Editor's Note:
The
testimony of current and past Secretaries of State and Defense and other
national security officials at the National Commission on Terrorist Attacks
Upon the United States, �dubbed the 9/11 commission,� dominated Washington
news last week. It was,
therefore, little noticed that officials from the State Department, Treasury
Department and FBI testified before the House International Relations
Subcommittee on the Middle East and Central Asia.
Cofer Black, Juan Zarate and Thomas Harrington presented their
agencies� views on the role of Saudi Arabia in the war on terrorism,
specifically addressing progress in combating terrorism financing.
Today,
the Saudi-US Relations Information Service provides their testimony in three
parts:
�
State
Dept. � Mr. J. Cofer Black, Coordinator for Counterterrorism
�
Treasury
Dept. � Mr. Juan C. Zarate, Deputy Assistant Secretary, Executive Office for
Terrorist Financing & Financial Crimes
�
FBI
� Mr. Thomas J. Harrington, Deputy Assistant Director, Counterterrorism
Division
 Testimony
by Juan C. Zarate, Deputy Assistant Secretary, Executive Office for Terrorist
Financing & Financial Crimes, U.S. Department of the Treasury
Testimony before the House Committee on International Relations Subcommittee
on the Middle East and Central Asia
March 24, 2004
"Saudi Arabia and the Fight Against Terrorist Financing"
INTRODUCTION
Chairwoman
Ros-Lehtinen, Congressman Ackerman and distinguished members of the
Subcommittee, thank you for this opportunity to discuss how the Treasury
Department and our government are working with the Kingdom of Saudi Arabia to
combat terrorist financing.
The
ongoing threat of terrorist financing demands a sustained and comprehensive
commitment from all governments of the world. I thank the Congress for
providing the U.S. government with powerful resources, authorities, and
support to assist us in our efforts to attack terrorist financing networks. Of
particular importance to these efforts, the USA PATRIOT Act expanded the law
enforcement and intelligence community's ability to access and share critical
financial information regarding terrorist investigations, while Title III of
that Act enhances our joint abilities to obtain, analyze and apply financial
information to attack the financing of terrorist activities. At Treasury, we
are committed to utilizing, aggressively but judiciously, the enhanced powers
you have provided us to ensure that relevant financial information is used to
both initiate and support actions against terrorist organizations.
But
we have found that our success is also dependent on the political will and
resources of other governments. As we have discussed on many occasions with
you and your colleagues in the Congress, our investigations and actions
against terrorist financing have revealed the global and sophisticated nature
of terrorist financing networks. The abuse of charitable organizations,
reliance on deep-pocket donors, and the use of informal methods of moving
money � like hawala networks � present challenges for ferreting out
tainted capital used to finance a global network of terror. Attacking these
networks requires critical support from our allies as part of a comprehensive
and sophisticated strategy. Indeed, our mission to dismantle the financial
infrastructure of al Qaida and like-minded terrorist groups can only be
achieved with international cooperation and support.
Since
September 11th, we have built an international coalition to attack the sources
of terrorist financing and have sustained the momentum in taking the fight to
the facilitators of terror. The international community has frozen and seized
approximately $200 million of terrorist-related funds, over 170 jurisdictions
have issued blocking orders, and we have built a tighter international
financial net through which suspect funds may be captured. Governments around
the world have arrested, financially isolated, or otherwise deterred key
financial facilitators. The efforts of the Kingdom of Saudi Arabia fall
directly in line with this international cooperation and continue to improve
in substantively important ways.
The
threat of terrorist financing and the need to attack and prevent the flow of
funds to terrorists is now an accepted principle around the world and in Saudi
Arabia. The al Qaida-directed attacks of May and November 2003 in Riyadh and
the uncovering of virulent cells of al Qaida operatives within Saudi Arabia
have awakened the Saudi government to the harsh reality that this threat must
be dealt with aggressively. The Kingdom has taken important steps,
independently and along with us, to attack al Qaida�s finances and to
prevent the continued support for those who would attack the United States and
Saudi Arabia.
