Audit Report 

OIG-05-032 

TERRORIST FINANCING/MONEY LAUNDERING: Office of 

Terrorist Financing and Financial Crimes Needs to Refine 

Measures for Its Performance Budget and Implement a Data 

Collection and Reporting System 

March 23, 2005 

Office of 

Inspector General 

Department of the Treasury

Contents 

Office of Terrorist Financing and Financial Crimes Needs to Refine 

Measures for Its Performance Budget and Implement a Data Collection 

and Reporting System (OIG-05-032) 

Page 1 

Audit Report................................................................................................. 3 

 Results in Brief............................................................................................ 4 

 Background ................................................................................................ 5 

 Findings and Recommendations .................................................................... 9 

 EOTF/FC Performance Measures Were Not Included in the 

 Fiscal Year 2005 Budget.......................................................................... 9 

 Recommendation .................................................................................... 14 

 Performance Measurement Data Was Not Routinely Collected and 

 Validated for Reporting Purposes .............................................................. 14 

 Recommendations................................................................................... 17 

 

Appendices

 Appendix 1: Objectives, Scope, and Methodology ...................................... 19 

 Appendix 2: Five Areas Needing Global Attention ....................................... 21 

 Appendix 3: Management Response ......................................................... 23 

 Appendix 4: Report Distribution................................................................ 28 

Abbreviations 

 BSA Bank Secrecy Act 

 DO Departmental Offices 

 EOTF/FC Executive Office for Terrorist Financing and Financial Crimes 

 FATF Financial Action Task Force 

FinCEN Financial Crimes Enforcement Network

FTE Full Time Equivalent 

GPRA Government Performance and Results Act 

IRS-CI Criminal Investigations Division of the Internal Revenue Service 

OFAC Office of Foreign Assets Control 

OIG Office of Inspector General 

OMB Office of Management and Budget 

OPB Office of Performance Budgeting 

OTF Office of Terrorist Financing 

TEOAF Treasury Executive Office for Asset Forfeiture 
Contents 

Office of Terrorist Financing and Financial Crimes Needs to Refine 

Measures for Its Performance Budget and Implement a Data Collection 

and Reporting System (OIG-05-032) 

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TFFC Office of Terrorist Financing and Financial Crimes 

TFI Office of Terrorism and Financial Intelligence 

TO Treasury Order 
OIG Audit 

Report

The Department of the Treasury 

Office of Inspector General 

Office of Terrorist Financing and Financial Crimes Needs to Refine 

Measures for Its Performance Budget and Implement a Data Collection 

and Reporting System (OIG-05-032) 

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March 23, 2005 

Mr. Juan C. Zarate 

Assistant Secretary for Terrorist Financing 

The Executive Office for Terrorist Financing and Financial Crimes 

(EOTF/FC) was established on March 31, 2003, within the 

Department of the Treasury to provide policy, strategic, and 

operational direction to the Department on issues relating to 

terrorist financing, financial crimes, money laundering, and other 

offenses threatening the integrity of the financial system. EOTF/FC 

was given direct oversight of the Financial Crimes Enforcement 

Network (FinCEN), the Office of Foreign Assets Control (OFAC), 

and the Treasury Executive Office for Asset Forfeiture (TEOAF). 

EOTF/FC was also assigned to coordinate policy with the Criminal 

Investigative Division of the Internal Revenue Service (IRS-CI). In 

April 2004, the Department realigned these functions in a newly 

created Office of Terrorist Financing (OTF) headed by the Assistant 

Secretary for Terrorist Financing within the Office of Terrorism and 

Financial Intelligence (TFI). TFI is headed by the Under Secretary 

for Enforcement.1

 In December 2004, OTF was again renamed, 

this time to the Office of Terrorist Financing and Financial Crimes 

(TFFC). TFFC remains within TFI. FinCEN, OFAC, and TEOAF now 

report directly to the Under Secretary for TFI. 

We reviewed the efforts of EOTF/FC (now TFFC) to meet 

performance measurement requirements. A description of our 

objectives, scope, and methodology is included in Appendix 1. 

 

1

 Treasury Order (TO) 105-17, Establishment of the Office of Terrorism and Financial Intelligence, dated 

April 28, 2004. 
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Measures for Its Performance Budget and Implement a Data Collection 

and Reporting System (OIG-05-032) 

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Results in Brief 

We found that EOTF/FC developed an initial set of performance 

measures in June 2003 for the fiscal year 2005 budget. However, 

these measures were not included in the budget submission 

because, at the time, Treasury’s Office of Performance Budgeting 

(OPB), which had responsibility for the budget submission, did not 

consider the measures to be sufficiently outcome-oriented as 

required by the Office of Management and Budget (OMB). OPB 

instead submitted two OFAC performance measures to represent 

EOTF/FC. The complex nature of terrorist financing and money 

laundering crimes, as well as the fact that EOTF/FC was newly 

established, made it difficult for EOTF/FC to develop outcomeoriented measures. Treasury’s Acting Assistant Secretary for 

Management believed that OPB’s initial assessment of EOTF/FC’s 

2003 draft measures was incorrect. As a result, TFFC recently 

proposed 5 performance measures, including 2 outcome measures, 

and worked with the Department’s Office of Management to 

implement these for reporting purposes. The Department plans to 

seek OMB concurrence with these measures. 

