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TERRORIST FINANCING AND 

THE ISLAMIC STATE 

HEARING 

BEFORE THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

SECOND SESSION 

NOVEMBER 13, 2014 

Printed for the use of the Committee on Financial Services 

Serial No. 113–99 

( 

(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

JEB HENSARLING, Texas, Chairman 

GARY G. MILLER, California, Vice Chairman 

SPENCER BACHUS, Alabama, Chairman 

Emeritus 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

SHELLEY MOORE CAPITO, West Virginia 

SCOTT GARRETT, New Jersey 

RANDY NEUGEBAUER, Texas 

PATRICK T. MCHENRY, North Carolina 

JOHN CAMPBELL, California 

MICHELE BACHMANN, Minnesota 

KEVIN McCARTHY, California 

STEVAN PEARCE, New Mexico 

BILL POSEY, Florida 

MICHAEL G. FITZPATRICK, Pennsylvania 

LYNN A. WESTMORELAND, Georgia 

BLAINE LUETKEMEYER, Missouri 

BILL HUIZENGA, Michigan 

SEAN P. DUFFY, Wisconsin 

ROBERT HURT, Virginia 

STEVE STIVERS, Ohio 

STEPHEN LEE FINCHER, Tennessee 

MARLIN A. STUTZMAN, Indiana 

MICK MULVANEY, South Carolina 

RANDY HULTGREN, Illinois 

DENNIS A. ROSS, Florida 

ROBERT PITTENGER, North Carolina 

ANN WAGNER, Missouri 

ANDY BARR, Kentucky 

TOM COTTON, Arkansas 

KEITH J. ROTHFUS, Pennsylvania 

LUKE MESSER, Indiana 

MAXINE WATERS, California, Ranking 

Member 

CAROLYN B. MALONEY, New York 

NYDIA M. VELA ́ ZQUEZ, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

MICHAEL E. CAPUANO, Massachusetts 

RUBE ́ N HINOJOSA, Texas 

WM. LACY CLAY, Missouri 

CAROLYN MCCARTHY, New York 

STEPHEN F. LYNCH, Massachusetts 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

GWEN MOORE, Wisconsin 

KEITH ELLISON, Minnesota 

ED PERLMUTTER, Colorado 

JAMES A. HIMES, Connecticut 

GARY C. PETERS, Michigan 

JOHN C. CARNEY, JR., Delaware 

TERRI A. SEWELL, Alabama 

BILL FOSTER, Illinois 

DANIEL T. KILDEE, Michigan 

PATRICK MURPHY, Florida 

JOHN K. DELANEY, Maryland 

KYRSTEN SINEMA, Arizona 

JOYCE BEATTY, Ohio 

DENNY HECK, Washington 

STEVEN HORSFORD, Nevada 

SHANNON MCGAHN, Staff Director 

JAMES H. CLINGER, Chief Counsel 

(III) 

C O N T E N T S 

Page 

Hearing held on: 

November 13, 2014 ........................................................................................... 1 

Appendix: 

November 13, 2014 ........................................................................................... 57 

WITNESSES 

THURSDAY, NOVEMBER 13, 2014 

Cohen, Hon. David S., Under Secretary for Terrorism and Financial Intelligence, United States Department of the Treasury ......................................... 7 

Gurule, Hon. Jimmy, Law Professor, Notre Dame Law School ........................... 36 

Johnston, Patrick B., Ph.D., Political Scientist, the RAND Corporation ............ 40 

Levitt, Matthew, Ph.D., Director, Stein Program on Counterterrorism and 

Intelligence, The Washington Institute for Near East Policy .......................... 38 

APPENDIX 

Prepared statements: 

Hinojosa, Hon. Ruben ....................................................................................... 58 

Cohen, Hon. David S. ....................................................................................... 62 

Gurule, Hon. Jimmy ......................................................................................... 71 

Johnston, Patrick B. ......................................................................................... 86 

Levitt, Matthew ................................................................................................ 96 

(1) 

TERRORIST FINANCING AND 

THE ISLAMIC STATE 

Thursday, November 13, 2014 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The committee met, pursuant to notice, at 10:04 a.m., in room 

2167, Rayburn House Office Building, Hon. Jeb Hensarling [chairman of the committee] presiding. 

Members present: Representatives Hensarling, Lucas, Garrett, 

Neugebauer, Bachmann, Pearce, Posey, Fitzpatrick, Westmoreland, 

Luetkemeyer, Huizenga, Duffy, Hurt, Stivers, Fincher, Stutzman, 

Mulvaney, Hultgren, Ross, Pittenger, Barr, Rothfus, Messer; 

Waters, Maloney, Sherman, Meeks, Capuano, Clay, Lynch, Scott, 

Green, Ellison, Perlmutter, Himes, Sewell, Foster, Kildee, Murphy, 

Delaney, Sinema, Beatty, Heck, and Horsford. 

Chairman HENSARLING. The committee will come to order. 

Without objection, the Chair is authorized to declare a recess of 

the committee at any time. 

Before we begin, if you think you are in a strange room, you are. 

We did not change the portraits. As I have announced previously 

to the committee, our hearing room, I think, is the last hearing 

room in the Rayburn Building to receive a sound upgrade and 

other modifications to make the room ADA-compliant. 

So as a reminder to all Members, we will be a Nomadic tribe between now and, theoretically, the end of March, we hope that 

doesn’t mean mid-May, and we will take whatever committee room 

our friends will allow us to have. So if you see Chairman Shuster 

on the Floor, please thank him for his kindness in allowing our 

committee to use his committee room. 

This hearing is entitled, ‘‘Terrorist Financing and the Islamic 

State.’’ I wish to advise Members who are unaware, we have two 

panels today, and of course we also have organizing meetings for 

the 114th Congress that are ensuing, and so we are going to release the Administration witness, Secretary Cohen, at noon. We 

will convene the second panel at that time, and then the hearing 

will be gaveled down at 1:00 p.m. 

Please know this will be our first hearing on this vitally important topic. It will not be our last in the next Congress. So Members 

who don’t have an opportunity to ask questions, if need be, we can 

certainly call the witnesses back in the future, and at least for 

those on the Republican side of the aisle, once the second panel begins, wherever we last left off in the queue, those who didn’t have 

2 

an opportunity to ask questions of the first panel, we will start 

with you on the second panel. 

I now wish to recognize myself for one minute for an opening 

statement. 

The 9/11 Commission estimated that al Qaida’s brutal, evil attack on 9/11 cost the terrorists approximately half a million dollars. 

So for half a million dollars, terrorists were able to murder almost 

3,000 of our fellow countrymen and inflict immeasurable suffering 

upon our Nation. Today, we face another terrorist enemy for which 

half a million dollars appears to be pocket change, an organization 

that reportedly raises between $1 million and $2 million a day. 

And unlike al-Qaeda and other terrorist groups with which we 

are familiar, who rely mainly on private donations and state sponsorship to fund their activities, ISIL is internally financed, and apparently is sitting on assets of almost $2 billion. 

So today’s hearing continues this committee’s ongoing efforts to 

ensure our Government is doing everything possible to stop the Islamic State and other terrorists from using the global financial system to pay for their evil activities. Fighting the financial war 

against terror will demand constant innovation and improvement. 

The tools we have used in the past may not be suitable for the future. 

I look forward to hearing from all the witnesses on what may be 

necessary to upgrade, innovate, and improve our capabilities to 

starve the terrorists of the money they so desperately need to carry 

out their attacks. 

I will now recognize the ranking member for 3 minutes for an 

opening statement. 

Ms. WATERS. Thank you very much, Mr Chairman, for scheduling today’s hearing. 

I would like to thank Under Secretary Cohen and each of our 

other witnesses for being here today. 

I am looking forward to hearing about the Administration’s efforts to degrade ISIL’s financial capability and to review the effectiveness of our current legal framework in deterring terrorists’ financing and money laundering. 

The Islamic State, also known as ISIL or ISIS, is an incredibly 

violent organization that has shown a particularly callous disregard for human life, employing shocking and brutal tactics that 

include beheading, mass murder, and rapes, and more recently, allegations of chemical weapons use. The group is a tremendously destabilizing force across large swaths of Iraq and Syria, and its brutal campaigns have appropriately drawn the condemnation of the 

broader international community. 