Our
progress in working with the Kingdom of Saudi Arabia to attack terrorist
financing networks is best understood in the context of the complementary
targeted and systemic approaches described in our 2003 National Money Laundering Strategy. In the short term, we have
engaged the Saudis on a number of terrorist financing targets to eliminate key
sources and conduits of terrorist support and have established direct
mechanisms to work together on the real threat posed to both of our countries.
Over the longer term, we have worked with the Saudis to enhance the
transparency and accountability of formal and informal financial systems,
particularly those that have been abused by terrorists to raise and move money
in the past. These efforts are ongoing, and much work remains to be done. Yet
the targeting actions and systemic reforms undertaken by the Kingdom of Saudi
Arabia clearly demonstrate its commitment to work with us and the
international community to combat the global threat of terrorist financing.
INCREASED
SAUDI UNDERSTANDING, COOPERATION AND ACTION AGAINST TERRORIST FINANCING
Our
dialogue, engagement and cooperation with the Saudis on terrorist financing
issues have developed progressively � and often quietly -- over the past two
years as the Kingdom of Saudi Arabia, like much of the world, has grown to
understand and appreciate its vulnerability to global terrorism. I have
witnessed this evolution first-hand in my trips to the Kingdom, first in
December 2002, then with Secretary Snow in September 2003, and most recently,
with Deputy National Security Advisor Frances Fragos Townsend in December
2003.
In
particular, the bombing attacks in Riyadh in May and November of last year
sparked a series of Saudi actions to confront aggressively the threat posed by
al Qaida and its global terrorist network. Targeted actions against specific
and identifiable sources and conduits of terrorist support have made an
immediate impact on the ability of terrorist cells and organizations to
operate. The systemic actions undertaken by the Saudis will take more time to
produce results, but these changes could have a substantial long-term effect
on the ability of terrorists to use financing mechanisms previously abused to
advance terrorist causes and operations.
TARGETED
ACTIONS
The
Saudis have taken direct and important actions to attack the financial
underpinnings of al Qaida�s terrorist infrastructure, not just in Saudi
Arabia but around the world.
First,
the Saudis have taken action on their own to capture or otherwise deal with
known operatives, financial facilitators and financiers for al Qaida. For
example, Saudi action against an al Qaida leader and key financial facilitator
known as Swift Sword was an important step in disrupting the financial network
of al Qaida in the Gulf region. Just last week, a raid by Saudi agents
eliminated Khaled Ali Haj, the suspected al Qaida chief on the Arabian
Peninsula, and one of his associates. Aggressive, proactive steps by the Saudi
government against key financiers and facilitators are continuing and serve as
an important disruptive element of the war against al Qaida.
The
Saudi government has also taken steps to isolate and freeze the assets of
individuals and entities designated as terrorist supporters � including the
freezing of over five million dollars and seizure of terrorist-related assets.
We have worked closely with Saudi Arabia to freeze the assets of organizations
and individuals suspected of providing support to al Qaida. In this regard,
the U.S. and Saudi Arabia have jointly proposed ten names to the United
Nations 1267 Sanctions Committee since December 2002. The Committee included
these names on its consolidated list, resulting in a binding obligation on all
UN member states to freeze the assets of the underlying individuals and
entities. Most recently, on January 22, 2004, the US and Saudi Arabia jointly
proposed the names of four branches of the Saudi-based Al-Haramain Islamic
Foundation to the UN Sanctions Committee. These branches -- located in
Indonesia, Kenya, Tanzania and Pakistan -- provided financial, material and
logistical support to the al Qaida network and other terrorist organizations.
Other
joint US-Saudi designations include the following actions:
-
On
March 11, 2002, the US and Saudi Arabia jointly designated the Somalia and
Bosnia branches of the Al-Haramain Islamic Foundation. These branches were
engaged in supporting terrorist activities and terrorist organizations,
such as al Qaida and AIAI (al-Itihaad al-Islamiya).
