11 May 2001
Source: http://usinfo.state.gov
10 May 2001
(New center aiming to thwart terrorist fundraising) (2970)
U.S. government agencies are working together to establish the Foreign
Terrorist Asset Tracking Center, a Department of the Treasury official
says.
In May 10 testimony before a Senate Appropriations subcommittee, R.
Richard Newcomb, director of Treasury's Office of Foreign Assets
Control (OFAC), said the center will aim to deny terrorist groups'
access to the international financial system, impair their fundraising
abilities and, where appropriate, block their financial transactions.
He said executive orders from President Clinton imposing sanctions on
certain terrorists and terrorist groups have already achieved some
success.
"We believe that the sanctions have had a deterrent effect on
fundraising in the United States and have impeded terrorists' use of
the U.S. financial system," Newcomb said.
Newcomb described also how his office is preparing to implement the
1999 Foreign Narcotics Kingpin Designation Act. That legislation
authorizes the president to impose sanctions against foreign drug
kingpins -- significant narcotics traffickers -- and their
organizations on a worldwide scale.
In June 2000 Clinton designated 12 drug kingpins as targets of the
Kingpin Act. Newcomb said he expected President Bush would issue a
second list by June 1. He also described OFAC's progress in
implementing existing sanctions against Colombian drug cartels.
Following is the text of Newcomb's testimony as submitted for the
subcommittee's record:
(begin text)
May 10, 2001
Statement of R. Richard Newcomb,
Director of the Office of Foreign Assets Control
U.S. Department of the Treasury
before the Senate Appropriations Committee
Subcommittee on Treasury and General Government
Chairman Campbell, Senator Dorgan, and Members of the Subcommittee, I
am pleased to have the opportunity to speak to you today about the
work of the Treasury Department's Office of Foreign Assets Control, or
"OFAC," as we are commonly called. OFAC administers economic sanctions
against foreign countries, entities and individuals to further U.S.
foreign policy and national security objectives. These sanctions
programs are normally imposed pursuant to a declaration of national
emergency by the President under specific statutory authority, but may
also be imposed directly by the Congress, as in the case of
legislation pertaining to foreign terrorist organizations and
narcotics kingpins.
OFAC currently administers twenty-one economic sanctions programs
involving assets freezes and/or trade embargoes, including programs
directed against Angola (UNITA), Burma, Cuba, Iran, Iraq, Libya, North
Korea, Sierra Leone, Sudan, the Taliban in Afghanistan, foreign
terrorists and foreign narcotics traffickers. In performing its
mission, OFAC relies principally on the President's broad powers under
the Trading With the Enemy Act ("TWEA"), the International Emergency
Economic Powers Act ("IEEPA"), and on occasion, the United Nations
Participation Act ("UNPA"), to prohibit or regulate commercial or
financial transactions involving specific foreign countries, entities
and individuals. These powers are employed to freeze, or block,
foreign assets by prohibiting transfers of those assets which are
located in the United States or in the possession or control of U.S.
persons, as well as to prohibit financial transactions (such as bank
lending), imports, exports and related transactions. These sanctions
programs may be either selective, prohibiting a specific class of
economic transactions (such as transactions with the government of the
target country), or comprehensive, prohibiting all unlicensed economic
transactions involving the designated country or its nationals. OFAC's
blocking authority has also been employed to protect classes of
assets, as in the case of the 1990 freeze of Kuwaiti assets after
Iraq's invasion of Kuwait, or in the case of assets pertaining to the
implementation of agreements between the United States and the Russian
Federation relating to the disposition of highly enriched uranium.
Organizationally, OFAC is composed of the following components:
1) Licensing Division -- Makes determinations on requests for specific
licenses -- processing more than 18,000 such requests during the past 12-month
period -- and provides guidance to the public with respect to
interpretive rulings and transactions authorized by general license.
The influx of requests for licenses and interpretive rulings under the
21 separate programs OFAC administers has increased dramatically. In
an effort to meet this demand and provide responsive and thorough
customer service, OFAC is instituting measures to: process licenses
within two weeks absent the need for interagency consultation; hire
additional personnel to respond to phone inquiries; promote
transparency of agency action by publishing interpretive rulings on
its website; and issue implementing regulations within 60 days of the
issuance of an executive order or enactment of legislation with an
opportunity for public comment.
