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29 April 2004

Treasury Unit to Consolidate Anti-Terrorist Financing Functions

New office will also focus on financial crime, official says

The U.S. Treasury Department has established a new Office of Terrorism and Financial Intelligence (TFI) to consolidate the department's intelligence, regulatory, law enforcement, sanctions and policy components.

The office will augment Treasury's efforts to combat terrorist financing and financial crimes, Deputy Secretary Samuel Bodman told the Senate Banking Committee. Bodman testified before the committee April 29.

Bodman said the new unit, which is still being developed, will give Treasury greater capability to collect and analyze data and use it to determine how terrorists use financial systems. It also will help the department design ways to stop the efforts, Bodman said.

The office will also coordinate more aggressive enforcement of regulations related to anti-terrorist financing and intensify Treasury's outreach to finance officials in other countries, Bodman said.

The unit will represent the United States in international bodies, such as the Financial Action Task Force (FATF), and work to develop "global solutions" to the problems of terrorist financing and financial crime, Bodman said. It will also further develop Treasury's analytical capacity, he said.

Bodman said the office will coordinate efforts with other federal entities focusing onf the war against terrorism including the departments of Homeland Security and Justice, the Federal Bureau of Investigation (FBI) and other units within Treasury, specifically, the Office of Foreign Assets Control (OFAC), the Financial Crimes Enforcement Network (FinCEN) and the Internal Revenue Service (IRS).

FinCEN prosecutes crimes related to money laundering and other forms of illegal finance. OFAC enforces economic sanctions. The IRS enforces tax provisions related to financial crimes.

Treasury's new office also will promote stronger partnerships with the private financial sector by sharing more complete and timely information, Bodman said.

Following is an excerpt from Bodman's prepared testimony:

(begin text)

The Future of Treasury's Efforts in the Battle against Terrorist Financing and Financial Crimes

The efforts and accomplishments of the past year have shown two things. First, the Treasury Department plays and must continue to play a critical role in driving national policies related to terrorist financing, money laundering, financial crimes, and economic sanctions. The is well placed -- given its authorities, expertise, and contacts -- to deal with issues that cut across several disciplines and require concerted attention to identify and interdict tainted financial flows. Second, these efforts have to be improved, amplified, and supported because of their growing importance at home and abroad.

We have had real success in fighting this war, but as the recent bombings in Madrid and Riyadh demonstrate, there is no end to our work. Our enemies are numerous, resourceful, and dedicated, and they continually adapt to the changing environment. We must do the same. We can and must do more using every tool that we have. We must also recognize that -- unfortunately -- we are in this fight for the long term -- and so the Department needs to be organized to reflect that reality.

This is precisely why the Administration has collaborated with Congress and this Committee to develop a new Treasury structure -- a high profile office led by an Under Secretary -- one of only three in the Department -- and two Assistant Secretaries. It is an office that will bring together Treasury's intelligence, regulatory, law enforcement, sanctions, and policy components.

I want to specifically note the important contributions made by the Chairman [Richard Shelby, Republican from Alabama] and Ranking Member [Paul Sarbanes, Democrat from Maryland] of this Committee, which resulted in an exchange of letters with Secretary Snow [Treasury Secretary John Snow] at the end of last year. I also want to thank the Congress for establishing the new Assistant Secretary for Intelligence position. Since that time, the Administration has worked hard to implement the concepts described in those letters.

On March 8th, 2004, Treasury formally announced the creation of this office, entitled the Office of Terrorism and Financial Intelligence (TFI) the Department of the Treasury. On March 10th, the President announced that he would nominate Stuart Levey, currently the Principal Associate Deputy Assistant Attorney General, for the Under Secretary position, and Juan Zarate, currently the Deputy Assistant Secretary in charge of terrorist financing at Treasury, for one of the two Assistant Secretary positions. Both of those nominations have since been transmitted to the Senate. We are working diligently to identify the most qualified individual to serve as the Assistant Secretary for Intelligence. In the meantime, we have appointed a very capable Deputy Assistant Secretary to get this office up and running.

The creation of TFI will redouble Treasury's efforts in at least four specific ways. First, it will allow us to better develop and target our intelligence analysis and financial data to detect how terrorists are exploiting the financial system and to design methods to stop them. TFI will be responsible for producing tailored products to support the Treasury Department's contributions to the war against terrorist financing. Second, it will allow us to better coordinate an aggressive enforcement program, including the use of important new tools that the Patriot Act gave to Treasury. Third, it will help us continue to develop the strong international coalition to combat terrorist financing. A unified structure will promote a robust international engagement and allow us to intensify outreach to our counterparts in other countries. Fourth, it will ensure accountability and help achieve results for this essential mission.

TFI will have two major components. An Assistant Secretary will lead the Office of Terrorist Financing. The Office of Terrorist Financing will build on the functions that have been underway at Treasury over the past year. In essence, this will be the policy and outreach apparatus for the Treasury Department on the issues of terrorist financing, money laundering, financial crime, and sanctions issues. The office will help to lead and integrate the important functions of OFAC and FinCEN.

This office will continue to assist in developing, organizing, and implementing U.S. government strategies to combat these issues of concern, both internationally and domestically. This will mean increased coordination with other elements of the U.S. government, including law enforcement and regulatory agencies. This office will continue to represent the United States at international bodies dedicated to fighting terrorist financing and financial crime such as the Financial Action Task Force and will increase our multilateral and bilateral efforts in this field. We will use this office to create global solutions to these evolving international problems. In this regard, we will also have a more vigorous role in the implementation of measures that can affect the behavior of rogue actors abroad.

Domestically, this office will be charged with continuing to develop and implement the money laundering strategies as well as other policies and programs to fight financial crimes. It will continue to develop and help implement our policies and regulations in support of the Bank Secrecy Act and the Patriot Act. We will further increase our interaction with federal law enforcement and continue to work closely with the Criminal Investigators at the IRS -- including integration of their Lead Development Centers, such as the one in Garden City, New York -- to deal with emerging domestic an international financial crimes of concern. Finally, this office will serve as a primary outreach body -- to the private sector and other stakeholders -- to ensure that we are maximizing the effectiveness of our efforts.

A second Assistant Secretary will lead the Office of Intelligence and Analysis {OIA]. In determining the structure of OIA, we have first focused on meeting our urgent short-term needs. We have assembled a team of analysts to closely monitor and review current intelligence threat reporting. These analysts, who are sitting together in secure space in the Main Treasury building, are ensuring that Treasury can track, analyze any financial angles, and then take any appropriate action to counter these threats. Treasury will make sure to coordinate with all relevant agencies, including the Terrorist Threat Integration Center (TTIC).

In the near term, the Department plans to further develop our analytical capability in untapped areas, such as strategic targeting of terrorist financial networks and their key nodes. We also plan to analyze trend and patterns and non-traditional targets such as hawalas and couriers. In order to accomplish these goals, we plan to hire several new analysts as well as to draw on additional resources from OFAC and FinCEN. The precise number of analysts has yet to be determined -- as we are still ensuring that we have the proper leadership in place and that we do not disrupt our important ongoing efforts. Certain specifics, such as the physical location of the analysts, will be determined by a number of factors, including expertise, skills mix, and lessons learned as we go.

This Assistant Secretary will focus on enhancing the Department's relations with the intelligence community -- making sure that we are not duplicating the efforts of other agencies, but instead, are filling any gaps in intelligence targets. Ultimately, we envision that all of Treasury's intelligence analysis will be coordinated through the Office of Intelligence and Analysis. This will include intelligence support for Treasury's senior leadership on the full range of political and economic issues

We are currently confronting the question of staffing and funding for TFI. As Secretary Snow wrote in an April 16th letter to Members of Congress, President Bush has proposed significant spending increases in his Fiscal Year 2005 Budget to continue the fight against terror financing and financial crimes. The Secretary also stated that the Department would use currently appropriated Fiscal Year 2004 resources to ensure that TFI has the necessary resources to staff the new offices, as well as to bolster capabilities of existing functions.

I am able to provide some more detail today about those issues. We believe that through a combination of prudent and targeted use of resources, Treasury will be able to spend up to an additional $2 million on staffing and other start-up needs of TFI during the rest of the current fiscal year. We anticipate that we will be able to bring on board up to 15 new personnel during the remainder of the fiscal year.

Looking forward to the next fiscal year, we have not made firm decisions about how much money we will devote to the new office. We will evaluate our needs, and we are prepared to make the hard decisions about how to allocate our limited resources. Fighting the war on terror is a priority of the President and of this Department -- and we will spend whatever we need to carry out our duties in a responsible manner. And, of course, we will work with the Congress in making those decisions.

As can be seen from the description above, TFI will enhance the Treasury Department's ability to meet our own mission and to work cooperatively with our partners in the law enforcement and intelligence communities. We are confident that TFI will compliment and not duplicate the important work being done by the Department of Justice and Department of Homeland Security, and by the various intelligence agencies, and will be fully integrated into already established task forces and processes.

President Bush and this entire Administration are firmly committed to waging a relentless war on terrorists and those who offer them support. Our fight is guided by 5 goals.

-- To leverage all of the government's assets to identify and attack the financial infrastructure of terrorist groups;

-- To focus Treasury's powers on identifying and addressing vulnerabilities in domestic and international financial systems, including informal financial systems;

-- To direct our government's efforts on financial missions of critical importance to our national security interests, such as proliferation finance and identifying and recovering stolen Iraqi assets;

-- To promote a stronger partnership with the private financial sector by sharing more complete and timely information;

-- To improve domestic and international coordination and collaboration by combating financial crime by increasing the frequency and value of financial information shared across our government and with other governments.

These goals are critical to protecting and promoting our national security interests. The new office of TFI will improve our ability to advance these goals by further consolidating Treasury's unique assets in the campaign against financial crime, and by integrating and coordinating these assets with those of the interagency community.

I look forward to continuing to work with the Congress and this Committee in the creation of TFI and in advancing our mission in the war on terrorism and financial crime.

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