-
On
September 6, 2002, the US and Saudi Arabia jointly designated Wa�el
Hamza Julaidan as an associate of Usama bin Laden and a supporter of al-Qa�ida.
Saudi Arabia also forwarded this name to the UN 1267 Sanctions Committee.
-
On
December 22, 2003, the US and Saudi Arabia jointly designated Vazir -- a
non-governmental organization located in Travnik, Bosnia � after it was
determined that Vazir was simply another name for the
previously-designated Al Haramain-Bosnia. The two governments also
designated Safet Durguti, the representative of Vazir.
Beyond
these designations, we have created a close agent-to-agent working
relationship with the Saudis to deal with terrorist financing specifically.
Last fall, we created the Joint Terrorist Financing Task Force, based in
Riyadh. Through this Task Force, investigators from the FBI and from the IRS
Criminal Investigation Division (IRS-CID) have gained unprecedented access to
Saudi accounts, witnesses, and other information. The Task Force agents both
provide and receive investigative lead information on various terrorist
financing matters. In addition, U.S. agents seek assistance from Saudi
investigators in following terrorist financing, and in using that information
to identify or attack terrorist cells and operations. Information received by
the U.S. agents is passed through FBI�s Terrorist Financing Operations
Section in Washington to the interagency Joint Terrorist Task Forces (JTTFs)
nationwide.
As
part of this initiative, IRS-CID participated in the FBI�s two week-long
classes of financial investigation training to Saudi Arabian criminal
investigators, pursuant to the State Department�s sponsorship. These courses
included the following topics: charitable entities, money laundering, net
worth method of proof, expenditures method, documenting financial crimes, and
computer sources of financial information. IRS-CID anticipates participating
in a third class that will be presented in the spring of this year, possibly
in Riyadh. These combined efforts of capacity-building and working
hand-in-hand on the ground in Riyadh have already produced substantial results
as we continue to unearth leads and unravel the financial support for al Qaida
in Saudi Arabia.
SYSTEMIC
ACTIONS
In
addition to taking action against targeted terrorist financing networks, the
Kingdom of Saudi Arabia has introduced numerous systemic changes in its formal
and informal financial sectors to address vulnerabilities exploited by
terrorist organizations in the past. These reforms should enhance the
transparency and accountability of these sectors, allowing investigators to
more readily identify and interdict terrorists and their supporters who
continue to rely upon these sectors to raise and move funds and other elements
of support.
Charities
Abuse
of the charitable sector by terrorist supporters in Saudi Arabia remains an
ongoing concern. Given the generous contributions from Saudi Arabia and the
Islamic requirement of zakhat (or charity), there is a deep need for the Saudi
government to ensure that money intended for good purposes is not diverted to
al Qaida or other terrorist groups. Saudi Arabia has acknowledged this
vulnerability and is taking action to safeguard the integrity of its
charitable sector. The protection of the charitable sector and the goodwill of
donors are not only important for our national security interests but are also
essential to preserving the sanctity and faith in charitable giving. For both
reasons, the Saudi government has taken concrete steps to deal with this
identified risk.
On
May 24th of last year, Saudi Arabia issued comprehensive new restrictions on
the financial activities of Saudi charities, including the following:
-
Charitable
accounts can only be opened in Saudi Riyals;
-
Enhanced
customer identification requirements apply to charitable accounts;
-
Each
charity must consolidate its banking activity in one principal account.
Although sub-accounts are permitted for branches, they are restricted to
receiving deposits � all withdrawals and transfers must be serviced
through the main account;
-
No
cash disbursements are permitted from charitable accounts; payments are
only allowed by check payable to the first beneficiary and must be
deposited in a Saudi bank;
-
No
ATM or credit cards may be issued against a charitable account (all
outstanding ATM and credit cards for such accounts have been canceled);
-
No
transfers from charitable accounts are permitted outside of Saudi Arabia.
