Treasury Evolves to Fight Terrorist Financing

By Matthew Harwood

The Senate Committee on Finance heard testimony today from one of its top officials on how well a new office has fared countering terrorist financing since its creation four years ago.

Stuart Levey, undersecretary for terrorism and financial intelligence at the Treasury Department, told committee members that Treasury has successfully subverted many of the financial networks al Qaeda relied on to recruit and train members and plan and execute attacks.

His testimony came a week after the Los Angeles Times reported that interagency infighting, splintering international relationships, and innovative terrorists have led to the deterioration in the U.S. capability to identify and stop terrorist financing. The report was referenced by both the committee chair, Senator Max Baucus (D-MT), and the ranking member, Senator Charles Grassley (R-IA), in their prepared remarks.

In 2004, Treasury created the Office of Terrorism and Financial Intelligence (TFI) to help track international financial flows and ensure that they do not finance terrorist acts and by doing so, Levey said the department has become "an important part of our country's national security architecture."

The unit operates on the premise that financial information created by and transactions performed by unsavory actors often can be used to identify key players and map out their networks. As Levey testified:

"Opening an account or initiating a funds transfer requires a name, an address, a phone number. This information tends to be very accurate and durable."

"Money trails don't lie," he added.

After following the money trail, TFI decides whether to go public with the information or stay covert. Owing to an Executive Order, Treasury has the ability to unilaterally designate people or organizations as terrorists or supporters of terrorists, which freezes their assets within any U.S. jurisdiction and bars U.S. businesses from dealing with them.

Declaring a person or organization complicit in terrorist financing, Levey said, provides a deterrent to others contemplating such support.

"Terrorist financiers typically live public lives with all that that entails: property, occupation, family, and social position," he said. "Being publicly identified as a financier of terror threatens an end to that 'normal' life. "

Treasury officials have also found that after they designate a person or group a terrorist financier, banks have voluntarily severed their business ties to that person or group.

Sometimes Treasury finds it better to simply surveil financiers "to continue to trace the network both upstream to the ultimate donors and downstream to the operational cells," said Levey.

At other times, Treasury shares its intelligence with other allied countries and leaves it to them to act against terrorist financiers.

Treasury has also moved forcefully against charities used as fronts for terrorism. It has designated "approximately 50 charities worldwide as supporters of terrorism, several in the United States, putting a strain on al Qaida's financing efforts."

Domestically, Treasury launched a comprehensive outreach campaign to charities and Muslim American communities explaining the department's various efforts to curb terrorism financing.

Through the Financial Action Task Force (FATF), Treasury has also acted internationally to help develop standards and best practices to stop terrorism financing through charitable organizations.

Treasury efforts have played a role in the war in Iraq as well, Levey testified. He says TFI's intelligence has restricted the flow of funds to the Iraqi insurgency. In 2005, Treasury teamed up with the Defense Department to create the Iraq Threat Finance Cell "to enhance the collection, analysis, and dissemination of timely and relevant financial intelligence to combat the insurgency."

Iraq, however, hasn't been its only international target. Levey singled out Iran and Syria as state supporters of terrorism and said the countries provide a financial infrastructure that allows terrorists to "move, store, and launder their funds."

Levey said TFI has designated individuals and entities in Iran and Syria as terrorism supporters, which has led many financial institutions to cut their business ties with those actors.

Nevertheless, Iranian banks, even the Central Bank of Iran, requests that financial institutions remove their names from transactions before processing them internationally. "This practice," said Levey, "is intended to evade the controls put in place by responsible financial institutions and has the effect of threatening to involve them in transactions they would never engage in if they knew who, or what, was really involved."

Besides financing terrorism, Levey said the Iranian regime is continuing its pursuit of nuclear weapons, but he hopes U.S. and multilateral efforts, including those of the U.N., would "reach a negotiated solution on Iran's nuclear program."


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