We also found that EOTF/FC had not implemented a routine data 

collection and recording system to report performance results. 

Once a data collection and reporting system is developed, TFFC 

will need to establish a process to ensure the data is verified and 

validated, and to assess the completeness and reliability of its 

performance data. 

We are recommending that TFFC ensure that the recently 

developed performance measures, with revisions as necessary after 

consultation with OMB, are implemented and included in the fiscal 

year 2006 budget submission. TFFC should also implement data 

collection and reporting procedures; develop methods for assessing 

the completeness and reliability of data; and create a mechanism 

for routinely gathering reliable data to report on its performance 

measures. 

In response to our draft report, the Assistant Secretary for TFFC 

indicated general agreement with our recommendations. TFFC is 
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committed to refining performance measures in close consultation 

with OMB and Treasury’s OPB, and to instituting a reliable data 

tracking system. 

The Assistant Secretary emphasized, however, that measuring 

effectiveness is a constant challenge that needs consistent revision 

and focus, and TFFC will continue to refine the performance 

measures moving forward. Further, while TFFC is committed to 

establishing a system to collect data that will measure its 

performance and to provide for an assessment of the data’s 

completeness and reliability, TFFC did not provide its detailed plan 

and estimated completion date to finalize and implement this 

recommendation. While we consider this recommendation to have 

a management decision, TFFC will need to provide a detailed action 

plan for input into the Department’s audit tracking system. TFFC’s 

complete response is included as Appendix 3. 

Background 

Federal Reporting and Performance Budget Requirements

The Government Performance and Results Act (GPRA) of 1993 

requires agencies to produce a strategic plan, an annual 

performance plan (including goals and performance measures), and 

an annual performance report. Performance measures are 

designated as either output- or outcome-oriented. An output 

measure is the tabulation, calculation, or recording of an activity or 

effort that is expressed in a quantitative or qualitative manner, 

whereas an outcome measure is an assessment of the results of a 

program activity compared to its intended purpose. 

Under GPRA, the Director of OMB is to require federal agencies to 

prepare an annual performance plan covering each program activity 

set forth in the budget of such agency. Agencies may aggregate, 

disaggregate, or consolidate program activities, except that any 

aggregation or consolidation may not omit or minimize the 

significance of any program activity constituting a major function 

or operation for the agency. 
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Beginning with the fiscal year 2005 budget, instead of preparing an 

annual performance plan, agencies now prepare a “performance 

budget” including an annual program performance report. This 

change from GPRA was made as part of the President’s 

Management Agenda to integrate performance and budget 

information. OMB Circular Number A-11, Preparation, Submission 

and Execution of the Budget (Revised 07/25/2003), provides 

federal managers with guidance on the preparation, submission, 

and execution of the performance budget. EOTF/FC was listed in 

the Budget of the United States Government Fiscal Year 2005, 

Department of the Treasury, DO Obligations by Program Activity, 

under the program activity titled “Financial Crimes Policies and 

Programs.” 

OPB ensures that Treasury’s annual performance budget supports 

the Department’s strategic plan and supports the execution of the 

budget. OPB: (1) provides leadership, management, and direction 

on budget and performance issues; (2) provides Treasury 

management with information that can be used to make informed 

decisions on budget requests to OMB and the Congress; and 

(3) serves as the Department’s focal point for budget matters with 

OMB and the Congress. 

Establishment of EOTF/FC 

In early 2003, significant law enforcement functions were 

transferred from the Department of the Treasury to the 

Departments of Homeland Security and Justice. Following the 

transfer, Treasury reorganized the remaining staff within its 

headquarters operation that dealt with these law enforcement 

issues. As part of this reorganization, Treasury established the 

EOTF/FC.2

 At that time, the Deputy Assistant Secretary for 

Terrorist Financing headed EOTF/FC and reported directly to the 

Deputy Secretary. 

 

2 TO 105-16, Establishment of Executive Office for Terrorist Financing and Financial Crimes, and 

Assignment of Enforcement Functions. This TO was replaced by TO 105-17, Establishment of the 

Office of Terrorism and Financial Intelligence. 
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Since inception, EOTF/FC has had limited staff and funding. For 

example, its travel budget was quickly exhausted by staff members 

who frequently traveled to foreign countries. Due to its limited 

staff size and the responsibilities of the Office, additional personnel 

were detailed to EOTF/FC. According to OPB officials, EOTF/FC 

was initially funded using money from existing vacated positions 

and was understaffed in light of its responsibilities. For fiscal year 

2004, EOTF/FC was funded at about $7 million with 14 full time 

equivalent (FTE) staff. At the time of our review, EOTF/FC’s staff 

consisted of 11 full-time employees. 