Moreover,
the Kingdom has banned cash contributions in local mosques and removed cash
collection boxes for charities from shopping malls.
In
some respects, these restrictions go further than those of any country in the
world. We commend Saudi Arabia for taking these important steps and urge its
officials to ensure that these new rules are rapidly implemented and enforced
fully and vigorously. We will continue to work directly with the Saudi
government on the concerns we have about the vulnerability of their charity
� often sent to crisis regions �being abused by terrorists.
Alternative
remittance systems -- Hawala
The
Kingdom of Saudi Arabia has also taken comprehensive action to reduce the
threat of terrorist financing through alternative remittance systems, such as hawala.[1]
There are more than seven million locally-paid expatriate workers living in
Saudi Arabia. These workers support their families living in their home
countries, thereby creating a strong and economically legitimate demand for
remittance services in the Kingdom. The Kingdom has sought to service this
demand and protect remittance systems from terrorist abuse through a mandatory
licensing requirement and additional legal, economic, and supervisory
measures. Only licensed banks and money-exchangers are allowed to provide
remittance services. Licenses are issued by the Saudi Arabian Monetary Agency
(SAMA), which controls and supervises Saudi financial sectors.
The
Saudi government targets unlicensed remittance systems for prosecution. The
Kingdom has reported that over the past 15 years, 204 cases have been filed
against 437 individuals for engaging in unlicensed remittance activities, and
more than US $9.6 million in financial penalties have been assessed against
these individuals.
Nonetheless,
the Kingdom has acknowledged that criminalization alone is insufficient as
long as there is a demand for these services, prompting a complementary
economic approach to attack unlicensed remittances. The Kingdom has encouraged
banks to open special remittance centers to provide secure, inexpensive, and
rapid money transfer services. As a result of this policy, a majority of Saudi
banks now offer such services -- known as �Speed Cash� � which are
available after traditional banking hours for the convenience of expatriates
employed during normal working hours. These banks, as well as money-exchange
providers licensed to provide remittance services, are regulated and
supervised by SAMA to ensure adequate implementation of client identification,
reporting and recordkeeping requirements. These steps represent a
sophisticated, multilayered response to the terrorist financing risks
presented by alternative remittance systems.
Formal financial sector
The
Kingdom has recently amended the legislative and regulatory framework
governing its formal financial sector to improve its ability to combat
terrorist financing and other financial crimes. These changes attack terrorist
financing on a systemic level by promoting greater transparency and
accountability. Among the most important legislative and regulatory reforms in
this area are the enactment of the Anti-Money Laundering Law of 2003 last
autumn, and the issuance of Anti-Money Laundering Implementation Rules just
last month. Specific measures include improved reporting and record-keeping
requirements, new inter-agency coordination mechanisms, and the establishment
of a financial intelligence unit.
The
Saudis have subjected their newly reformed anti-money laundering regime to
intense international scrutiny. The Financial Action Task Force (FATF) � a
33-member international body dedicated to promoting international compliance
with anti-money laundering and counter-terrorist financing (AML/CFT) standards
� has recently conducted an in-depth review of Saudi Arabia�s overall AML/CFT
regime, which included an extensive on-site examination. The willingness to
undergo this assessment represents a new commitment to openness by Saudi
authorities and an opportunity to benefit from the insight of international
AML/CFT experts. FATF is in the process of completing the assessment, and we
look forward to FATF�s issuance of a summary report in June.
ONGOING CHALLENGES
The
measures and initiatives described above demonstrate considerable progress and
commitment by the Kingdom of Saudi Arabia in combating terrorist financing.
But like all countries, the Kingdom faces several ongoing challenges in the
global campaign against terrorist financing. Many of these challenges involve
the implementation of the measures and initiatives described above. Other
challenges are more fundamental.