In addition to the horrific massacres, kidnappings, and decapitations, officials now believe that ISIL is one of the richest terrorist 

groups to ever exist, with estimated assets in excess of $1 billion. 

Unlike most other terrorist groups, which tend to rely heavily on 

foreign sponsors, ISIL generally raises its funds internally, limiting 

the opportunities traditionally available to the Treasury Department to cut them off from the formal financial system. 

Regardless, Treasury’s ability to sanction and block assets remains vital to ensure that over the long run the United States and 

our allies can shut down any funds that are tied to illicit oil sales, 

3 

extortion, and kidnapping for ransom, and as we make progress in 

curtailing ISIL’s internal funding schemes, it may be forced to rely 

more heavily on types of funding that would most likely have to 

float through the formal financial system. To guard against this 

and all other efforts to finance terrorist activities, Treasury, our financial regulators, the Department of Justice, and Congress must 

work diligently to strengthen the enforcement and deterrent value 

of our counterterrorism and anti-money-laundering laws. 

Due to concerns that the Department of Justice and regulators 

have not met the task of holding banks and their executives sufficiently accountable for blatant violations of law designed to 

staunch the flow of funds to terrorist groups, I joined with my 

Democratic colleagues earlier this Congress in introducing legislation that would close loop holes, encourage the flow of information 

related to illicit activity, and strengthen civil powers to hold bank 

executives accountable for their role in safeguarding our national 

security, among other things. 

So I hope that as part of this committee’s discussion of the adequacy of international banking policy, we take a hard look at the 

proposal that Democrats have put forth but which has yet to be 

considered by this committee. 

I yield back the balance of my time. 

Chairman HENSARLING. The Chair now recognizes the chairman 

of our Capital Markets Subcommittee, the gentleman from New 

Jersey, Mr. Garrett, for 1 minute. 

Mr. GARRETT. And I thank the chairman for holding this important hearing today on terrorist financing and ISIS. 

ISIS inherits the rightful claim to the evil legacies of senseless 

brutality and inhumanity, and there is no doubt that if given the 

opportunity, ISIS would try to harm Americans here in the homeland, and as a Member of Congress who represents the district 

across the river from what once was the World Trade Center twin 

towers, I know that we cannot be cavalier about security threats 

such as ISIS. 

Unfortunately, our Commander in Chief hasn’t always appreciated ISIS’ threat to this Nation. Accordingly, I am concerned 

about just how seriously our Commander in Chief, President 

Obama, has taken this threat, and so I look forward to today’s 

hearing and today’s witnesses, including an Administration official. 

I hope to get a better understanding of what has been done and 

what must be done to not only degrade, but actually eliminate this 

terrorist threat. 

Thank you, Mr. Chairman. 

Chairman HENSARLING. The Chair now recognizes the gentleman 

from California, Mr. Sherman, for a minute and a half. 

Mr. SHERMAN. Thank you, Mr. Chairman. 

I spent a substantial amount of time on these issues at our Terrorism and Nonproliferation Subcommittee over on the House Foreign Affairs Committee. We have learned that Qatar is a major 

source of funds, both at the governmental level, but also allowing 

its citizens to donate to Hezbollah, Hamas, and ISIS. ISIS is now 

much more internally-funded. At one point, it relied more on donations. 

4 

There are those who attack the President’s—who I think have an 

overly simplistic view of the situation. ISIS is evil. But many of 

ISIS’ enemies are just as evil and more dangerous than ISIS. Given 

this complicated circumstance, simplistic attacks on policy don’t 

really further our situation. 

I am concerned that the electricity continues to be on in all the 

cities that ISIS controls. This means that either we are providing 

that electricity from dams under the control of the Iraqi government or we are allowing ISIS to operate electric generation facilities. Either way, ISIS is able to sell electricity because we are unwilling to turn the lights off. We are in a difficult circumstance because the civilians who live under ISIS’ rule are, to some extent, 

hostages, and, to some extent, supporters of ISIS, but we did not 

hesitate to bomb strategic targets in occupied Europe, and we cannot hesitate to bomb strategic targets in ISIS-controlled Northern 

Iraq and Eastern Syria. 

Finally, we have learned that the control of the New York Fed 

and its ability to clear dollar transactions is perhaps the most powerful sanction that we have against terrorist states like Iran, and 

I will be interested to see whether that would play a role in ISIS. 

In any case, it has brought Iran to the point where they are willing 

to pretend to negotiate with us in Geneva. 

I yield back. 

Chairman HENSARLING. The Chair now recognizes the vice chairman of our Oversight and Investigations Subcommittee, the gentleman from Pennsylvania, Mr. Fitzpatrick, for 2 minutes. 

Mr. FITZPATRICK. Thank you, Mr. Chairman. 

This past month I had the opportunity to travel to the region to 

investigate terror financing. I had meetings in Qatar and Turkey 

with Department of State and Department of the Treasury officials 

to round out my understanding of terror financing, and specifically 

the threat posed by ISIS. 

I look forward to working with my colleagues on this committee 

to provide oversight over the Government’s response to ISIS and 

ensure that we have all the tools necessary to meet this very 

unique challenge. 

ISIS is an enemy unlike any other that we have faced up to this 

point. Though they have their roots in al-Qaeda in Iraq, they have 

not only learned from their previous experiences, they have, in fact, 

evolved, and they are not just an organization committed to acts 

of terrorism, but have designs on establishing their own state and 

are, in fact, currently governing a large area in the region. 

This structure creates a unique challenge for one of the means 

that we have traditionally employed to combat terrorist threats, 

which is to go after their money and their resources. 

This mission to degrade and ultimately defeat ISIS requires a coordinated response between the Executive and the Legislative 

Branches. Our national security transcends all other considerations, and I look forward to hearing today how we can work together to protect the American people. 

I yield back. 

Chairman HENSARLING. The Chair now recognizes the gentleman 

from Massachusetts, Mr. Lynch, for a minute and a half. 

Mr. LYNCH. Thank you very much, Mr. Chairman. 

5 

I want to thank the Secretary and the other panelists for working with the committee and helping us with our work. 

As co-Chair of the Congressional Task Force on Antiterrorism Financing, along with my colleague, Mr. King from New York, who 

is the Republican co-Chair, we have done a lot of work in this area 

in the traditional sense where we are trying to block terrorist organizations from using a legitimate financial system. This problem 

presents a different type of issue where a lot of revenue is being 

generated internally by ISIS and it is a totally different scale. We 

are talking $1 million to $2 million a day, as the chairman pointed 

out, in terms of their revenue. 

I would be very interested in hearing from the Secretary on what 

we are doing in Turkey along the border—the northern border of 

Syria there. 

Like my colleague, I just came back from Erbil and looked at the 

situation in Northern Iraq as well as in Turkey, and we are very 

concerned about the porous nature of that border and how illicit 

shipments are still being handled both through Turkey and 

through parts of Syria. So I would be interested in hearing the Secretary’s comments on that. 

I do want to say thank you for the work you have done so far. 

I think it has been commendable in terms of the anti-money-laundering and anti-terrorist-financing work that you have done. 

Thank you. 

Chairman HENSARLING. The Chair now recognizes the gentleman 

from Florida, Mr. Ross, for 1 minute. 

Mr. ROSS. Thank you, Mr. Chairman, and thank you for holding 

this hearing. I also want to thank our distinguished panelists for 

their testimony today. 

As you pointed out, Mr. Chairman, it cost the terrorists who targeted and murdered thousands of Americans citizens on 9/11 approximately $500,000 to plan and execute their coordinated attack, 

and in a single day, ISIL is estimated to bring in more than double 

that amount through illicit business practices. 

ISIL is a threat to America and the free world. We must dismantle and destroy this terrorist organization before more American lives are put at risk. From selling oil on the black market to 

taxing and extorting local businesses to kidnapping for ransom, 

ISIL is a criminal organization with numerous financial resources 

that have perpetuated their reign of terror in unstable regions 

across the Middle East. 