Mission TFFC, the successor office to EOTF/FC: (1) develops and 

implements U.S. government strategies to combat terrorist 

financing, domestically and internationally; (2) develops and 

implements the National Money Laundering Strategy as well as 

other policies and programs to fight financial crimes; 

(3) participates in the Department’s development and 

implementation of U.S. Government policies and regulations in 

support of the Bank Secrecy Act and the USA PATRIOT Act; 

(4) represents the United States at international bodies dedicated 

to fighting terrorist financing and financial crimes; and (5) develops 

U.S. Government policies relating to financial crimes. When 

created as EOTF/FC, TFFC was given responsibility for policy 

guidance and oversight of FinCEN, OFAC, and TEOAF, and policy 

guidance for IRS-CI. Through its work with these offices, and 

through work with foreign countries and international bodies such 

as the Financial Action Task Force (FATF), TFFC endeavors to 

ensure that all countries cooperate and implement appropriate 

measures to prevent the corruption of the global financial system. 

In accordance with the fiscal year 2005 appropriation (Public Law 

108-447), FinCEN, OFAC, and TEOAF now report directly to the 

Under Secretary for TFI.

Participation in the FATF TFFC heads the U.S. delegation to FATF 

and has assigned seven staff to support this effort. The FATF is 

the leading policy-making and standard-setting body in the 

international effort against money laundering and terrorist 

financing. FATF’s mission is to set international standards in antimoney laundering and counter-terrorist financing, assess countries 
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against these standards, and when necessary, compel compliance 

through diplomatic pressure and economic sanctions through its 

member countries. 

Establishment of the Office of Terrorism and Financial Intelligence 

The Administration announced the establishment of TFI on 

March 8, 2004. In addition to TFFC, TFI includes an Office of 

Intelligence and Analysis led by an Assistant Secretary. TFI brings 

together intelligence, regulatory, law enforcement, sanctions, and 

policy offices, and is intended to allow Treasury to be more 

effective in the war on terrorist financing and in securing the 

international financial system. 

Treasury’s Goals Related to Terrorist Financing and Money 

Laundering 

According to testimony in April 2004 by the Deputy Secretary,3

 the 

Treasury Department must continue to play a critical role in driving 

national policies related to terrorist financing, money laundering, 

financial crimes, and economic sanctions. He stated that these 

efforts have to be improved, amplified, and supported because of 

their growing importance at home and abroad. 

In his testimony, the Deputy Secretary identified five broad goals of 

the Department and the Administration. TFI is the Treasury office 

that will be working to achieve these goals. The goals include: 

(1) leveraging the Government’s assets to focus on identifying the 

financial infrastructure of terrorist groups and directing our most 

effective authorities to attack these networks; (2) focusing 

Treasury’s powers on identifying and addressing vulnerabilities in 

domestic and international financial systems, including informal 

financial systems; (3) directing the Government’s efforts on 

financial missions of critical importance to our national security 

interests, such as the accumulation and concentration of terrorist 

funds and identifying and recovering stolen Iraqi assets; 

 

3 Testimony presented by Dr. Samuel W. Bodman, Deputy Secretary, Department of the Treasury, 

before the Senate Committee on Banking, Housing, and Urban Affairs, on April 29, 2004.
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(4) promoting a stronger partnership with the private financial 

sector by sharing more complete and timely information about 

systemic vulnerabilities, typologies of financial crime, sanctions 

programs, emerging international standards, and domestic 

implementation issues; and (5) improving domestic and 

international coordination and collaboration in combating financial 

crime by increasing the frequency and value of financial information 

shared across our government and with other governments. 

Findings and Recommendations 

Finding 1 EOTF/FC Performance Measures Were Not Included in the 

Fiscal Year 2005 Budget 

EOTF/FC worked with outside consultants in June 2003 to create a 

pilot set of performance measures. The performance measures 

that EOTF/FC initially developed encompassed all of the major 

areas that EOTF/FC manages. The performance measures included 

goals to combat domestic and international terrorist financing and 

money laundering, and also included performance measures for 

FinCEN and OFAC for which EOTF/FC had oversight. EOTF/FC 

submitted these performance measures to OPB, which decided not 

to include them in the Department’s fiscal year 2005 budget 

request forwarded to OMB. At the time, OPB staff considered the 

performance measures more output-oriented than outcome-oriented 

and, therefore, not meeting OMB requirements for the budget 

submission. According to Treasury’s Acting Assistant Secretary 

for Management, with whom we met in August 2004, OPB was 

incorrect in concluding that the measures were inappropriate for 

the budget request because several of EOTF/FC’s measures were 

outcome-oriented. 

The summary on the next page presents the EOTF/FC performance 

measures linked to the Department’s strategic goal and objectives 

and EOTF/FC’s mission that were developed but not forwarded for 

the fiscal year 2005 budget: 
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 EOTF/FC’s Draft Performance Measures for FY 2005

TREASURY’S STRATEGIC GOAL 

• Preserve the Integrity of Financial Systems. 

DEPARTMENTAL OFFICE’S (DO) STRATEGIC OBJECTIVES 

• Disrupt and dismantle flow of funds to terrorists. 

• Counter money laundering and other financial crimes. 

• Attack financial infrastructure of drug trafficking and related crimes. 

EOTF/FC MISSION STATEMENTS AND DRAFT PERFORMANCE MEASURES 

Mission Statement 1: Develops and implements U.S. government strategies to combat 

terrorist financing domestically and internationally. 

