommended that the Secretaries of State and the Treasury
enter into a Memorandum of Agreement concerning counter-terrorism-
financing and anti-money-laundering training and technical assistance
to ensure a seamless campaign in providing such assistance programs to
vulnerable countries. The agreement should specify, with regard to U.S.
counter-terrorism-financing training and technical assistance,
* the roles of each department, bureau, and office;
* methods to resolve disputes concerning OTA's use of confidentiality
agreements in its contracts; and:
* coordination of funding and other resources.
In March 2006 letters to relevant congressional oversight and
appropriation committees, State and Treasury describe general steps
that they are taking to improve the interagency process in delivering
counter-terrorism-financing training and technical assistance abroad.
The agencies report engaging with each other at all levels to ensure
increased coordination. In addition, they report that, in concert with
the NSC and the Departments of Homeland Security and Justice, they are
reviewing TFWG and its procedures with a view to enhancing its
effectiveness. Also, State reports that it has begun chairing TFWG at
the Deputy Assistant Secretary level to further enhance coordination.
State also says that it is reconvening a senior-level interagency
Training and Assistance Subgroup that is responsible for coordinating
all U.S. government assistance on counterterrorism matters, including
counter-terrorism-financing training and technical assistance.
Although these steps could provide a basis for improved stakeholder
acceptance of roles and procedures, State's and Treasury's letters lack
sufficient detail to affirm that the preparation of an integrated and
risk-based strategic plan is under way. The letters also do not address
efforts to strategically align resources with needs or to measure
performance. Moreover, the letters do not address our recommendation
regarding the Memorandum of Agreement or offer alternative means of
ensuring the duration of any improvements in coordination.
Treasury Needs Meaningful Performance Measures and Information to Show
Results and Progress of Terrorist Asset Blocking:
Treasury's OFAC undertakes a number of activities as part of its
efforts to block terrorist assets. However, although Treasury uses some
limited performance measures related to OFAC's efforts, Treasury
officials acknowledged that the measures do not assess results or show
how OFAC's efforts contribute to Treasury's terrorist financing-related
goals. In addition, OFAC officials acknowledged that Treasury's annual
Terrorist Assets Report to Congress on the nature and extent of blocked
terrorists' U.S. assets does not provide the information needed to
assess progress achieved. In our report, we recommended that the
Secretary of the Treasury finalize the development of the performance
measures as well as an OFAC-specific strategic plan and provide more
complete information in its annual reports to Congress on terrorist
assets blocked. As of March 2006, OFAC had developed new performance
measures and said it would work with Congress to provide the
information needed regarding OFAC's terrorist asset blocking efforts.
OFAC Administers Terrorism-Related Sanctions:
OFAC administers and enforces economic sanctions, based on U.S. foreign
policy and national security goals, against designated individuals or
groups that conduct or facilitate terrorist activity.[Footnote 28] Once
individuals or groups are designated by Treasury or State, OFAC serves
as the lead agency responsible for prohibiting transactions and
blocking assets subject to U.S. jurisdiction. As part of its efforts,
OFAC:
* coordinates and works with other U.S. agencies to identify and
investigate prospective terrorist designations;
* compiles the administrative record or evidentiary material that will
serve as the factual basis underlying a decision by OFAC to designate
individuals or groups; and:
* engages foreign counterparts to gather information, apply pressure,
or request or offer assistance in support of terrorist designation and
asset blocking activities.
OFAC may use the threat of designation to gain cooperation, forcing key
sources of financial support to choose between public exposure of their
support of terrorist activity of their good reputation. OFAC also works
with the regulatory community and industry groups to assure that assets
are expeditiously blocked and the ability to carry out transactions
through U.S. parties is terminated.
Treasury's Performance Measures Do Not Assess Results of Terrorist
Asset Blocking:
At the time of our October 2005 review, Treasury lacked effective
performance measures to assess the results of OFAC's terrorist asset
blocking efforts or show how these efforts contribute to the
department's goals of disrupting and dismantling terrorist financial
infrastructures and executing the nation's financial sanctions
policies. Treasury's 2004 Performance and Accountability Report
contained limited performance measures related to asset blocking,
including terrorist designations, including:
* an increase in the number of terrorist finance designations in 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 29]
and:
* the estimated number of sanctioned entities no longer receiving funds
from the United States.[Footnote 30]
OFAC officials told us that they recognized the inadequacy of these
measures to assess progress in blocking terrorist assets. According to
the OFAC officials:
* The measures in the 2004 Performance and Accountability Report are
not specific to terrorist financing. Two of the three measures do not
separate data on terrorists from data on other entities such as drug
traffickers, hostile foreign governments, corrupt regimes, and foreign
drug cartels, although OFAC officials acknowledged that they could have
reported the data separately.