2) Compliance Division -- Serves as the primary point of contact for
the financial community, fielding more than 45,000 "hotline" calls per
year to provide guidance on in-process transactions. Last year, the
calls resulted in denying access to the U.S. banking system to more
than 5,500 items that were contrary to U.S. sanctions and the blocking
of more than 2,000 transactions. As a result of regulatory audits
which it conducts, the Compliance Division opened 1,000 cases in FY
2000 and issued more than 1,000 "administrative demands for
information," culminating in 205 referrals to either the Civil
Penalties or Enforcement Divisions and the issuance of more than 500
Warning Letters. This OFAC Division also monitors adherence to the
terms of licenses and requirements regarding blocked property;
conducts public and private sector awareness programs to assure
familiarity with requirements for compliance with regulations; and
maintains and updates OFAC's public informational material, website,
and fax-on-demand service.
3) Blocked Assets/Information Technology Division -- Maintains OFAC's
aggregate database of blocked assets; coordinates multilateral
sanctions implementation with foreign governments; and develops and
implements information technology systems in OFAC.
4) International Programs Division -- Administers the Specially
Designated National, Specially Designated Terrorist, Specially
Designated Narcotics Trafficker, and Foreign Terrorist Organization
programs, as well as designations under the Foreign Narcotics Kingpin
Designation Act, including the preparation of two annual Presidential
reports to the Congress and an annual report to the Congress on
blocked terrorist assets; and coordinates certain multilateral
enforcement matters with foreign governments.
5) Enforcement Division -- Coordinates overall enforcement of
sanctions programs by making referrals to Customs and other law
enforcement agencies for criminal investigations, opening 60
investigations during 2000; provides technical advice and assistance
to Customs agents and inspectors and Assistant U.S. Attorneys
concerning suspected violations, with six criminal prosecutions
brought in 2000; and administratively pursues non-criminal cases for
civil penalty consideration, opening 1544 new civil cases for
investigation with 515 referrals for civil penalty consideration
during 2000.
6) Civil Penalties Division -- Administers the civil penalties program
for violation of sanctions laws administered by OFAC, processing more
than 2,000 cases and collecting more than $3.2 million in fines over
the course of the past year.
7) Policy Planning and Program Management Division -- Performs policy
analysis; coordinates interoffice and interagency program
implementation and regulatory issues; and currently prepares 35
statutorily required Presidential reports and 14 Notices of
Continuation of emergency authorities per year to the Congress.
Other components of OFAC include the Miami Office, which coordinates
certain Cuba licensing, compliance and enforcement matters, and the
Bogota Office, which coordinates the Colombian narcotics traffickers
program and conducts research on specially designated narcotics
traffickers. Offices are also being established in Mexico City and
Bangkok in support of OFAC's implementation of the Foreign Narcotics
Kingpin Designation Act. A ninth division within OFAC is also being
organized to establish the Foreign Terrorist Assets Tracking Center.
In addition, while not organizationally part of OFAC, Treasury's
Office of the General Counsel devotes a complement of attorneys to
providing OFAC legal support in the administration of its programs.
I would like to focus the remainder of my remarks today on OFAC's
increasing responsibilities to administer economic sanctions with
respect to foreign terrorists, particularly with regard to the
establishment of the Foreign Terrorist Asset Tracking Center, as well
as economic sanctions programs targeting foreign narcotics
traffickers.
OFAC's International Programs Division has historically been
responsible for compiling available evidence establishing that certain
foreign entities or individuals are owned or controlled by or acting
for or on behalf of a foreign government subject to an economic
sanctions program. These entities and individuals then become
"specially designated nationals" and are subject to the same sanctions
as the foreign government to which they are related. In 1995, the
President used his authority under IEEPA to declare national
emergencies with respect both to terrorists who threaten to disrupt
the Middle East Peace Process and significant narcotics traffickers
centered in Colombia. These declarations of national emergency marked
the first occasion that this statutory authority had been invoked to
directly target organizations and individuals, rather than hostile
foreign regimes.
Since the inception of the Colombia program in 1995, OFAC has
identified 578 businesses and individuals as specially designated
narcotics traffickers ("SDNTs"), consisting of 10 cartel leaders of
the Cali, North Valle, and North Coast drug cartels, 231 of their
businesses and 337 other individuals. Four of the most notorious
Colombian drug kingpins were identified in the executive order itself.