Performance Measures:

• Dollar amount of terrorist assets and of transactions blocked worldwide annually 

• Number of countries in full compliance with FATF eight special recommendations on 

terrorist financing 

Mission Statement 2: Develops and implements the National Money Laundering 

Strategy. 

Performance Measure:

• Estimated amount of money laundered in the U.S. and abroad annually 

Mission Statement 3: Participates in the Department’s development and implementation 

of U.S. government policies and regulations in support of the BSA and the USA 

PATRIOT Act. 

Performance Measure:

• Increase in the % of U.S. financial institutions (by sector) found to be in compliance 

with Bank Secrecy Act (BSA) and PATRIOT Act requirements 

Mission Statement 4: Represents the United States at international bodies dedicated to 

fighting terrorist financing and financial crimes. 

Performance Measure:

• Number of countries in full compliance with FATF 40 recommendations on money 

laundering 

Mission Statement 5: Develops U.S. government policies related to financial crimes. 

Performance Measure:

• Estimated $ flow of funds from U.S. to sanctioned entities 

Source: Treasury’s Strategic Goal and DO Strategic Objectives obtained from 

the Performance Measures For The DO, Discussion Document dated 

June 23, 2003. EOTF/FC Mission Statement obtained from the Treasury Web 

site. 

To fulfill OMB requirements for fiscal year 2005, OPB submitted 

OFAC performance measures to represent EOTF/FC. OPB 

personnel explained that this was acceptable because of EOTF/FC’s 
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oversight role of OFAC. OFAC’s performance measures accepted 

for the FY 2005 budget were: 

• Increase the number of drug trafficking/terrorist related financial 

sanctions targets identified and made public 

• Increase sanction targets frozen under drug and terrorist-related 

sanctions programs 

Following OPB’s rejection of EOTF/FC’s initial set of performance 

measures, EOTF/FC devoted staff time to other initiatives and did 

not revisit the task of developing performance measures. On the 

domestic side, EOTF/FC worked on: 

• completing the 2003 National Money Laundering Strategy; 

 

• building relationships with the private sector to enlist its support 

as the gatekeepers to the financial system; and 

• attacking money laundering and terrorist financing through nonbanking financial systems under the USA PATRIOT Act by 

subjecting new sectors of the economy (such as money service 

businesses and broker-dealers) to anti-money laundering 

controls like record-keeping and reporting requirements, 

previously imposed on banks alone. 

Simultaneously, EOTF/FC handled several international issues. 

These included: 

• identifying, freezing, and repatriating Iraqi assets; 

• working with its counterparts in the FATF; 

• engaging the International Monetary Fund and World Bank to 

gain their recognition of the FATF 40 Recommendations to 

combat terrorist financing and financial crimes; 
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• working closely with Saudi Arabia to freeze the assets of 

organizations and individuals suspected of providing support to 

Al Qaeda terrorist groups; and 

• increasing awareness about the abuse of charities by terrorist 

groups through both enforcement actions and outreach efforts. 

As a general observation, money laundering and terrorist financing 

methods and techniques are moving targets that change in 

response to developing counter-measures. The 2003-2004 FATF 

typology exercise provides a global perspective on current money 

laundering and terrorist financing trends, as well as information on 

the nature and scope of the threat posed by these transactions, 

and illustrates the difficulty associated with developing meaningful 

performance measures.4 (See Appendix 2 for more detail about the 

results of this exercise.) In light of these complexities, TFFC is 

challenged with reporting its progress toward preventing terrorist 

financing, money laundering, and financial crimes. In the past it 

has proven difficult for federal law enforcement agencies engaged 

in combating money laundering to develop appropriate performance 

measures. 

Nevertheless, performance measures are useful for important policy 

and budget decisions regarding program activities. Decisions 

formulated with insufficient information could adversely impact 

such areas as resource allocation and recommendations to improve 

program performance for TFI. In this case, efforts to combat 

terrorist financing and financial crimes could be impacted. 

Proposed TFFC Measures 

In August 2004, we met with the Acting Assistant Secretary for 

Management, the Director of the Department’s Office of Strategic 

Planning and Performance Management, and TFFC officials to 

discuss this finding and the process for establishing TFFC’s fiscal 

 

4

 FATF members along with organizations such as the International Monetary Fund and World Bank 

performed this review to examine the methods and trends of money laundering and terrorist financing. 

This information is to be used to help FATF policy makers develop and refine anti-money laundering and 

counter-terrorist international financing standards. 
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year 2006 performance measures. The Acting Assistant Secretary 

for Management believed that OPB incorrectly disregarded 

EOTF/FC’s 2003 draft measures. As a general observation, the 

Acting Assistant Secretary commented that TFFC needs practical 

and useful measures to demonstrate success in achieving its 

objectives to disrupt and dismantle the flow of funds to terrorists, 

counter money laundering and other financial crimes, and attack 

financial infrastructure of drug trafficking and related crimes. In 

this regard, TFFC staff communicated to the Department’s Office 

of Strategic Planning and Performance Management that the draft 

measures that were not put forward in the fiscal year 2005 budget 

were nevertheless useful in managing EOTF/FC’s programs. The 

Acting Assistant Secretary advised subsequent to these meetings 

that his Office and TFFC staff worked together to implement the 

following performance measures for TFFC going forward, which 

build upon and included some of the initial draft measures, and 

which his Office considered a reasonable array of measures in the 

context of Treasury’s overall financial crimes program: 

• Percent reduction in the number of countries removed from the 

Financial Action Task Force 40+8 non-cooperative countries 

and territories list, as an outcome measure. 