I look forward to working with my colleagues on this committee 

to ensure the Federal Government uses every tool at its disposal 

to prevent ISIL and all terrorist groups from acquiring the funds 

to continue their reign of terror. 

I yield back. 

Chairman HENSARLING. The gentleman yields back. 

The Chair now recognizes the gentlelady from Ohio, Mrs Beatty, 

for 1 minute. 

Mrs. BEATTY. Thank you, Chairman Hensarling, Ranking Member Waters, Under Secretary Cohen, and the other panelists. 

Today, we are examining the critical and important topic of terrorist financing in the Islamic State, specifically how the terrorist 

6 

group known as ISIL obtains and deploys financial resources to 

further their operations in Iraq, Syria, and the Middle East. 

Each night, my constituents turn on the news, and they find reports of ISIL’s acts and the brutality against religious minorities, 

women, aid workers, and journalists. This must stop, and the financing is the kill switch. 

While the military is providing air support and aid to moderate 

rebels and legitimate governments in the Middle East to defeat 

ISIL, we must also highlight the efforts of other agencies within 

the Administration and how Federal resources may be coordinated 

to erode and ultimately eradicate ISIL. 

The U.S. Government is actively combating terrorist financing, 

attempting to choke off sources of funding for ISIL and related organizations. 

Mr. Chairman and my other colleagues here, I look forward to 

working with you because the hearing on this topic not only protects our financial interests but our national security interests as 

well. 

Thank you, and I yield back. 

Chairman HENSARLING. The Chair now recognizes the gentleman 

from Indiana, Mr. Stutzman, for 1 minute. 

Mr. STUTZMAN. Thank you, Mr. Chairman, and thank you for 

calling this very important hearing. 

Mr. Chairman, Islamic State is one of the most well-armed, wellequipped, and well-financed terror organizations the world has ever 

seen. They are potentially the most barbaric as well, using tactics 

that include torture, kidnapping for ransom, and beheading of innocent people, including two Americans, James Foley and Steve 

Sotloff. 

Since 2013, they have recruited thousands of fighters from 

around the world, swept through Iraq and Syria, taken over cities, 

and killed thousands of innocent people who did not conform to 

their ways. 

It is reported that Islamic State now controls around 60 percent 

of the oil fields in Syria, which are bringing in massive daily revenues to fund their operations. 

One of the most effective ways the United States has disrupted 

terrorists in the past has been to cut off their financing, limiting 

their ability to plot and plan attacks. Thwarting Islamic State’s 

multiple revenue streams and their ability to spend money they already have requires new tactics. 

So today I am looking forward to hearing exactly how we are 

identifying and blocking financial intermediaries that could keep 

Islamic State in a strong position. Is our current strategy working? 

Are our allies doing all that they can to help coordinate this effort? 

Thank you to the witnesses for appearing today and I look forward to this conversation. 

I yield back. 

Chairman HENSARLING. Last but not least, the Chair recognizes 

the gentleman from North Carolina, Mr. Pittenger, for 1 minute. 

Mr. PITTENGER. Thank you, Mr. Chairman, for calling this very 

critical hearing. 

The threat from ISIS seems to be growing exponentially. In the 

summer, we were told there were about 15,000 soldiers. Now, we 

7 

are told that there are between 40,000 and 80,000 soldiers. We are 

training 5,000 moderate Syrians right now. Our best hope and our 

best opportunity appears to me to be to intercept this transport of 

funds coming from the sale of oil. Of course, there is extortion and 

ransoms and other means. It does beg the question of whether we 

have enough military intel ops on ground to make these interceptions. 

Another area of real opportunity is, of course, with data mining 

software that is available. I have met with FinCEN and with 

OFAC several times as chairman of the Task Force on Terrorism, 

and also with many national software companies, and with the 

very sophisticated software available, I do hope that the Department is making every effort to utilize the software to engage these 

funds as they get into the international financial system. 

Thank you. I yield back. 

Chairman HENSARLING. We now turn to our Treasury Department witness, David Cohen, the Under Secretary for Terrorism and 

Financial Intelligence, a position to which he was confirmed in 

June of 2011. At Treasury, Mr. Cohen leads the Department’s Policy, Enforcement, Regulatory and Intelligence functions aimed at 

identifying and disrupting the lines of financial support to international terrorist organizations. 

Prior to his current service, Under Secretary Cohen held other 

positions at Treasury. He also practiced law in the private sector. 

We welcome you, Mr. Under Secretary, to the committee. Without objection, your full written statement will be made a part of the 

record. 

You are now recognized for a 5-minute summary of your testimony. 

STATEMENT OF THE HONORABLE DAVID S. COHEN, UNDER 

SECRETARY FOR TERRORISM AND FINANCIAL INTELLIGENCE, UNITED STATES DEPARTMENT OF THE TREASURY 

Mr. COHEN. Good morning, Chairman Hensarling, Ranking 

Member Waters, and distinguished members of the committee, I 

thank you for the invitation to appear before you today to testify 

on this very important topic. I will focus my testimony this morning on the Treasury Department’s efforts to undermine ISIL’s financial strengths as part of the Administration’s comprehensive 

strategy to disrupt, degrade, and ultimately defeat ISIL. 

We are determined to defeat ISIL not just because of its brazen 

atrocities, but also because it threatens core U.S. interests. ISIL 

threatens American personnel and facilities. It threatens our regional allies, and if left unchecked, it could ultimately pose a direct 

threat to the U.S. homeland. That is why, under the leadership of 

President Obama, a broad coalition of more than 60 partners has 

come together to stop this threat. 

ISIL has grabbed the world’s attention for its astounding brutality, but also, as this committee knows, for its substantial wealth. 

So I would like to outline how we at Treasury are focused on undermining ISIL’s financial foundation. 

Our work is one of several complementary lines of effort being 

undertaken by the international coalition. These include military 

operations and training, additional humanitarian assistance, stemVerDate Nov 24 2008 18:38 Jun 08, 2015 Jkt 092874 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 K:\DOCS\92874.TXT TERRI
8 

ming the flow of foreign terrorist fighters into and out of Syria and 

Iraq, and exposing the hypocrisy of ISIL propaganda. 

The military components of the strategy are also bolstering our 

work in attacking ISIL’s financial foundation. As with the rest of 

the campaign, our efforts to combat ISIL’s financing will take time, 

patience, and extensive collaboration, but so long as ISIL terrorizes 

the people of Iraq and Syria, imperils the broader Middle East, and 

threatens U.S. interests, we will remain to committed to degrading 

its financial strength. Our strategy involves 3 mutually supportive 

elements. 

The first is working to cut off ISIL’s main sources of funding. 

ISIL has raised a significant amount of money from selling oil that 

it extracts from the fields of Iraq and Syria. From mid-June until 

recently, ISIL’s daily oil revenue was approximately $1 million, although it is now likely lower, thanks mostly to coalition air strikes. 

To further disrupt this market we are targeting for sanctions 

anyone who trades in ISIL’s stolen oil. It is true that ISIL’s oil 

moves in illicit networks that are largely outside of the formal 

economy, but at some point that oil is acquired by someone who 

makes use of the financial system and is thus vulnerable to sanctions. 

We are also working with our Turkish and Kurdish partners, as 

well as with regional companies, to clamp down on ISIL’s cross-border smuggling. 

Next, ISIL, like other terrorist organizations, kidnaps civilians to 

profit from ransoms paid to obtain their release. ISIL has taken in 

at least $20 million from ransoms this year. To address this, we 

are redoubling our engagement with foreign partners as we urge 

them to subscribe to a no-ransoms policy. Refusing to pay ransoms 

to terrorist organizations not only makes it less likely that innocent 

civilians will be kidnapped, it also deprives terrorists of funding 

critical to their deadly aspirations. 

ISIL also takes in some funds from external financial supporters, 

and we will continue to target them for sanctions. We intend to 

make sure that donations do not become more significant to ISIL 

as we squeeze its other revenues. 

As the revenue that ISIL generates from crime and extortion, essentially by demanding cash at gunpoint, shutting down this source 

of funding ultimately will require breaking ISIL’s hold on territory. 