The
most fundamental challenge facing the Kingdom is defusing the religious
extremism that facilitates support and recruitment for radical Islamist
terrorist organizations like al Qaida. The Kingdom of Saudi Arabia has begun
to take action to deal with this problem. These efforts are important to
ensure that militant religious extremism cannot provide a platform for
terrorists to justify and launch their terrible actions. The Kingdom is
working with clerics, and has also launched a public campaign against
terrorism, including publishing a hotline and offering rewards to those who
have information on identified or suspected terrorist individuals or
operations. These efforts must be sustained to overcome the threat of
terrorism engendered by militant religious extremism, which has no scruples in
attacking innocent civilians -- including Muslims.
Another
critical challenge for the Kingdom is fully implementing and enforcing the
comprehensive measures it has enacted to ensure charities are not abused for
terrorist purposes. In a cultural environment committed to charitable giving,
the Kingdom must move forward to clarify and empower an oversight authority
that will administer effective control over the sector and ensure compliance
with obligations under the new regulatory measures that I have described. This
authority must also coordinate its efforts with other elements of the
regulatory and criminal justice system.
In
addition to these primary challenges, the Kingdom faces a number of secondary
challenges in combating terrorist financing. These challenges include ensuring
that originator information is recorded on all cross-border wire transfers,
protecting its borders from illicit cash couriers, and sharing critical
information on terrorist financing investigations with all relevant
investigatory authorities, both domestically and internationally. These types
of challenges are common to all countries, and we will be working together
with the Kingdom to improve global performance on these issues.
Finally,
the Kingdom must continue to publicize and promote its actions against
terrorists as necessary measures to protect the safety of the Saudi and global
populace. My sitting here and discussing these measures with you not only
sends a message to the Saudi people regarding the commitment of their
government, but also to other Islamic countries regarding their need and
ability to undertake similar initiatives.
We
work in close partnership with the Saudis on these issues on a daily basis to
protect the American and Saudi people from the scourge of terrorism.
CONCLUSION
As
I stated earlier, the ongoing threat of terrorist financing demands a
sustained and comprehensive commitment from all governments of the world. The
measures and initiatives adopted by the Kingdom of Saudi Arabia indicate that
the Kingdom stands committed with us to defeating this threat. The targeted
actions undertaken by the Kingdom have already produced tangible results, and
the systemic changes made by the Kingdom could prove even more effective in
defeating terrorist financing over the long term.
We
look forward to continuing to work with the Kingdom as it begins to implement
the systemic changes discussed above. The terrorist financing challenges we
all face are considerable, but the progress we have achieved provides a solid
basis from which to move forward. We appreciate the efforts of the Kingdom to
date � as they put the lives of their agents and people on the line to fight
this battle. We anticipate continued progress in the months ahead.
Thank
you again for the opportunity to testify before you today on these matters of
great importance. We look forward to our continued work with Congress to
combat the threat of terrorist financing.
Note:
[1]
Alternative remittance systems represent informal or unregulated means of
transferring value between or among multiple locations. Often these systems
are comprised of geographic networks and are described by a variety of
specific terms depending on the region or community they serve. Hawala
is the term often used to describe alternative remittance systems or
services in the Middle East.
Related Material:
- Saudi
Arabia's Role in Combating International Terrorism [Press Release]
Ros-Lehtinen
examines cooperation in Wednesday oversight hearing
-
Meeting
Notice -- Subcommittee on the Middle East and Central Asia
-
Subcommittee
on the Middle East and Central Asia
- House
Committee on International Relations
-
Committee Members in Attendance at
the Hearing:
-
Ileana Ros-Lehtinen, Chair, R-FL
-
Steve Chabot, R-OH
-
Gary L. Ackerman, D-NY
-
Howard L. Berman, D-CA
-
Joseph Crowley, D-NY
-
Thaddeus G. McCotter, R-MI
-
Shelley Berkley, D-NV
-
Joseph R. Pitts, R-PA
-
Ed Royce, R-CA
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