• Increase the dollar amount of terrorist assets and number of 

financial channels blocked, as an outcome measure. 

• Number of countries that are assessed for compliance with the 

Financial Action Task Force 40 + 8 recommendations, as an 

output measure. 

• Increase the number of international measures and bodies 

established internationally to protect the financial system from 

money laundering and terrorist financing, as an output measure. 

• Increase the number of outreach engagements with the 

charitable and international financial communities, as an output 

measure. 
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The Acting Assistant Secretary further advised that the Department 

planned to discuss these proposed measures with OMB to gain its 

concurrence. 

Recommendation

We recommend that the Assistant Secretary for Terrorist Financing 

ensures that the Office of Terrorist Financing and Financial Crimes 

implements the recently proposed performance measures, adjusted 

as appropriate based on planned discussions with OMB, and 

includes the measures in the Department’s fiscal year 2006 budget 

submission. 

Management Response The Assistant Secretary for Terrorist 

Financing stated that five performance measures, including two 

outcome measures, were created for the fiscal year 2006 budget 

process as a result of work performed by OIG and Treasury’s OPB. 

However, he said that the best measures of the TFFC’s 

performance are often classified and anecdotal, and the measures 

should correlate with the office’s objectives, and not distort its 

priorities with deficient performance measures. The Assistant 

Secretary believes performance measures developed in June 2003 

for the fiscal year 2005 budget, though not included in the budget, 

were important benchmarks to monitor the office’s progress. The 

Assistant Secretary stated that going forward, his office will refine 

its performance measures in close consultation with OMB and 

Treasury’s OPB. He recognizes that because of the Office’s 

mission, performance measures need consistent revision and focus. 

OIG Comment Management has taken corrective action that 

satisfies the intent of our recommendation. 

Finding 2 Performance Measurement Data Was Not Routinely 

Collected and Validated for Reporting Purposes 

EOTF/FC had not implemented the routine data collection and 

recording methods necessary to report performance results. 
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EOTF/FC obtained most of its performance data ad hoc by relying 

on input from EOTF/FC staff and by consulting with organizations 

outside of the Department. In the absence of specific measures, 

EOTF/FC had not consistently captured performance data. Once 

performance measures are established and a data collection system 

implemented, TFFC will need to determine the means to verify and 

validate the performance data values. TFFC will also need to 

annually assess the completeness and reliability of this 

performance data. In addition, TFFC will need to obtain available 

information about the accuracy and reliability of data obtained from 

sources outside of the Department and consider this information 

when using the data for its performance measures. 

According to the Government Accountability Office, performance 

data is only useful if it is relevant, credible, and reliable. The data 

must be comprehensive and provide valid measures of program 

outcomes. The benefit of collecting performance information is 

fully realized only when this information is actually used by 

managers to bring about desired results.

Data Sources for EOTF/FC Performance Measures 

At the time of our audit, EOTF/FC did not have routine performance 

data collection procedures. Instead, it obtained data ad hoc from 

both internal and external sources. The Director of EOTF/FC 

explained that data was informally collected from staff members 

whenever necessary. The Director also stated that all staff 

members have different areas of expertise and have been able to 

provide the appropriate data upon request. The types of 

information provided by the staff include: (1) the amount of Iraqi 

assets identified, frozen, and recovered; (2) illegal funds handled by 

charities and money service businesses; (3) statistics on 

convictions, prosecutions, suspicious activity reporting, seizures, 

and forfeitures resulting from financial crimes; and (4) the status of 

foreign countries’ compliance with anti-money laundering and 

counter-terrorist international financial standards. 

Among the outside sources from which EOTF/FC gathered data 

were the Department of State, FATF, and the United Nations. We 
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believe it beneficial for TFFC to reach agreement with these 

organizations to regularly collect data, once TFFC establishes its 

performance reporting system. TFFC should concurrently identify 

which data it will need to collect, record, and report in order to 

satisfy both internal controls and reporting requirements. 

Assessing the Completeness and Reliability of Performance Data

We also found during our audit that EOTF/FC did not have a 

mechanism to validate the data it reported or to assess the 

reliability of data obtained. In accordance with the Reports 

Consolidation Act of 2000, agencies must include an assessment 

and a related statement regarding the reliability and completeness 

of the performance data included in the annual program 

performance report. In this regard, the agency is to describe how 

the reliability and completeness of the data was assessed. Also, 

the agency should identify instances where performance data is 

deemed materially unreliable and describe the actions that will be 

taken to resolve this situation. 

Actions Taken to Improve Data Collection and Reporting 

At the conclusion of our audit, TFFC officials stated that they 

began to institute data collection and reporting procedures. The 

Office was in the process of creating a database, and every 

2 weeks, for example, planned to accumulate data on the amount 

of Iraqi assets frozen using information provided in cables sent 

from different countries. Once these procedures are formalized for 

performance measurement reporting purposes, TFFC needs to 

describe the means for validating and verifying the measured 

values, and assess the reliability and completeness of the data, 

when reporting on its performance. 
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Recommendations

We recommend that the Assistant Secretary for Terrorist Financing 

ensures that the Office for Terrorist Financing and Financial Crimes: 

1. Implements routine data collection and reporting procedures to 

help manage its operations and report on its performance 

measures. 