OFAC has added six more Colombian drug cartel leaders since 1998,
including four leaders of Colombia's powerful North Valle drug cartel
named in 2000 and 2001. United States persons are prohibited from
engaging in financial or business dealings with the 10 drug kingpins
and the 568 other SDNTs.
As a result of the SDNT program against Colombian drug cartels,
traffickers' companies have been forced out of business, are suffering
financially, and have been isolated both financially and commercially.
By May 2001, more than 60 SDNT companies, with an estimated annual
aggregate income of more than U.S. $230 million, have been liquidated
or are in the process of liquidation. SDNTs are denied access to
banking services in the United States and Colombia and have been
denied access to the benefits of trade and transactions involving U.S.
businesses. SDNT individuals have been denied U.S. visas or had their
visas revoked. OFAC will continue to identify businesses of the
Colombian drug cartels and to expand the SDNT list to include
additional drug traffickers and their organizations.
Economic sanctions were imposed by the President pursuant to IEEPA in
1995 against terrorists who threaten to disrupt the Middle East Peace
Process. This action was taken to combat fundraising in the United
States on behalf of foreign terrorist organizations identified in an
annex to the implementing executive order. In August 1998, a second
executive order was issued expanding the list of foreign terrorists to
include Usama bin Ladin, his organization (Al-Qaeda), and two other
individuals. In addition to the 13 terrorists and terrorist entities
identified by executive order, OFAC has authority to designate
organizations or individuals, known as "specially designated
terrorists" or "SDTs," that are owned or controlled by, act for or on
behalf of, or that provide material or financial support to these
terrorists. As a result of these sanctions, a number of individuals
acting on behalf of the Middle East terrorists have been subjected to
sanctions, and financial assets of some of these groups have been
blocked.
We believe that the sanctions have had a deterrent effect on
fundraising in the United States and have impeded terrorists' use of
the U.S. financial system. OFAC continues to work closely with
Justice, State, the FBI, and other Federal agencies in implementing
the two Middle East terrorist executive orders against identified or
potential SDTs.
In April 1996, Congress passed the Antiterrorism and Effective Death
Penalty Act ("Antiterrorism Act"), in part to prevent U.S persons from
providing material support or resources to Foreign Terrorist
Organizations ("FTOs") throughout the world. Currently, 29 FTOs are
subject to OFAC-administered sanctions, having been designated by the
Secretary of State in consultation with the Secretary of the Treasury
and the Attorney General. Under the Antiterrorism Act and OFAC's
implementing regulations, U.S. financial institutions must maintain
control over all funds in which an FTO has an interest, block
financial transactions involving FTO assets, and report those actions
to OFAC. OFAC is the coordination point with State and Justice on FTO
designations and also has responsibility for coordinating with the
financial community, the FBI, State, and other Federal agencies in
implementing the prohibitions of the Antiterrorism Act.
In December 1999, the Congress also passed the Foreign Narcotics
Kingpin Designation Act (the "Kingpin Act"), which is modeled after
OFAC's Colombia narcotics traffickers program. The Kingpin Act
provides a statutory framework for the President to impose sanctions
against foreign drug kingpins and their organizations on a worldwide
scale. Like the Colombia program, the Kingpin Act is designed to deny
these significant foreign narcotics traffickers and their
organizations, including their related businesses and operatives,
access to the U.S. financial system and to all trade and transactions
involving U.S. companies and individuals. The President named the
first 12 kingpins ("tier one designations") on June 1, 2000. The
President plans to make the next list of kingpins public by June 1,
2001. OFAC also has authority under the Kingpin Act to make derivative
("tier two") designations of the kingpins' businesses and agents.
These tier two designations are very important to the long-term
practical impact and effectiveness of the Kingpin Act, since they
target entities through which the kingpins penetrate legitimate
commerce.