* Progress on asset blocking cannot be measured simply by totaling an
amount of blocked assets at the end of the year, because the amounts
may vary over the year as assets are blocked and unblocked.
* As of October 2005, Treasury had not developed measures to track
activities and results related to asset blocking. For example,
Treasury's underlying research to identify terrorist entities and their
support systems is used by other U.S. agencies for activities such as
law enforcement investigations. However, Treasury lacked measures to
track other agencies' use of this research.
Treasury officials also noted that measuring the effectiveness of these
efforts in terms of their deterrent value is problematic, in part
because the direct impact on unlawful activity is unknown and because
precise metrics for illegal and clandestine activities are hard to
develop. According to Treasury officials, measuring these efforts'
effectiveness can also be difficult because many of them involve
multiple U.S. agencies and foreign governments and are highly
sensitive. However, contrary to a U.S. legislative directive to
agencies to ascertain and explain the infeasibility or
impracticableness of a performance goal for a program activity,
Treasury's annual report does not address the deterrent value of
designations or the difficulties in measuring their
effectiveness.[Footnote 31]
In October 2005, in commenting on a draft of our draft report, Treasury
officials told us that they were in the process of developing better
quantitative and qualitative measures for assessing the results of
OFAC's terrorist asset blocking efforts. In addition, Treasury
officials said that they were developing a strategic plan to guide
OFAC's efforts.[Footnote 32] The officials stated that they expected
OFAC's new performance measures to be completed by December 1, 2005,
and its new strategic plan to be completed by January 1, 2006. We
recommended in our report that the Secretary of the Treasury complete
the efforts to develop meaningful performance measures and an OFAC-
specific strategic plan to ensure that policy makers and program
managers are able to examine the results of U.S. efforts to block
terrorists' assets. According to discussions with OFAC officials in
March 2006, OFAC has developed new measures to assess its role in
administering and enforcing economic sanctions against terrorists;
however, we have not assessed the adequacy of these new measures.
According to OFAC officials, as of March 30, 2006, the strategic plan
had not yet been finalized.
Treasury Report Does Not Show Progress in Asset Blocking:
Treasury's annual Terrorist Assets Report, which offers a year-end
snapshot of dollar amounts of terrorist assets held in U.S.
jurisdiction, does not provide sufficient information to demonstrate
OFAC's progress in its terrorist asset blocking efforts.[Footnote 33]
In 2004, OFAC reported that the United States blocked almost $10
million in assets belonging to seven international terrorist
organizations and related designees.[Footnote 34] The 2004 report also
noted that the United States held more than $1.6 billion in assets
belonging to six designated state sponsors of terrorism.[Footnote 35]
However, the report does not document or quantify changes from amounts
of assets blocked in previous years. For example, the 2004 report
stated that the United States held $3.9 million in al Qaeda assets, but
it did not show that this represented a 400 percent increase from the
value of al Qaeda assets held by the United State in 2003 or offer an
explanation for this increase.[Footnote 36]
We noted in our October 2005 report that although the amounts of assets
blocked are not in themselves a complete measure to assess progress
over time, such information, along with other key performance metrics,
could help policy makers and program managers examine the results of
OFAC's asset blocking efforts. We recommended that the Secretary of the
Treasury provide more complete information in the annual Terrorist
Assets Report on the nature and extent of assets blocked, such as
differences in amounts blocked each year, explanations for such
differences, results of OFAC's terrorist asset blocking efforts, and
obstacles faced by the U.S. government. In commenting on a draft of our
report, Treasury observed that the Terrorist Assets Report "is not
mandated or designed as an accountability measure." However, nothing in
the statutory language or the congressional intent underlying the
mandate precludes Treasury from compiling and reporting in this manner.