But Treasury still has a crucial role to play, and that brings me 

to the second element of our strategy: Restricting ISIL’s access to 

the international financial system in order to impair its ability to 

collect funds from abroad and to store, move, and use the funds it 

acquires locally. ISIL’s ability to make the most effective use of its 

money or to fund external operations depends on its access to the 

banking system. So we are working with the Iraqi authorities, Iraqi 

banks, and international banks and regulators to prevent ISIL 

from using bank branches located in territories where it operates. 

The third element of our strategy aims to dismantle ISIL’s financial foundation through targeted sanctions on its leadership and financial facilitators. This will make it harder for ISIL to conduct 

commercial activity and also clearly identify who stands behind 

this evil organization. 

9 

Before concluding, I would like to make one final point. We 

should not confuse funding with financial strength. While ISIL 

today is well-funded, a terrorist group’s overall financial strength 

turns not just on its income, but also on its expenses and its ability 

to spend money freely. In that regard, ISIL faces significant financial burdens. Paying its fighters and attempting to govern sprawling territory is expensive, and ISIL does not have the money to 

meet its costs. As we make progress in diminishing ISIL’s revenues 

and its freedom to use them, we will further exploit this vulnerability. 

Thank you, and I look forward to addressing your questions. 

[The prepared statement of Under Secretary Cohen can be found 

on page 62 of the appendix.] 

Chairman HENSARLING. The Chair now recognizes himself for 5 

minutes for questions. 

Mr. Under Secretary, my understanding is that the ability to 

block terrorist funds derives from Executive Order 13224 that was 

issued by President Bush shortly after 9/11. As part of that Executive Order, certain entities and individuals can be designated as 

specially designated global terrorists, and I think the initial list 

has grown from maybe 27 to now 800, which, as you know, is important because it means that funds in the United States can be 

blocked. U.S. persons and entities are no longer permitted to do 

business with those on the list. 

It is my understanding that so far, only four members of ISIS 

have been designated specially designated global terrorists by 

Treasury, and it is my understanding that these four are not involved with the major funding sources of the illicit petroleum trade 

to the black market. So it strikes me as a little bit of a low number. 

Can you briefly describe some of the challenges here and what 

should be the expectation of this committee and the American people going forward? 

Mr. COHEN. Yes. Absolutely, Mr. Chairman. As you note, the authority to impose sanctions on terrorists and terrorist financiers derives from Executive Order 13224. It is an authority that we have 

used extensively in attacking the financial foundations of a wide 

variety of terrorist organizations, including al-Qaeda and ISIL’s 

predecessor, al-Qaeda in Iraq, and so we have, over the years, used 

this authority to designate more than two dozen individuals and 

entities, some of whom are in the current manifestation of ISIL, 

and some of whom are part of ISIL’s antecedents in al-Qaeda in 

Iraq, and we are continuing to look for opportunities to use this 

tool to designate these individuals because, as you note, it freezes 

their assets, it prevents their use of the U.S. financial system, but 

equally importantly, it also has ramifications overseas— 

Chairman HENSARLING. I understand what it does, Mr. Under 

Secretary, but we only have four people on the list. So is this an 

intelligence challenge? Is it a priority challenge? Again, what 

should be our expectation there? 

Mr. COHEN. Specifically with regard to your question on the oil 

trade, there is work that needs to be done to get better insight into 

precisely who is involved in that oil trade and our intel agencies 

are working day and night to develop that intelligence, and we are 

working with partners in the region as well to help us gain better 

10 

insight into that. As we identify the individuals who are involved 

in that oil trade, they are vulnerable to designation under this authority. 

As I noted in my remarks, what we are particularly eager to 

identify are the individuals who have some foothold in the formal 

financial system because we can designate people who are in Syria 

and Iraq who have no— 

Chairman HENSARLING. Mr. Under Secretary, if I could, my time 

is running out, and I am going to attempt to set a good example 

here. 

Besides the question of priorities, we have mentioned the Executive Order. Is there any other legal authority that the Administration is positing that it needs on a go-forward basis to deal with 

ISIL terrorist financing? 

Mr. COHEN. Mr. Chairman, I think we have the legal authorities 

that we need, mostly the Executive Order 13224. We have a host 

of other authorities that are potentially available to us to address 

terrorist financing and the financial activity related to it. 

One of the keys to our ability to designate, which is just one aspect of our plan of attack— 

Chairman HENSARLING. I understand. 

Mr. COHEN. —is to develop better insight, better intel. I can tell 

you that work is under way. We have— 

Chairman HENSARLING. With the remaining time I have, let me 

get this last question in, which deals with intel. 

My search of the record seems to indicate that there has been 

really only one significant terrorist financing prosecution by the 

Justice Department, and as a Texan, it received a lot of press in 

my hometown of Dallas: The United States of America v. the Holy 

Land Foundation, but I am unaware of any other major terrorist 

financing prosecution. I understand you are representing Treasury 

and not Justice here, but can you at least describe the intel sharing 

between Treasury and Justice because, again, one significant prosecution seems to be a dearth. 

Mr. COHEN. Mr. Chairman, I am not sure that there has only 

been one terrorist financing prosecution. I think, in fact, there have 

been many, but I would— 

Chairman HENSARLING. ‘‘Significant’’ may be a term of art, so 

proceed. 

Mr. COHEN. I would defer to my colleagues at the Department of 

Justice, whom I understand file an annual report with Congress 

about their activities in prosecuting terrorist financing. So, I will 

leave it to them. 

In terms of information-sharing between Treasury and Justice, 

we are very, very closely linked up with Justice on a policy level 

and also on an information-sharing level. I think probably the best, 

but by no means the only, is our relationship between FinCEN, our 

financial intelligence unit, and the Justice Department in sharing 

information that FinCEN obtains regarding financial activity that 

could potentially be used for a whole host of financial prosecution. 

Chairman HENSARLING. Thank you, Mr. Under Secretary. I have 

run past my time. 

The Chair now recognizes the ranking member for 5 minutes. 

Ms. WATERS. Thank you very much, Mr. Chairman. 

11 

The questions that I have, perhaps, are questions that should 

only be asked in a classified briefing, and so rather than delving 

into some of the questions that I have about what we have not 

been able to do, I will simply say this: Many of us were shocked 

and surprised that we appear to know so little about ISIS when the 

information finally reached public view. 

It is inconceivable when we have what we think is one of the 

best intelligence agencies in the world that ISIS could have developed this far with sophisticated operations for selling oil and other 

kinds of things that it is doing without us knowing what they were 

doing. 

So without asking the questions that I would ask in a classified 

briefing, I would simply ask you: Have you been engaged, has 

Treasury been engaged with the CIA and others who have the responsibility for intelligence in ways that we can catch up with how 

far they have developed and what they are doing? 

I heard what you said about their inability to spend the money 

and the fact that they are short maybe of money because of the 

payouts that they have to do, et cetera, but how can we have confidence in that kind of representation without knowing what you 

have done to fix the system or to mend the lack of communication 

that got us to the point where we are with too little information 

about ISIS? 

Mr. COHEN. Congresswoman Waters, I don’t want to understate 

our insight into ISIL financing on a whole host of areas because I 

do think we have good information. We need better information, 

but we are not, by any means, completely blind to how ISIL is raising its funds. 

On the oil transactions in particular, the situation there is that 

this oil smuggling that ISIL is now taking advantage of had been 

going on for quite some period of time. You had people who were 

essentially stealing oil from Iraqi and Syrian wells and selling it 

through this black market that has existed in that part of the 

world for a long time, but what changed was when ISIL came in 

and took over some of these fields, it became ISIL that was the 

beneficiary of this pre-existing smuggling network. 

In years past when it was not a terrorist organization that was 

involved in this smuggling network, it frankly wasn’t a high priority for our intelligence community to understand exactly who was 

involved in the smuggling of Iraqi or Syrian oil. It is now, obviously, an enormously high priority to identify these individuals, but 

what has changed is you now have ISIL as the beneficiary because 

they have some control over the oil coming out of the ground. 

The work to identify external funding networks for ISIL is something that we have been very much involved in for many years, understand, and to take action against the funding networks that are 

coming out of the Gulf. 