2. Creates a mechanism that will allow the office to regularly 

gather reliable data from organizations outside of Treasury. 

3. Develops methods to assess the completeness and reliability of 

its performance measurement data. 

Management Response The Assistant Secretary for Terrorist 

Financing stated that TFFC needs to develop a system to collect 

data and track progress. He stated that his office is committed to 

instituting a reliable data tracking system to assess the 

completeness and reliability of data that TFFC gathered. He stated 

that TFFC has collected, analyzed, and used performance 

measurement data to report and monitor the office’s progress, but 

not through a single database. He also stated that FinCEN and 

OFAC provide performance measurement information with their 

own data collection and reporting requirements. 

OIG Comment While TFFC indicated it is committed to establishing 

a system to collect data that will measure its performance and to 

provide for an assessment of the data’s completeness and 

reliability, TFFC did not provide its detailed plan and estimated 

completion date to finalize and implement this recommendation. 

While we consider this recommendation to have a management 

decision, TFFC will need to provide a detailed action plan for input 

into the Department’s audit tracking system. 

****** 

We would like to extend our appreciation to TFFC and Office of 

Management officials for their cooperation and courtesies extended 

to our staff during the audit. If you have any questions, please 
Office of Terrorist Financing and Financial Crimes Needs to Refine 

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contact me at (202) 927-5400 or Donald Benson, Director, Eastern 

Field Audit Office, at (617) 223-8640. Major contributors to the 

report were Mr. Benson; Sharon Torosian, Audit Manager; Maryann 

Costello, Auditor-in-Charge; and Audrey Philbrick, Auditor. 

Marla A. Freedman 

Assistant Inspector General for Audit 
Appendix 1 

 Objectives, Scope, and Methodology 

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The objectives of this audit were to determine if EOTF/FC had 

established performance measures and had adequate data 

collection, validation, and reporting systems to ensure the goals 

outlined in the Treasury’s strategic plan are achieved. This audit 

was included in Office of Inspector General Fiscal Year 2004 

Annual Plan. 

We reviewed draft performance measures developed by EOTF/FC in 

June 2003 to determine if the performance measures appropriately 

demonstrated that program goals were being achieved. We 

assessed the relevancy of the draft performance measures to 

EOTF/FC’s mission and responsibilities. We also evaluated 

EOTF/FC’s procedures for collection, validation, recording, and 

reporting of performance measurement data. Because we 

determined that EOTF/FC was a Treasury policy office that had not 

officially established performance data reporting for the 

Department, tests of the management controls were not 

performed. 

We reviewed (1) applicable laws and regulations related to the 

development and reporting of performance measurement data, 

(2) congressional testimonies by Treasury officials, (3) EOTF/FC 

Briefing Materials, (4) recent Government Accountability Office 

testimony on performance measurement reporting and on terrorist 

financing, and (5) FATF documents addressing anti-money 

laundering and terrorist financing issues. These documents include 

(1) Report on Money Laundering Typologies 2003-2004 examining 

current methods and trends of money laundering and terrorist 

financing, (2) the FATF 40 Recommendations providing the basic 

framework for international anti-money laundering efforts, and (3) 

the FATF Eight Special Recommendations addressing international 

efforts to combat terrorist financing. 

To obtain information about EOTF/FC’s performance measures and 

data collection, we interviewed officials at Treasury Headquarters 

in Washington, D.C., from TFFC and the Office of Management. 
Appendix 1 

 Objectives, Scope, and Methodology 

Office of Terrorist Financing and Financial Crimes Needs to Refine 

Measures for Its Performance Budget and Implement a Data Collection 

and Reporting System (OIG-05-032) 

Page 20 

We conducted our audit between December 2003 and 

August 2004 in accordance with generally accepted government 

auditing standards.
Appendix 2 

 Five Areas Needing Global Attention 

Office of Terrorist Financing and Financial Crimes Needs to Refine 

Measures for Its Performance Budget and Implement a Data Collection 

and Reporting System (OIG-05-032) 

Page 21 

As additional perspective on current money laundering and terrorist 

financing trends, we are providing the following information for the 

2003-2004 FATF typology exercise as to five areas needing global 

attention: 

Wire transfers Wire transfers are a fast and efficient way of 

moving funds for terrorist purposes. Given that wire transfers do 

not involve the actual movement of currency, they are a rapid and 

secure method for transferring value from one location to another. 

Complex wire transfer schemes can be used to create a deliberately 

confusing audit trail to disguise the source and destination of funds 

destined for terrorist use. 

Non-profit organizations The examination of terrorist misuse of 

non-profit organizations found that the diversion of even a very 

small volume of funds could represent a potentially serious terrorist 

financing problem. Non-profit organizations possess many 

characteristics that are particularly vulnerable to misuse for terrorist 

financing. They enjoy the public trust, have access to considerable 

sources of funds, and are often cash-intensive. Some of these 

organizations have a global presence that provides a framework for 

national and international operations and financial transactions, 

often within or near those areas that are most exposed to terrorist 

activity. Depending on the country and legal form of the non-profit 

organization, there are few obstacles to their creation, and they are 

often subject to little or no regulation. 

Insurance industry Inconsistent regulation of the insurance 

industry may provide an opportunity that could be exploited by 

money launderers. The industry provides risk transfer, savings, 

and investment products to a variety of consumers, from 

individuals to multi-national corporations and governments. The 

industry is viewed to be most vulnerable at the integration stage of 

the money laundering cycle. Once funds have been placed into an 

insurance policy, the launderer has made significant steps in 

layering and integrating the funds into the international financial 

system. 
Appendix 2 

 Five Areas Needing Global Attention 

Office of Terrorist Financing and Financial Crimes Needs to Refine 

Measures for Its Performance Budget and Implement a Data Collection 

and Reporting System (OIG-05-032) 

Page 22 

Politically exposed persons Politically exposed persons are 

individuals who are, or have been in the past, entrusted prominent 

public functions in a particular country. Politically exposed persons 

often conceal their illicit assets through networks of shell 

companies and off-shore banks located outside the politically 

exposed person’s country of origin. Politically exposed persons are 

known to use middlemen or family members to move or hold 

assets on their behalf. 

Gatekeepers Specialized financial advice providers referred to as 

gatekeepers are legal and financial specialists who provide advice 

to criminals for handling their funds. A small number of these 

specialists are providing information about schemes to launder 

criminal proceeds and about the best vehicles and offshore 

locations used to launder money. These specialists also act as 

gatekeepers because they offer legitimacy to criminal operations by 

serving as intermediaries in dealing with financial institutions. 
Appendix 3 

Management Response 

Office of Terrorist Financing and Financial Crimes Needs to Refine 

Measures for Its Performance Budget and Implement a Data Collection 

and Reporting System (OIG-05-032) 

Page 23 
Appendix 3 

Management Response 

Office of Terrorist Financing and Financial Crimes Needs to Refine 

Measures for Its Performance Budget and Implement a Data Collection 

and Reporting System (OIG-05-032) 

Page 24 
Appendix 3 

Management Response 

Office of Terrorist Financing and Financial Crimes Needs to Refine 

Measures for Its Performance Budget and Implement a Data Collection 

and Reporting System (OIG-05-032) 

Page 25 

-8-

PRESERVE THE INTEGRITY OF FINANCIAL SYSTEMS (I)

Disrupt and dismantle flow of funds to 

terrorists

• Dollar amount of terrorist assets and 

of transactions blocked worldwide 

(accounts, systems, etc.) annually

• Number of countries in full 

compliance with the FATF eight 

special recommendations on terrorist 

financing

Preserve 

integrity of 

financial 

systems

Develop, lead and implement US anti-terrorist financing strategy

• Increase dollar amount of terrorist assets and number of financial channels 

blocked (e.g. accounts, systems, etc.)

• Increase percentage of designated persons’ accounts frozen of those identified 

during the previous year

• Increase the number of regional or country-specific counter-terrorism financing 

strategies developed and implemented

• Increase the number of terrorist financing networks discovered due to financial 

analysis

Deter terrorist financing and support

• Increase the number of donors, facilitators and fundraisers exposed and 

designated

• Increase the number of 311 designations of financial entities or transactions for 

facilitating terrorist financing

• Increase the number of channels disrupted through public or diplomatic action

• Increase the number of outreach programs to charitable communities

Ensure global compliance on counter-terrorism financing standards (e.g., FATF 8)

• Increase the number of FATF member countries in full compliance with each of 

the FATF 8 special recommendations on terrorist financing

• Increase the number of non-FATF members in compliance with any of the FATF 

8 special recommendations on terrorist financing

• Increase the number of countries receiving technical assistance provided by 

Treasury

• Increase the number of countries initiating or enhancing oversight of charitable 

sector

Engage international partners in disrupting terrorist financing

• Increase the number of countries acting simultaneously with US designations

• Decrease the time to provide feedback on international inquiries

Strategic outcomes measures

Potential FY04 performance targets

Internal indicators

DO strategic objectives and key outcome

measures (5-year horizon) Strategic goal DO initiatives and performance goals for FY2004 
Appendix 3 

Management Response 

Office of Terrorist Financing and Financial Crimes Needs to Refine 

Measures for Its Performance Budget and Implement a Data Collection 

and Reporting System (OIG-05-032) 

Page 26 

-9-

PRESERVE THE INTEGRITY OF FINANCIAL SYSTEMS (II)

Counter money laundering and other 

financial crimes

• Estimated amount of money 

laundered in the U.S. and abroad 

annually

• Number of countries in full 

compliance with FATF 40 

recommendations on money 

laundering

Preserve 

integrity of 

financial 

systems

Develop, lead and implement US anti-money laundering strategy

• Increase number of designations as primary money laundering concerns

• Increase cost of money laundering in the U.S. and abroad, adjusted for inflation

• Increase dollar amount forfeited resulting from Treasury actions and analysis or 

support

Ensure domestic compliance with anti-money laundering laws and regulations

• Increase in percentage of U.S. financial institutions (by sector) found to be in 

compliance with Bank Secrecy Act (BSA) and Patriot Act requirements

• Increase the number of newly-registered entities subject to the BSA

• Increase the number of entities newly subject to anti-money laundering 

regulations that have been audited/inspected 

• Increase the number of educational programs offered to new sectors subject to 

regulation

• Increase the number and dollar amount of fines levied for violations of BSA

• Increase the number of compliance updates and advisories to various financial 

sectors (including feedback to financial community)

Ensure global compliance with anti-money laundering standards

• Increase the number of FATF member countries in full compliance with each of 

the FATF-40 recommendations

• Increase the number of countries that have moved off the NCCT process

• Increase the number of countries implementing legislative or regulatory 

improvements

• Increase the number of countries evaluated/assessed

Provide information and analytical support for law enforcement agencies

• Increase the number of cases supported by FinCEN, OFAC, and IRS-CI

• Decrease the time taken to administer civil penalties

• Increase the number of proactive cases provided to law enforcement from BSA 

data and analysis

• Decrease the time taken to provide proactive leads

• Decrease the number of related BSA filings necessary to develop a lead for 

investigation

Develop the use and capacity of international financial intelligence units

• Increase in membership in the Egmont Group

• Increase the number of countries with established financial intelligence units

• Increase the amount of information shared among financial intelligence units

• Decrease the time to provide feedback on international inquiries

• Increase the number of financial intelligence unit-related training missions

Strategic outcomes measures

Potential FY04 performance targets

Internal indicators

DO strategic objectives and key outcome

measures (5-year horizon) Strategic goal DO initiatives and performance goals for FY2004 
Appendix 3 

Management Response 

Office of Terrorist Financing and Financial Crimes Needs to Refine 

Measures for Its Performance Budget and Implement a Data Collection 

and Reporting System (OIG-05-032) 

Page 27 

- 10 -

PRESERVE THE INTEGRITY OF FINANCIAL SYSTEMS (III)

Preserve 

integrity of 

financial 

systems

Increase the reliability of the U.S. financial 

system

• Semi-variance of U.S. capital markets

• Estimated counterfeiting rates of new 

bills

• $ FDI into the U.S.

Execute the Nation’s financial sanctions 

policies

• Estimated $ flow of funds from U.S. to 

sanctioned entities(1)

Deter drug trafficking and related crimes

• Increase number of drug trafficking-related designations (e.g., SDNT, 311, Kingpin)

• Increase the number of drug trafficking support networks identified, made public

• Increase the number of cases referred for investigation or prosecution for drug 

trafficking based on financial information and analysis

• Increase dollar amount of assets frozen under drug-related sanctions programs

Develop, implement and administer USG financial sanctions policies

• Increase dollar amount of fines for violations of financial sanctions policies

• Increase the number of licenses issued in a timely manner

• Decrease the response time to public inquiries to 48 hours

• Increase the number of transactions that can be handled automatically via the 

Internet or the phone

• Decrease the time to calculate total amounts and location of assets frozen under 

specific programs

• Increase ratio of assets subject to sanctions program that are frozen and 

monitored 

Identify, trace and freeze sanctioned assets

• Increase $ amount of assets repatriated from total amount of assets frozen • Increase the number of countries cooperating in search for assets

• Increase the number of persons publicly identified or designated as sponsors or 

agents of the Hussein regime

• Increase the number of countries freezing assets

• Increase the number of countries repatriating assets

• Decrease the amount of time taken to repatriate identified and frozen assets

Develop/implement critical infrastructure protection policies

• Increase participation of U.S. fin. institutions in FS-ISAC (by segment)

• Increase the number of end-to-end continuity operations tests of U.S. Treasury 

fiscal systems

Administer and evaluate the Terrorist Risk Insurance Program

• Promulgate all regulations by first anniversary of statute

Promote better corporate governance

Issue new currency to continue to reduce the opportunity for counterfeiting

• Launch new $50 and $100 bill successfully 

Seek deposit insurance reform in legislation without increasing taxpayer risk

• Enact deposit insurance reform without increasing the deposit insurance limits (1) Excluding transactions not subject to sanctions

Strategic outcomes measures

Potential FY04 performance targets

Internal indicators

Attack financial infrastructure of drug 

trafficking and related crimes

• Annual number of drug traffickingrelated financial networks identified 

and made public

• Annual dollar amount and percentage 

growth of assets frozen under drugrelated sanctions programs

DO strategic objectives and key outcome

measures (5-year horizon) Strategic goal DO initiatives and performance goals for FY2004 
Appendix 4 

Report Distribution 

Office of Terrorist Financing and Financial Crimes Needs to Refine 

Measures for Its Performance Budget and Implement a Data Collection 

and Reporting System (OIG-05-032) 

Page 28 

The Department of the Treasury

Under Secretary for Enforcement 

Assistant Secretary for Terrorist Financing 

Acting Assistant Secretary for Management 

Acting Chief Financial Officer 

Office of Strategic Planning and Performance 

Management 

Office of Accounting and Internal Controls 

Office of Management and Budget

OIG Budget Examiner