OFAC's sanctions programs against foreign narcotics traffickers and
foreign terrorists expose and impede money laundering activities,
terrorist fundraising and financial flows. While these activities
continue to be coordinated with traditional law enforcement agencies,
we believe that counter-terrorism activities against foreign
terrorists will be greatly enhanced by the establishment of the
Foreign Terrorist Asset Tracking Center (the "Center"). Last year, the
Report from the National Commission on Terrorism (the "Bremer Report")
recognized the potential for more effectively employing the broad
sanctions authorities delegated to OFAC and recommended the
development of a joint task force of relevant U.S. government agencies
to develop strategies to counter terrorist fundraising. The Bremer
Report also recommended that the Secretary of the Treasury create a
unit within OFAC dedicated to the issue of terrorist fundraising. The
Congress subsequently provided funding to Treasury for FY 2001 [the
current fiscal year ending September 30] to develop the Center, in
coordination with the relevant USG [U.S. government] agencies.
The Center's mission is to gather information from all sources
relating to terrorist groups' sources and methods of fundraising and
funds movement. The Center will use this information to conceptualize,
coordinate, and implement strategies within the U.S. government that
could ultimately lead to denying these target groups access to the
international financial system; impair their fund-raising abilities;
expose, isolate, and, where appropriate, block their financial
transactions; and work with other friendly governments to take similar
measures. The Center will accomplish this mission by:
1) gathering information from all sources relating to terrorist
groups' sources and methods of fundraising and funds movement;
2) reviewing data regarding the fundraising activities and funds of
terrorist groups that threaten the U.S. national security;
3) assessing the sources and methods of fundraising and funds movement
of each targeted foreign terrorist group, and of their operatives and
terrorist-owned entities;
4) tracking all information about the nature, operations, goals, and
methods of each terrorist group, related especially to the movement
and placement of their assets;
5) sharing all relevant information and analysis, as appropriate, with
U.S. regulatory, diplomatic, defense, intelligence and enforcement
communities;
6) conceptualizing and developing implementation strategies to deny
targeted terrorist groups access to the international financial
system, and whenever possible, to expose, isolate and incapacitate
their financial holdings within the United States and in other
countries;
7) developing strategies to deny these targets the ability to conduct
financial transactions with U.S. entities and individuals and impair
their fundraising abilities; and
8) persuading foreign governments to take similar measures. Such
strategies would bring to bear the full weight and influence of the
Federal government relating to financial matters -- regulatory,
diplomatic, defense, intelligence and enforcement communities -- and
involve foreign and domestic actions.
OFAC is currently in the process of establishing the Center and USG
agencies with counter-terrorism responsibilities have committed to
participate in the Center by: 1) providing the Center with all
relevant information; 2) detailing specialists to analyze the data;
and 3) appointing special liaisons to cement the constant interaction
of the member organizations. It is anticipated that the departments
and agencies that will participate in or work with the Center are: 1)
the Department of Treasury -- OFAC, Customs [U.S. Customs Service],
IRS [Internal Revenue Service], USSS [Secret Service], ATF [Bureau of
Alcohol, Tobacco and Firearms], and FinCEN [the U.S. financial
intelligence unit]; 2) the Department of Justice, FBI, INS
[Immigration and Naturalization Service]; 3) the CIA [Central
Intelligence Agency] -- Office of Transnational Issues and the DCI's
[director of central intelligence] Counter-Terrorism Center; 4) the
National Security Agency; 5) the Department of State -- Office of the
Counter-terrorism Coordinator (S/CT); and 6) the Department of
Defense.
The role of each agency would depend upon the target, and the
circumstances of each target's fundraising, money movements, and
placements modus operandi. Some terrorist groups are involved in
multiple activities to produce income. These activities would also be
covered under the Center's mission.
OFAC is currently hiring staff to implement the Kingpin Act, establish
the Foreign Terrorist Assets Tracking Center and make the other
improvements I've discussed. We currently have 77 staff members on
board, 21 position offers outstanding, and expect to hire an
additional 36 positions -- eight of which involve reimbursable
agreements with other agencies -- by the end of FY 2001. Crucial to
the successful administration of these priorities is enhanced customer
service, particularly with regard to the pending implementation of the
Trade Reform and Export Enhancement Act of 2000. Your continuing
support of our mission is critical.
Thank you very much for the opportunity to discuss these matters of
grave concern to the Congress as well as the Executive Branch. I look
forward to keeping you posted of our progress.
(Distributed by the Office of International Information Programs, U.S.
Department of State. Web site: http://usinfo.state.gov)