Senior OFAC officials acknowledged that the Terrorist Assets Report is
not useful for assessing results of asset blocking efforts. In its
March 2006 letter to relevant congressional oversight and appropriation
committees, Treasury responded that although it does not believe that
the amounts of assets blocked is a meaningful measure of its efforts'
effectiveness, it would work with Congress to discuss recrafting the
Terrorist Assets Report to address congressional interests.
Conclusion:
U.S. agencies have accomplished much in their efforts to combat
terrorist financing abroad. Despite the difficulties of interagency
coordination, TFWG has delivered counter-terrorism-financing training
and technical assistance to numerous vulnerable countries and has
designated and blocked significant amounts of terrorist assets.
However, as GAO's October 2005 report described, several challenges
impact the effectiveness of U.S. agencies' efforts. Without a strategic
and integrated plan for coordinating the funding and delivery of
training and technical assistance by the agencies, the U.S. government
cannot maximize the use of its resources in the fight against terrorist
financing. Interagency disputes over State-led TFWG roles and
procedures have hampered TFWG leadership and wasted staff energy and
talent. In addition, decisions based on anecdotal and informal
information, rather than transparent and systematic assessments, have
hindered managers from effectively addressing problems before they grow
and potentially become crises. Further, the U.S. government's,
including TFWG's, failure to integrate all available U.S. and
international resources may result in missed opportunities to leverage
resources to meet related needs and risks, particularly given the
scarce expertise available to address counter-terrorism financing.
Finally, without a functional performance measurement system, TFWG
lacks the information needed for optimal coordination and planning.
Although OFAC undertakes a number of important efforts with regard to
blocking terrorist assets, the lack of meaningful performance measures
and sufficient information regarding these efforts has created
uncertainty about their results and progress. The new performance
measures that OFAC has recently developed may enable Congress and other
officials with oversight responsibilities to ascertain the strengths
and weaknesses of these efforts as well as hold OFAC managers
accountable. OFAC's strategic plan, when completed, could further
facilitate the development of meaningful performance measures by
describing the relation of performance goals and measures to OFAC's
mission, goals, and objectives. In addition, including information in
Treasury's annual Terrorist Assets Reports that shows changes in the
amounts of assets blocked from year to year may help Congress and other
officials better understand the importance of these efforts in the
overall U.S. effort to combat terrorist financing and may assist in the
strategic allocation of resources.
Matter for Congressional Consideration:
In view of congressional interest in U.S. government efforts to deliver
training and technical assistance abroad to combat terrorist financing
and the difficulty of obtaining a systematic assessment of U.S.
resources dedicated to this endeavor, as stated in our report, Congress
should consider requiring the Secretary of State and the Secretary of
the Treasury to submit an annual report to Congress showing the status
of interagency efforts to develop and implement an integrated strategic
plan and Memorandum of Agreement to ensure TFWG's seamless functioning,
particularly with respect to TFWG roles and procedures.
Madame Chairwoman, this concludes my prepared statement. I would be
pleased to respond to any questions that you or other members of the
subcommittee may have at this time.
Contacts and Acknowledgments:
Should you have any questions about this testimony, please contact
Loren Yager at (202) 512-4128 or yagerl@gao.gov. Other major
contributors to this testimony were Christine Broderick, Kathleen
Monahan, Tracy Guerrero, Elizabeth Guran, and Reid Lowe.
[End of section]
Appendix I: Terrorist Finance Working Group (TFWG) Membership and
Program Development Process:
According to the Department of State (State), the Terrorist Finance
Working Group (TFWG) was convened in October 2001 to develop and
provide counter-terrorism-financing training to countries deemed most
vulnerable to terrorist financing. Composed of various agencies
throughout the U.S. government, TFWG is cochaired by State's Office of
the Coordinator for Counterterrorism and Bureau for International
Narcotics and Law Enforcement Affairs. It meets biweekly to receive
intelligence briefings, schedule assessment trips, review assessment
reports, and discuss the development and implementation of technical
assistance and training programs.
TFWG Membership:
Agencies and offices participating in TFWG include the following:
Department of State:
* 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 Overseas 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 TFWG process for developing counter-terrorism-
financing training and assistance programs involves the following
steps:
1. With input from the intelligence and law enforcement communities,
identify and prioritize countries most vulnerable to terrorist
financing, and needing the most assistance in combating it.
2. Evaluate priority countries' counter-terrorism-financing and anti-
money-laundering regimes with Financial Systems Assessment Team (FSAT)
on-site visits or Washington tabletop exercises. State-led FSAT teams
of 6 to 8 members include technical experts from State, Treasury,
Justice, and other regulatory and law enforcement agencies. The FSAT on-
site visits take about 1 week and include in-depth meetings with host
government financial regulatory agencies, the judiciary, law
enforcement agencies, the private financial services sector, and
nongovernmental organizations.
3. Prepare a formal assessment report on each priority country's
vulnerabilities to terrorist financing and make recommendations for
training and technical assistance to address these weaknesses. The
formal report is shared with the county's government to gauge its
receptivity and to coordinate U.S. offers of assistance.
4. Develop a counter-terrorism-financing training implementation plan
based on FSAT recommendations. Counter-terrorism-financing assistance
programs include financial investigative training to "follow the
money," financial regulatory training to detect and analyze suspicious
transactions, judicial and prosecutorial training to build financial
crime cases, financial intelligence unit development, and training in
detecting over-and under-invoicing schemes for money laundering or
terrorist financing.
5. Provide sequenced training and technical assistance to priority
countries in the country, regionally, or in the United States.
6. Encourage burden sharing with our allies, with international
financial institutions (e.g., IMF, World Bank, regional development
banks), and through international organizations such as the United
Nations (UN), the UN Counterterrorism Committee, Financial Action Task
Force on Money Laundering, or the Group of Eight (G-8) to capitalize on
and maximize international efforts to strengthen counter-terrorism-
financing regimes around the world.
FOOTNOTES
[1] See GAO, Terrorist Financing: Better Strategic Planning Needed to
Coordinate U.S. Efforts to Deliver Counter-Terrorism Financing Training
and Technical Assistance Abroad, GAO-06-19 (Washington, D.C.: October
24, 2005).
[2] INTOSAI has more than 180 members consisting of supreme audit
institutions from countries that belong to the UN or its specialized
agencies.
[3] See GAO, Executive Guide: Effectively Implementing the Government
Performance and Results Act, GAO/GGD-96-118 (Washington, D.C.: June
1996). Also see GAO, Electronic Government: Potential Exists for
Enhancing Collaboration on Four Initiatives, GAO-04-6, pages 17-21
(Washington, D.C.: Oct. 10, 2003) for a discussion of key practices for
interagency collaboration.
[4] 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. Treasury's
Financial Crimes Enforcement Network (FinCEN) is the FIU for the United
States.
[5] A TFWG assessment includes meetings with host government financial
regulatory agencies, the judiciary, law enforcement agencies, the
private financial services sector, and nongovernmental organizations.
TFWG assessment teams are, like TFWG, led by State and comprise
technical experts from each of TFWG's member departments and agencies.
[6] World Bank and International Monetary Fund, Reference Guide to Anti-
Money Laundering and Combating of Financing of Terrorism, (2003). As
noted in the guide, the formal definition of terrorist financing is
provided in the United Nations International Convention for the
Suppression for the Financing of Terrorism (1999). However, a
universally accepted definition for "terrorism" has not been
established owing to significant political and national implications
that differ from country to country. The UN continues to work to gain
worldwide consensus on the definition of terrorism.
[7] 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).
[8] These experts define money laundering as the processing of criminal
proceeds to disguise their illegal origin in order to legitimize ill-
gotten gains.
[9] International standards are represented by the UN International
Convention for the Suppression of the Financing of Terrorism and by
FATF's 40 recommendations on money laundering and nine special
recommendations on terrorist financing.
[10] These federal regulators are the Federal Reserve Board, the
Federal Deposit Insurance Corporation, and the Office of the
Comptroller of the Currency.
[11] See GAO-06-19, appendix IV, for key U.S. counter-terrorism-
financing and anti-money-laundering training and assistance for
vulnerable countries by U.S. agency and financial regulators.
[12] We have previously found that building a collaborative management
structure across participating organizations is an essential foundation
for ensuring effective collaboration and that strong leadership is
critical to the success of intergovernmental initiatives. [For a
discussion of practices essential to interagency collaboration, see
GAO, Electronic Government: Potential Exists for Enhancing
Collaboration on Four Initiatives, GAO-04-6 (Washington, D.C.: Oct. 10,
2003): 17-21.] Moreover, involvement by leaders from all levels is
important for maintaining commitment.
[13] For example, according to Treasury officials, the agency has
developed numerous counter-terrorism-financing programs to advance the
core strategic aims identified in the 2003 National Money Laundering
Strategy. The officials said that these programs are not under TFWG's,
and therefore State's, purview.
[14] According to Justice, a high-level interdepartmental decision has
assigned Justice the lead among U.S. agencies in drafting foreign
criminal laws, reviewing the legal sufficiency of such laws, and
providing prosecutorial training and development for the TFWG
countries.
[15] According to Treasury officials, OTA funds other Treasury offices
that conduct assessments or deliver training, such as Terrorist
Financing and Financial Crimes and FinCEN, in conjunction with its
programs. Also according to Treasury, OTA has funded the expenses of
other agencies to deliver technical assistance in support of an
existing work plan and to meet performance objectives.
[16] 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 agreed but maintained that this problem will be resolved only
when other agencies acknowledge Justice's jurisdiction and expertise.
According to Treasury, in many cases, countries pass laws that don't
meet international standards, even after having received substantial
commentary from the U.S. government.
[17] 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.
[18] 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 nongovernmental organizations.
[19] Our previous work has shown that alignment of resources is
critical to making strategic planning a dynamic and inclusive process.
See GAO, Executive Guide: Effectively Implementing the Government
Performance and Results Act, GAO/GGD-96-118 (Washington, D.C.: June
1996).
[20] 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.
[21] TFWG expenditures are classified.
[22] 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.
[23] 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.
[24] Department of State expenditures for priority countries are
classified.
[25] Our analysis considered 19 priority countries, excluding countries
that TFWG added to the priority list in March 2005. At the time of our
review, OTA had obligated $9.5 million of the $30.3 million budgeted
for financial enforcement programs in priority and non-priority
countries in fiscal years 2002-2005.
[26] 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.
[27] It became unclear at our meeting with OPDAT and State whether the
database should be classified. Justice had not classified the database,
because officials were under the impression that only the ranking of
priority countries was classified information, while State maintained
that the listing of priority countries was classified.
[28] According to Treasury, these economic sanctions are intended to
deprive terrorists and terrorist groups of access to U.S. markets and
the international financial system and are aimed at impeding their
larger supply networks, which aid, facilitate, and ultimately underpin
the successful execution of terrorist acts. OFAC also administers other
economic and trade base sanctions against foreign countries,
international narcotics traffickers, and those engaged in activities
related to the proliferation of weapons of mass destruction.
[29] Treasury's 2004 Annual Performance and Accountability Report
states that Treasury proposes to discontinue use of this indicator in
2005.
[30] 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.
[31] According to the Government Performance and Results Act (GPRA) of
1993, Pub. L. No. 103-62, when it is not feasible to develop a measure
for a particular program activity, the executive agency shall state why
it is infeasible or impractical to express a performance goal for the
program activity. GPRA also states that the agency shall consult with
the Director of the Office of Management and Budget to determine that
it is not feasible to express the performance goal in a measurable
form.
[32] According to GPRA, agency strategic plans should include, among
other elements, a set of general goals and objectives and a description
of how performance goals and measures are related to the general goals
and objectives of the program. Currently, OFAC's efforts are guided by
Treasury's overall strategic plan.
[33] Section 304 of Public Law 102-138, as amended by Public Law 103-
236 (codified at 22 USC §2656g), requires the Secretary of the
Treasury, in consultation with the Attorney General and appropriate
investigative agencies, to provide an annual report to Congress
"describing the nature and extent of assets held in the United States
by terrorist countries and organizations engaged in international
terrorism." Treasury must submit the Terrorist Assets Reports to the
Committee on Foreign Relations and the Committee on Finance of the
Senate and to the Committee on International Relations and the
Committee on Ways and Means of the House.
[34] 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.
[35] 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.
[36] According to OFAC, amounts blocked for terrorist entities may
shift year to year for policy-related purposes. For example, funds may
be unblocked when the U.S. government terminates a sanctions program or
when OFAC issues exceptions to sanctions programs in accordance with
applicable law.