Congressman Sherman referenced Qatar earlier. We have been 

deeply engaged with Qatar, Kuwait, Saudi Arabia, and the United 

Arab Emirates over the years to both better understand the financing networks in the Gulf and to take action to cut those funding 

networks off. So we are working very, very closely with our intelligence community, the CIA and other members of the intelligence 

12 

community, so that we have the information that we need in order 

to execute the policy or— 

Ms. WATERS. I don’t want to cut you off, but my time is running 

out. 

Let me just say that to date, many of us are uncomfortable with 

the fact that ISIS has gotten as far as it has gotten, raised as much 

money as it has raised, and is wreaking havoc in the way that it 

is doing without us having known more about them. We invest a 

lot of money in our intelligence operation here in this country, and 

we just don’t expect to be this far behind ever because of it. 

I yield back the balance of my time. 

Chairman HENSARLING. As a reminder to all Members, to state 

the obvious, this is an open hearing. In a sidebar conversation between myself and the ranking member, we anticipate a classified 

hearing very early in the next Congress. 

The Chair now recognizes the gentleman from New Jersey, the 

chairman of our Capital Markets Subcommittee, Mr. Garrett. 

Mr. GARRETT. Thanks again, Mr. Chairman. 

I have had a number of concerns with this Administration’s approach to combating ISIS. From the very beginning, the Administration, including the President, has underestimated the threat 

that ISIS poses to the region and to the United States. His early 

characterization of ISIS, as we all know now, as the ‘‘JV team,’’ 

suggests perhaps that the President was not informed of the 

threat, and so it is also concerning that the reports then also indicate that the President missed more than half of his security briefings at the beginning of the Administration. 

So looking to you now, from your perspective within the Department of the Treasury, do you believe that the necessary information is now being communicated to the President, and from your 

position, do you think the information was always being communicated to the President and other senior Administration officials 

over the last year-and-a-half? 

Mr. COHEN. Congressman, I don’t accept the premise of your 

question. I think the President and the national security team as 

a whole has been focused on the terrorist threat that we see coming out of— 

Mr. GARRETT. The premise of the question was that the President saw this as not a significant terrorist threat. The President 

said that this was the ‘‘JV team,’’ so meaning that there were other 

more looming issues. That is from the President’s comments. 

So you are saying the President misspoke when he said that it 

wasn’t a problem before and now it is a problem? 

Mr. COHEN. I will obviously allow the President to speak for himself on this. What I am telling you is that the national security 

team, from the President on down, has been focused like a laser 

on the threat of terrorism coming from this part of the world, and, 

frankly, from elsewhere as well, throughout this Administration. 

Mr. GARRETT. That is really the question— 

Mr. COHEN. I can tell you that because I have been part of this 

team from the outset. We have been working day and night to degrade al-Qaeda, and degrade al-Qaeda affiliates, as well as the terrorist organizations that have grown up in the turmoil in Syria, 

whether it is al-Nusrah funds or ISIL. 

13 

We are working extraordinarily hard to ensure that we have both 

the information that we need in order to address the terrorist financing threats and the way that these organizations are financed— 

Mr. GARRETT. And just as a semantic point, because you used a 

term that the President often uses, which is to degrade and eliminate, you used the term there. That is why I bring it up. 

Has our intention always been, from the Treasury’s perspective, 

simply to degrade al-Qaeda and now ISIS, or has our intention has 

been to eliminate them? 

Mr. COHEN. I think I said degrade, disrupt, and defeat ISIL, 

and— 

Mr. GARRETT. Because during other military engagements—we 

just had Veterans Day, and when we talk about World War II, we 

never said, ‘‘We are going to degrade our enemies there, the axis 

of power.’’ We said, ‘‘We are going to defeat them.’’ And during the 

other wars as well, we didn’t say we were simply going to degrade 

our enemies, we said we were going to defeat them. 

I have taken a note that both the President and now you as well 

simply say that our intentions here seem to be to degrade them, 

to allow them to exist for a period of time and then take that 

step— 

Mr. COHEN. Can I just be very clear? The ultimate objective is 

to defeat ISIL, to defeat al-Qaeda. There is a process involved here 

that, particularly on the financing side, initially what we are looking to do is to degrade their access to funding, ultimately leading 

to the defeat of this terrorist organization. 

Mr. GARRETT. I would hope. 

Mr. COHEN. There is no misunderstanding. 

Mr. GARRETT. Okay. I assume you consult and you coordinate 

with DOD as well, and it is my understanding that the United 

States employs something called a Threat Finance Cell to gather 

on-the-ground intelligence to track illicit financial transactions in 

the Middle East. 

You are nodding, ‘‘yes.’’ 

It is also my understanding that these units have been pulled 

out of Iraq as a result of the President’s troop withdrawal. 

Can you explain to this committee how this lack of resource has 

impacted our fight against terrorist financing, and also within the 

time we have here, I think the Administration is also talking about 

removing them from Afghanistan as well, these Threat Finance 

Cells. Will that have an impact upon your intelligence gathering if 

that goes forward? 

Mr. COHEN. Actually, picking up on the chairman’s direction of 

the classified supplements to this hearing, I can give you a more 

expansive answer in that setting. 

I can tell you, though, that we are—the Iraq Threat Finance Cell 

that had existed a decade ago was dismantled when the activity— 

the fighting on the ground was ramping down, but I would actually 

like to leave the second half of this answer to a classified setting, 

if I could. 

Mr. GARRETT. Okay. 

Mr. COHEN. What we are doing to enhance our intel collection. 

Mr. GARRETT. Okay. 

14 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentlelady from New York, the 

ranking member of our Capital Markets Subcommittee, Mrs. Maloney. 

Mrs. MALONEY. Thank you. 

Mr. Cohen, ISIS is the richest terrorist organization on Earth, 

and financially sophisticated. Unlike the other terrorist organizations we have dealt with that raise their money from outside 

sources, they basically raise it and spend it internally in Iraq and 

Syria, and one way to crack down on them is to crack down on the 

shell companies that are financing terrorism. 

Toward this end, last year Ranking Member Waters, Representative King, and others on the other side of the aisle and I introduced 

a bill called the Incorporation Transparency and Law Enforcement 

Assistance Act, which would require the disclosure of very basic information from corporations of who their beneficial owners are. I 

was very pleased in August when Treasury proposed a rule to implement many parts of my bill, and I would like to know what is 

the update on this. Has it been successful? Have you cut off revenues? What is happening with the rule that you put into place? 

Mr. COHEN. Congresswoman, you highlight a very important 

issue with the issue of shell companies. The rule that you are referring to, we proposed a final rule in August. The comment period 

on that final rule—actually, I think the comment period expired in 

August. We are in the process of reviewing the comments that— 

I think we received over 120 comments on that proposed rule. 

Because it is in ongoing rulemaking, I should probably not get 

into any more detail on where we are in terms of issuing the rule, 

but we are deeply committed and have been for a number of years, 

as I know you have, to getting better transparency into the beneficial owner of legal entities. 

In that regard, I would also note that in the President’s budget 

this year there is a proposal for legislation that would enhance our 

insight into the beneficial owners of legal entities at the time they 

are formed so that we would be able to address this in two ways: 

both when an entity opens a bank account, we will have insight 

into the beneficial owner of the entity at that stage; and also when 

a company is formed, we will have better insight into who the beneficial owner is of a company that is formed. So we are continuing 

to pursue this very vigorously, and I— 

Mrs. MALONEY. It just seems like common sense to me and something we should have implemented yesterday. And I think that is 

something that we could jointly work on, is requiring this and helping you move forward with your rulemaking more quickly by passing it in a bipartisan way in Congress. 

Secondly, you testified that they are making money off of extortion and their territorial gains as they went into Mosul and took 

over the bank and so forth. 

One of the ways that we can contain them is to obviously go after 

their territory, but also go after how they can hold onto that territory, which is huge cars, tanks, infrastructure, and equipment. 

Have we moved to block their ability to purchase this, sanction 

companies, the materials that they need to hold onto geographic 

areas? 

15 

Mr. COHEN. Clearly, one important line of effort to address ISIL’s 

hold on geographic territory is the Defense Department’s line of activity working with the Iraqi security forces— 

Mrs. MALONEY. Obviously, we support the military, but I am— 

they also have a procurement system. Can we cut off their ability 

to purchase cars, tanks— 

Mr. COHEN. Absolutely— 

Mrs. MALONEY. And are we moving to do that? 

Mr. COHEN. Yes. Part of our strategy is to deprive ISIL of access 

to the financial system. Because, obviously, one way that they can 

try to procure vehicles, weapons, what have you— 

Mrs. MALONEY. We could just cut off their banks in the territories. Have we looked at that? 

Mr. COHEN. Yes. We have, and we have worked very closely with 

the Iraqi Central Bank and with the Iraqi banks that have 

branches in the territory where ISIL operates to ensure that ISIL 

does not have the opportunity to use those banks to make payments for whatever reason, including the reasons that you cite. 

Mrs. MALONEY. And then of course the third area is to cut off 

their revenue from the illegal oil sales that they are controlling, 

and they can’t all be in cash. It is too much money. You were saying it was like a million a day. Now it is down to a million or two 

a week. What are we doing to cut off the transactions that are not 

in cash? It has to be through banks. 

Chairman HENSARLING. Very brief answer, please. 

Mr. COHEN. Yes. We are working to understand exactly how 

those transactions occur, whether it is entirely in cash or through 

banks. If it is through banks, we will be able to address that. 

Chairman HENSARLING. The Chair now recognizes the gentleman 

from Texas, the chairman of our Housing and Insurance Subcommittee, Mr. Neugebauer. 

Mr. NEUGEBAUER. Thank you, Mr. Chairman, and Secretary 

Cohen, thank you for being here. 

As you were kind of laying out the plan that Treasury has for 

the counterterrorism financing, I think one of the questions that 

came to my mind was—two things. One, how long do you think it 

will take to get this plan to the point where we see some diminishing amount of resources going to ISIL? 

Mr. COHEN. Congressman, it is a very good question, and it is 

a hard question to answer. I think we have begun to see some diminishment in ISIL’s revenue from the oil sales. As I noted, they 

were earning, on average, about a million dollars a day over the 

summer. 

In particular, because of the air strikes on the ISIL mobile refineries, as well as other military activity, we have seen a decrease 

in what we estimate to be the revenue from the oil sales from 

about a million dollars a day to several million dollars a week. So, 

there is some progress there. 

The history of our counter-terrorist financing work, not ISIL-related but more generally, has been that it is small steps you can 

see over time that are having a real impact. So I don’t expect I am 

going to be able to come back to this committee a month from now 

and be able to give you a balance sheet that says: Okay. This is 

exactly what ISIL has today, and then a month later show a deVerDate Nov 24 2008 18:38 Jun 08, 2015 Jkt 092874 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 K:\DOCS\92874.TXT TERRI
16 

crease. I do think that the strategy that we are employing will impair ISIL’s access to funding. It will impair their ability to use the 

funding that they have, and we will see a real impact on ISIL as 

a result, but it is going to take the dedicated effort over some period of time. 

Mr. NEUGEBAUER. Now, one of the things that also came to mind 

was that we almost sound like we are ramping up this 

antiterrorism funding infrastructure, but we have been fighting 

these terrorists for a very long time. 

So are we just now really taking this issue seriously, or have we 

been taking it seriously but this is a different situation? I’m not 

clear as to where we have been and why we are just now, I think, 

maybe taking this more seriously. 

Mr. COHEN. We have been working for years on degrading the 

access of terrorist organizations to funding, whether, it is al-Qaeda, 

al-Qaeda affiliates, Hezbollah, Hamas, Lashkar-e-Taiba, Haqqani 

network, you name it, we are working on this, including al-Nusrah 

funds and al-Qaeda in Iraq, which was the predecessor to ISIL, as 

well as ISIL. 

What we are obviously doing is talking more about the integrated strategy that we have to defeat ISIL and to go after its financing, but this is a reflection of a lot of work that has been done 

over many years. 

Mr. NEUGEBAUER. Recently, in September ISIL released 46 hostages from Turkey. And the Turkish president said no ransom was 

paid. The President of the United States said no ransom was paid, 

but there are a lot of different ways to remunerate or to compensate for someone, and I think it is kind of outside of ISIL’s pattern here of releasing hostages, even though you state that they 

are using hostages to raise money. 

Are you absolutely sure that there was no quid pro quo for releasing those hostages between Turkey and ISIL? 

Mr. COHEN. Congressman, recognizing the chairman’s admonition about this being an open hearing, I think this might be a topic 

better addressed in a closed session. 

I can tell you that it is U.S. policy not to pay ransom and not 

to make any other type of concession to hostage takers, including, 

obviously, terrorist organizations. We are very aggressive in our efforts to ensure that others around the world adhere to a similar 

policy. We think that is the best way to protect all of our citizens, 

is for everybody to adhere to a no-ransoms, no-concessions policy. 

Mr. NEUGEBAUER. Final question quickly before my time runs 

out. 

What are the metrics that you use to—in other words, you have 

this plan that you have implemented. What are some of the metrics 

that you are using that say: Okay. This indicates we are being successful? 

Mr. COHEN. Most importantly is we will continue to get insight 

into how ISIL is raising its funds and its ability to use the funds, 

and we can get reflections on the extent to which it feels that it 

is under financial stress. 

Again, it is not going to be a pretty balance sheet, but we do get 

information on the financial wherewithal of these organizations, 

and we will be able to track it that way. 

17 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from California, Mr. 

Sherman. 

Mr. SHERMAN. Yes. Some of my colleagues have talked about the 

surprising strength of ISIS. I think instead it is the incredible and 

surprising weakness of the Iraqi government and military, which 

easily conceded territory, handed over weapons, left the bank vault 

open in Mosul and elsewhere. 

The problem is the government in Baghdad. We, under a previous Administration, installed Mr. Maliki, a man whose evil is exceeded only by his incompetence; a man who refused to enter a status of forces agreement not only with this Administration, but refused to enter such a long-term agreement with the prior Administration that had installed him, and instead wanted and succeeded 

in getting American troops out so that he could further oppress the 

Sunnis in the middle of his country. 

Second, we are talking a lot about how powerful ISIS is. Let us 

keep in mind the Hezbollah/Assad/Iran alliance or axis is far more 

powerful, has far more money, and has a far greater capacity to 

carry out terrorist actions outside the Middle East than ISIS does. 

Looking at ISIS’ finance, we have had discussions of their export 

and smuggling of oil. Do we have—and this comes from the gentleman from Illinois, Mr. Foster—the technology to sample oil that 

might be on sale in Turkey and say we know what field that oil 

came from? That came from an ISIS-controlled field in Syria. That 

came from Northern Iraq. Is that technology available or is oil 

more or less fungible? 

Mr. COHEN. Your question is at the outer edges of my knowledge 

of oil, but I can tell you this mostly from my work on the Iran sanctions effort. 

Different oil has different properties. It is often possible to tell 

where oil comes from, although I am also told that there is some 

similarities among fields. So I can’t tell you where great certainty 

that we will be able to do that, but I believe so. 

Mr. SHERMAN. We all want to go after ISIS. The policy issue is 

do we go after ISIS in a way that causes harm to the civilians 

under its control? As I said in my opening statement, we didn’t 

hesitate to bomb occupied Europe. 

If a business person of good character and reputation in Mosul 

wants to buy something from Europe using the international banking system, a civilian item, do we try to stop that? 

Mr. COHEN. Congressman, it is a—we obviously would not try to 

stop a decent citizen in Mosul trying to buy a— 

Mr. SHERMAN. We certainly did in World War II, which we seem 

to have taken more seriously. You couldn’t just say: Hey. I am in 

occupied Marseille. I want to buy a shipment of food from Argentina. Let’s ship it on over. Use the banking system, use the—but 

you are saying that if I need a replacement part for my factory in 

Mosul, I can just buy it online? 

Mr. COHEN. No. I am not saying that, and in particular— 

Mr. SHERMAN. Do we prevent the honest business person in occupied Mosul from conducting civilian transactions? 

Mr. COHEN. What prevents most directly the honest citizen of 

Mosul from conducting transactions is ISIL and ISIL’s effort to conVerDate Nov 24 2008 18:38 Jun 08, 2015 Jkt 092874 PO 00000 Frm 00021 Fmt 6633 Sfmt 6633 K:\DOCS\92874.TXT TERRI
18 

trol that territory, but the use of the banking system to facilitate 

a transaction coming out of Mosul is something that we are, as I 

noted earlier, attempting to prevent. We are— 

Mr. SHERMAN. Okay. You have answered this question, but with 

two inconsistent answers. 

If you get an international banking transaction where a civilian 

business person not affiliated with ISIS, but located in Mosul, is 

moving his investments around on Wall Street or is trying to buy 

replacement parts for his factory, is that something where, if a 

bank is involved in that transaction, they will be sanctioned? 

Mr. COHEN. And it is not related to ISIL in any way? Is that the 

question? 

Mr. SHERMAN. No. Except that the guy is located in Mosul. 

Mr. COHEN. There is obviously an intelligence question embedded 

in there: Do we know that this person is or is not affiliated with 

ISIL? If he is not affiliated with ISIL, it is not a sanctionable transaction. 

That being said— 

Mr. SHERMAN. When we get serious, it will be. We did not wage 

World War II and say every Marseilles businessman can conduct 

international business just because we love the French. We noticed 

that was Nazi territory. 

I yield back. 

Mr. COHEN. Could I just briefly answer, please? 

Chairman HENSARLING. Briefly. 

Mr. COHEN. Our efforts to prevent ISIL from making use of the 

banking system would effectively prevent that transaction, but we 

are not targeting the civilian in Mosul who is currently being dominated and subjugated by ISIL. 

These people are victims as well. But what we are trying to do 

is to prevent ISIL from making use of the financial system. 

Mr. SHERMAN. So the lights are on in Mosul. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from New Mexico, Mr. 

Pearce. 

Mr. PEARCE. Thank you, Mr. Chairman. 

And thank you, Mr. Cohen, for being here. 

Okay. I appreciate your efforts to create national security and diminish the terrorist threat. 

You lay out a fairly complex strategy in your report here. Are 

you in the rooms where those strategies are being formulated— 

Mr. COHEN. Absolutely. 

Mr. PEARCE. —sort of? Yes. 

So on a scale of 1 to 10, when you talk about depleting the resources, say from oil production, you would be familiar with the 

processes and the targets and things like that? 

Mr. COHEN. In terms of the military targets? 

Mr. PEARCE. Yes. You are sitting there. You are fairly comprehensive in your report here. Are you in that room, is all I am 

asking? 

Mr. COHEN. We are linked up closely with the Defense Department in terms of its overall effort. But I’m not— 

Mr. PEARCE. Okay. Well, let’s go a different direction then. 

19 

On a scale of 1 to 10, how committed are you to stopping the oil 

revenues from coming in? The Administration, 1 to 10. 

Mr. COHEN. I would give that a 10, Congressman. 

Mr. PEARCE. Okay. So why don’t you stop it this afternoon? If 

you really want to do it—you are in the room—you can stop it 

today. 

You can move 30,000 barrels of oil a day, basically, is what the 

report is saying, that sell for anywhere from $25 to $60 a barrel, 

which results in three-quarters of a billion dollars to $1.8 billion a 

day. To move 30,000 barrels of oil requires 250 trucks. 

Now, your report starts talking about insurance—choking off the 

funding for insurance. If you start bombing the trucks, the insurers 

will cut the insurance off themselves. You don’t have to track one 

insurance company down. 

It is the trucks moving the oil to market. And you have access 

to that. Satellites tell you every movement, every highway, every 

oil field. You know which oil fields are under the control. I wonder 

why you are not stopping the oil today, because can you do it. It 

is well within your grasp, and you have the technology. You have 

the information. 

You don’t have to sort through all the banking. You don’t have 

to track straw companies. You don’t have to find out which people 

in Marseilles are taking the oil. Stop the flow of the oil. It is very 

simple. 

Why don’t you do it? 

Mr. COHEN. Congressman, as you know, the Defense Department 

has conducted air strikes— 

Mr. PEARCE. No. You are telling me that it is not important, 

then. It is not a number 10 on the list of the Administration or 

they would have stopped it today. 

It doesn’t matter what the Department of Defense says. The 

American people—you say in your report that American interests 

are at stake. Then, stop the flow of the oil. 

Every single drop of oil, speaking as someone who comes from a 

county that makes its entire living on oil, goes from a well into a 

tank. Now, you can either blow up the tanks, you can blow up the 

trucks, or you can blow up the connection between the two. 

You don’t just put oil by 5-gallon cans into a tanker truck. You 

put it in through a delivery mechanism. So you don’t have to blow 

up the tanks. Just blow up the delivery mechanism that loads it 

on the trucks. 

This is a very simple operation and, yet, you all do not appear 

to have a number 10 commitment to the process of stopping the oil 

today or you would do it. 

Do you have any—I really am curious, because people in my 

State are extremely alarmed by the fact that the terrorists are 

funding themselves through oil revenues and they know how to 

stop it. They could stop it this afternoon. 

Mr. COHEN. Congressman, I am not a military targeter. 

Mr. PEARCE. It doesn’t require a military target. I asked you 

what is your commitment from this Administration to stop the flow 

of oil. You said it is a number 10. That is the highest on the scale 

of 1 to 10. 

20 

And if the commitment is there, you don’t have to be a military 

targeter. Just stop the oil. We can shut it off today. It is a very 

simple process if you have a commitment. 

The other result I come up with is that maybe the commitment 

is lacking, the commitment to absolutely stop the funding for ISIS. 

Mr. COHEN. If I had a switch that I could turn to— 

Mr. PEARCE. You told me you are in the room, sir. Is anyone in 

the room talking about this? Has anyone suggested that we stop 

the flow of oil today? 

If it is a number 10 item, if we have a desire on a 10 scale, number 10, to stop the flow of oil, why hasn’t somebody said, ‘‘Let’s stop 

the flow of oil. Let’s quit working around the corners. Let’s quit 

looking at insurance companies. Let’s quit looking at financing. 

Who takes the oil? We don’t have to know any of that?’’ 

Stop it in its tracks. It is very simple. 

Mr. COHEN. Okay. I understand your point, Congressman. 

Mr. PEARCE. If you would take that message back, maybe someone would contact someone in the oil field and find out what it 

takes to blow up a 120-barrel tanker. It is not very complex. 

I don’t know that we have the technology in our county, but I 

suspect it exists in the Department of Defense. But we just sit here 

and let them get $2 billion a day while the American people live 

in fear? It is irresponsible on the part of the Administration. 

Thank you, Mr. Chairman. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from New York, the 

ranking member of our Financial Institutions Subcommittee, Mr. 

Meeks. 

Mr. MEEKS. Thank you, Mr. Chairman. 

Mr. Under Secretary, in your remarks at the Carnegie Endowment, I believe you stated that you were working to limit ISIL’s 

ability to transact through Iraq, Syria, and international banking 

systems. 

However, it is the hawala system, which is the informal value 

transfer system based on the performance and honor in the Middle 

East, with a huge network of money brokers, that has been in place 

for centuries. 

And if the international community imposes sanctions on persons 

and institutions under ISIL control, there is a chance that the 

sanctions would not only be as effective as we like, but it would 

push money into this informal, hard-to-regulate network. 

So my question is: Is the U.S. Treasury looking into hawala brokers who, according to written testimony that we have received 

here today, are able to move ISIL money sort of through Iraq and 

Syria and abroad? What are we doing in that regard? 

Mr. COHEN. Absolutely, Congressman, the hawala networks are 

part of the financial system in Iraq and Syria, as well as the more 

formal banking system. And as we are working to exclude ISIL 

from the ability to use the formal financial system, we are very 

much focused on ensuring that they can’t use and can’t turn to the 

hawala system to a greater extent than they already use it. 

I will say that we have had success in Afghanistan, Pakistan in 

particular, in targeting hawalas for sanctions and disrupting their 

activity. Because these hawalas, although they are an informal 

21 

mechanism for value exchange, ultimately also have intersections 

with the formal financial system. 

These brokers need to at some point have accounts at banks. And 

that is another means by which we can disrupt the use of informal 

financial networks to transact outside of the formal financial system. 

Mr. MEEKS. Because the concern here is, from what I also understand, utilizing the hawala system and others, that is the mechanism that ISIL has used, also, to send payments to its fighters and 

workers and regional leaders and that is what is enticing some 

folks to come, because they are looking for it. 

So are we looking at ways that we can prevent them from getting 

this money so that these payments are interrupted and the folks 

won’t get—they won’t be able to entice folks to join them because 

of the revenue that they are able to generate? 

Mr. COHEN. Absolutely. And what we are looking to do is identify 

who the hawala brokers are and how those hawala brokers intersect with the formal financial system. Because, at some point, essentially, the payment message that goes through a hawala system 

needs to get translated into actual cash or other—being delivered 

to somebody on the other end. 

We do have, when we get insight into who is involved there, 

ways to disrupt that activity. So that is very much one of the 

things that we are working on with our partners in the intelligence 

community. 

Mr. MEEKS. Now, here is also a question I have that I think is 

difficult. I know we have to try to weigh these lines, and I am trying to make sure that we don’t turn against—or have all the folks 

over in the region against us, et cetera. 

So I was wondering what steps is Treasury taking to close the 

financial systems to sponsors of terrorist organizations such as 

ISIL, but at the same time keeping remittance channels open to legitimate actors, including the millions of—because there are a lot 

of immigrants and immigrant families who provide critical financial lifelines to their family members back in their home countries. 

I have some in my district, for example, who send money. And 

so, we have this thin line to work. I have some coming to my office 

asking me, so I thought that I would ask you to see what you have 

to say. 

How is Treasury working on that? 

Mr. COHEN. Right. We are working on the remittance issue 

broadly to try to ensure that legitimate remittances coming from 

the United States going to communities around the world are able 

to flow. And I see Congressman Ellison here. We have had a number of conversations on this issue. 

I think—and I can go into more detail on sort of the variety of 

steps that we are taking, including providing guidance to the banking community, implementing legislation that Congressman Ellison 

sponsored that was signed into law over the summer to try to ensure that the money service businesses can continue to operate. 

With respect to remittances into Iraq, our efforts to cut off the 

banking activity in the area where ISIL operates will not prevent 

remittances going into Baghdad, for instance, but ought to prevent 

22 

ISIL from getting access to funds in the areas where it is operating, which I think is very much in our interests. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from Pennsylvania, the 

vice chairman of our Oversight and Investigations Subcommittee, 

Mr. Fitzpatrick. 

Mr. FITZPATRICK. I thank the chairman. 

And, as I said, Mr. Secretary, before I traveled to the region last 

month, I had the chance to meet with some of your analysts and 

employees of the Treasury. I found them to be very helpful and 

very thorough in the information. 

I did want to follow up on some of what Mr. Meeks was asking 

about the hawala systems, which are informal, they have been 

around a long time, and pose quite a challenge, I think, in terms 

of trying to follow the money and how it flows into terrorist organizations. 

Does the Department of the Treasury have a handle on how 

many there are, say in Iraq or in Qatar, and perhaps as a percentage of the bigger banking system there? 

Mr. COHEN. Congressman, first of all, I do want to commend you 

for your interest in this issue. And I actually was in Qatar, I think, 

just after you were there and got a briefing on your meetings. I 

think they were very useful, and I appreciate your interest in this 

issue. 

In terms of the hawala networks, let me get back to you with 

specific information on this. I can tell you, though, that the hawala 

networks that cross the borders—so from Iraq or Syria into— 

whether it is Qatar or into Saudi Arabia, into Kuwait, UAE—we 

are—you can work on both ends of this issue, both on what is happening in the area where ISIL is operating, but, also, in the—on 

the other end, where the funds may be being transmitted in the 

first instance. 

And so part of our strategy is to work with our partners in the 

Gulf to cut down on the source of financing, cut down on the ability 

to transfer money, whether through the formal system or through 

the informal hawala system, so that the money doesn’t flow into 

Iraq and Syria to ISIL. 

Mr. FITZPATRICK. When you say, ‘‘cut down on the source,’’ you 

are talking about the source being the illicit gains from the oil? 

Mr. COHEN. No, I mean principally from donations that are collected in the Gulf. 

Mr. FITZPATRICK. Okay. 

Mr. COHEN. The oil sales, I think, are actually more of an issue 

going north into the Kurdish region in Iraq or into Turkey. 

And as I was answering an earlier question, what we are trying 

to get a good handle on is how those payments are made, whether 

through cash changing hands, through a hawala system, through 

the formal financial system. Whatever the mechanism may be, we 

are looking for the key there so that we can disrupt that financial 

activity. 

Mr. FITZPATRICK. Right. What makes ISIS unique is their ability 

to self-finance their terror interests. They use the oil—this is different from other terror organizations—to fund their recruitment, 

their training, their equipping. 

23 

And so, while we are taking a look at this—why ISIS is unique 

and how to deal with that, I think you are correct that we can’t 

forget the more traditional sources. You were talking about donations. 

On that subject, one of the meetings that I had in Qatar was 

with the minister of labour and social affairs. His name is Abdullah 

Saleh al-Khulaifi. And he was talking about a new law that they 

have in Qatar to crack down on funding that comes through what 

they call Qatari charities, that we have a concern some of it may 

ultimately find its way to radical Islamists. 

Does Treasury have faith that law will work? 

Mr. COHEN. The law that was adopted, I think, just in September 

in Qatar is well-designed. It can cut down on the misuse of charitable organizations to provide funding to terrorist organizations. 

What it requires is solid implementation. 

I had similar meetings to the ones you had. We have been pressing the Qataris to move from a situation where they have the right 

structures in place, the right laws in place, the right institutions 

in place, to being more effective in cutting down on funding that 

comes out of Qatar for terrorist organizations. 

We have recently seen some very positive steps that Qatar has 

taken after your trip and some of the engagement that we have 

had. They have deported an individual who was involved in illicit 

charitable fundraising in Qatar. It wasn’t really charitable fundraising. It was fundraising for terrorist organizations. 

They have committed to implementing their charities law—and 

there are other laws—to more effectively cut down on terrorist financing. There is still work to be done there. But I think some of 

the recent steps are a harbinger of some good things to come. But 

there is clearly work that needs to get done. 

Mr. FITZPATRICK. Are you able to identify other regimes in the 

area that need to do more? 

Mr. COHEN. I think we haven’t been shy about identifying Qatar 

and Kuwait as the two jurisdictions in the Gulf where additional 

steps could be taken. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from Massachusetts, 

Mr. Lynch. 

Mr. LYNCH. Thank you, Mr. Chairman. 

Again, Mr. Secretary, thanks for your willingness to testify. I just 

want to just make one observation. I do share the frustration that 

some of my colleagues across the aisle have expressed about 

stanching the flow of oil and degrading some of the facilities that 

are currently under the control of ISIS. 

But I do want to point out that, for instance, the Baiji oil refinery 

about—I don’t know—maybe about 75 miles—maybe 150 miles 

north of Baghdad—I have been there a couple of times. It is not 

really—it is low tech, but it is the largest refinery that they have 

there in that region. 

If we had destroyed that a month ago, I think the Iraqi government, last week—2 weeks ago the Iraqi forces retook that refinery. 

So now it is pumping oil for the Iraqi government. It is a key asset. 

If we had gone in there and destroyed that asset, that refinery, it 

24 

would have been a huge setback for the Iraqi government to retake 

and reestablish their oil flow. 

We have a similar situation in the Kirkuk region, where it is in 

dispute right now between Kurdish forces and ISIL. Sure, we could 

go in there and destroy those oil wells, but there is a long-standing 

problem there. 

We had a similar problem with Saddam Hussein when we first 

went in there about whether to destroy these oil facilities or whether to allow them to continue to operate and then capture them. So 

that will be an ongoing challenge for us as we go forward. 

What I would like to talk to you about, Mr. