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Freeze on Terror Cash Not Working

Associated Press

The top senators on the powerful Senate Finance Committee are openly questioning a key
federal agency's ability to block terrorist money, citing examples in which U.S. officials failed to
freeze the money of people identified as terrorist financiers by American allies.

"Other nations rightly look to the United States for leadership and information in the war on
terrorism. We should not be playing catch-up," Sens. Charles E. Grassley, Iowa Republican, and
Max Baucus, Montana Democrat, wrote the Treasury Department's Office of Foreign Assets
Control (OFAC) in a letter just before Christmas.

Mr. Grassley, the committee chairman, and Mr. Baucus, its senior Democrat, cited numerous
concerns about OFAC's performance, including evidence of sloppy record keeping, failure to
provide required information to Congress and reliance on voluntary compliance by banks to
impose sanctions against suspected terrorists.

Though an internal investigation in 2002 recommended OFAC make changes to ensure it has the
legal authority to test banks' compliance with sanctions, the agency hasn't taken steps to do so,
according to the letter obtained by the Associated Press.

"This leaves OFAC in a position of not knowing what it does not know," the two senators wrote.
"While many financial institutions report their own violations when they are detected, we do not
have the luxury of assuming that all financial institutions do this.

"The dangers of terrorism financing operating unhindered are too great to take a passive
approach," the letter said.

Treasury Department spokeswoman Tara Bradshaw said Wednesday she was not familiar with
the lawmakers' complaint, and OFAC Director Richard Newcomb was out of town and
unavailable for comment.

OFAC is an obscure office that plays a key role in the war on terrorism. It is charged with freezing
the bank accounts and other financial assets of countries, companies and individuals who are
deemed enemies of the United States -- everyone from Saddam Hussein to Osama bin Laden.

Based on orders from Congress and the president or just raw intelligence, OFAC names people
to a "specially designated nationals" list that requires all financial institutions to block their money.
It is one of the most powerful tools for choking off terrorist finances.

Earlier this month, a U.N. monitoring committee complained that 108 nations have failed to file
required reports on their actions in the war against terrorism, such as freezing assets and
reporting the names of suspected terrorists.

Frustrated committee members said they are considering asking for a stronger Security Council
resolution with "more teeth" to force compliance from member states.

The United States, which has met most of its reporting requirements, has questioned the need for
a stronger counterterrorism resolution.

The reports are required under Security Council resolutions passed since 2001, which imposed
sanctions first on the Taliban and later on al Qaeda and the 30 to 40 terrorist groups thought to
be affiliated with them.


Aufhauser, David
From: McHale, Stephen
Sent: Thursday, November 01, 2001 7:44 AM
To: Aufhauser, David; Wolfe, George; Fox, William
Subject: Terrorism for the unforeseeable future

You asked for my thoughts on a structure for Treasury and the Executive Branch to deal with its terrorism responsibilities
on a (sadly) more permanent basis. Treasury first:
-As Bill and I said, we still seem to be operating in stove pipes. IA has its "war room"; OFAC has FTAT and its normal
processes; the rest of Enforcement has "Operation Green Quest" which is housed at Customs but staffed by IRS,
Customs, LJSSS (?) agents, and has FinCEN and OFAC (?) reps, as well as plans for two DoJ prosecutors; FinCEN
continues to do its thing; and your PCC tries to coordinate; and Jim Gillis and I are working on an ad hoc basis to
strengthen our case against one designee (work that I believe will have to be done for a number of others as we start to go
seriously against banks and financiers whe have the resources to challenge designations).
-FTAT, Green Quest and the IA war room should be combined (because we made a big noise about setting up each one,
we can structure it so that OGQ and the war room are subgroups of FTAT). FTAT should be separated from OFAC and
given the broad mission of developing strategic and tactical approaches to attacking the financial support for terrorists,
terrorist orgs., and financial backers and facilitators of terrorists. Its mission should be to use all available resources to
develop information and action plans on each target whcih it then presents to the PCC or other suitable body. The action
plans might call for referral for criminal investigation, OFAC blocking, diplomatic action by State and IA or other responses.
--FTAT would need up front to deal with FBI concerns by making clear that it is not preparing criminal prosecutions and
that all information it develops will be available to the FBI — close FBI liason is essential. We need to build on your work to
wrap the Intell. Community tightly into the process.
-As I noted on Tuesday, budget is the key. This is doable within Treasury because we can establish task forces with
multi-bureau funding. There will, however, be sginificant resistance if bureaus think they are losing control. It will take a
sales job and some high-level push to bring it off. There will also be Hill concerns to be dealt with. Specifically, the
money and personnel that OFAC has hired using the FTAT budget would have to come with FTAT. The Enforcement
bureaus would have to provide money equivalent to the cost of supporting their current agents and participation. DO
would have to kick in money equivalent to the IA, Enforcement and GC resources currently being given. We should avoid
trying to do this thru' non-reimbursable details. The head of FTAT needs to have some measure of budgetary control.
-Even so, FTAT should rely largely, if not entirely on detailees. That will avoid the appearance of the creation of a rival,
peramnent structure, and (maybe) lessen turf fears. The reliance on a staff of detailees brings strengths and weaknesses.
The strengths are the knowledge gained and contacts in their home organizations; the weakness is that is where they will
look for their long-term career prospects and may be inhibited in acting in ways that might be frowned upon by their home
agencies. There is also the very real possibility that FTAT will be seen as a place to park deadbeats and problem
employees. From the outset, therefore, it must be seen as a choice assignment — being in the front line on the war against
terrorism should be a strong selling point. The head of FTAT must be given authority to reject or return detailees and get
appropriate replacements. On occasions, I suspect detailees will need to be drafted over the objectins of bureau heads.
This will require a long-term solid, high-level commitment.
-Because of the large Enforcement contribution, it probably make sense to have the FTAT head report to the US(E), but
FTAT could be placed under the Dep. Sec. for greater stature. That would be a departure for Treasury.
-The head of FTAT would have to be someone of stature. IT would be a significant enough job that you could attract
outside talent. But there are significant bureaucratic hurdles to the structure and whoever got the job would have to be
someone who thoroughly understands the levers and buttons of government. The job would have to be at the SES level,
maybe with an SES deputy.
-Despite the recent focus, I suggest a low profile for FTAT giving existing orgs. the spot-light to reduce jealousies.
For the Exec. Branch, the problem is harder. There is no clear leader of this fight below the President and the turf
problems are of historic proportions. Ridge has not yet been given sufficient authority. In my view, his lack of budget may
prove fatal. There is no terrorism Tsar in the sense that anyone's order must be obeyed.
-Instead, the process you are grappling with is probably the most effective model. Weekly or bi-weekly meetings of senior
level reps of various agencies. The only thing I would add to a small (2-3 person) "secretariat" to follow-up on decisions
and set agenda. Frankly, this is what the NSC staff is for, but it usually loses sight of that role. The hard part is that the
senior level commitment must be maintained. If delegation goes to too low a level, the committee(s) fail and should be
abolished and reformed as appropriate.
-As you can see, the Exec. Branch piece needs more thought. I'll keep at it, as well as continuing to think on Treasury.

October 16, 2001


FROM: Jared Feinberg

SUBJECT: Engagement and Education of the Money Service Industry and Law Enforcement

After initiating research on companies that advertised in newspapers for money remitting
services to South Asia and the Middle East, it has become clear that FTAT does not have the
resources to identify actively all of the potential hawaladars in the United States as I described
to you in my memo of September 27 (Memo 927).

Rather, I recommend that FTAT seek to increase its knowledge of illicit money service business
(MSB) activities by engaging legitimate MSBs as information sources and requesting
information from local law enforcement. Requesting MSBs to identify their illicit competitors
exploits connections among MSBs and hawaladars. Furthermore, I also recommend that FTAT
determine the desirability of creating an educational campaign for the law enforcement and
regulatory communities about informal remittance systems. Banking regulators and local law
enforcement interact with MSBs and the banking sector every day and may not be aware that
they are investigating a piece of a larger informal network that would be of great interest to
FTAT's research on hawaladars and efforts to counter terrorist financing.


1. Identify all state registered MSBs in selected locales (ATTACHED); forty-five states require
MSBs to register, and on December 31, 2001, FFNCEN will require MSB principals to
register at the federal level (ATTACHED)
2. Contact registered MSBs for assistance in identifying non-registered competitors;
3. Continue investigating targets through advertisements related to Memo 927;
4. Contact and educate local and state law enforcement to obtain local information and insight
into informal remittance systems;
5. Contact federal enforcement agencies, DEA, Customs, Secret Service, ATF, to review case
files for information; and
6. Discuss the ultimate need to hire an independent contractor to perform field research of

Agree Don't Agree Let's Discuss_

OFAC - 12460


In the March 14, 2000 Federal Register Vol. 65, No. 50, FINCEN issued final rules that would
require MSB principals to register with the Department of the Treasury by December 31, 2001
and maintain a current list of its agents for examination beginning January 1, 2002. Prior to
September 11, FINCEN was prepared to require MSBs to file SARs by September 2002.
FINCEN, in consultation with the Under-Secretary, is now reevaluating this date and will most
likely require MSB SARs between the spring and summer 2002.

MSBs under the BSA include agents, agency, branch or office of any establishment undertaking
the following capacities:
• Retail currency dealer or exchanger;
• Check casher;
• Issuer of traveler's checks, money orders, or stored value;
• Seller or redeemer of traveler's checks, money orders, or stored value;
• Money transmitters; and
• The United States Postal Service.


Virginia: Arlington Country

Maryland: Prince Georges County for the Tacoma Park area
New Jersey: Middlesex County, specifically Iselin
New York: Queens and Manhattan
Michigan: Wayne Country for Detroit and Dearborn
Ohio: Lucas Country for Toledo
California: City of San Jose, Los Angeles
Texas: Dallas-Fort Worth
Illinois: Cook County, Chicago

OFAC - 12461

RG: 148
Box: 00007 Folder: 0018 Document: 6
Series: Team 4 Files

Copies: 1 Pages: 94


The item identified below has been withdrawn from this file:

Folder Title: FTAT

Document Date:
Document Type: Miscellaneous
Special Media:

Subject: Miscellaneous memos, letters, and other clasified

documents relting to terrorism financing

In the review of this file this item was removed because access to it is
restricted. Restrictions on records in the National Archives are stated in
general and specific record group restriction statements which are available
for examination.

Withdrawn: 10-23-2008 by:

RETRIEVAL #: 401 00007 0018 6

System DocID: 5172

RG: 148
Box: 00007 Folder: 0018 Document: 7
Series: Team 4 Files

Copies: 1 Pages: 6


The item identified below has been withdrawn from this file:

Folder Title: FTAT

Document Date: 07-31-2001
Document Type: Note/Notes
Special Media:

Subject: FTAT meeting notes

In the review of this file this item was removed because access to it is
restricted. Restrictions on records in the National Archives are stated in
general and specific record group restriction statements which are available
for examination.

Withdrawn: 10-23-2008 by:

RETRIEVAL #: 401 00007 0018 7

System DocID: 5173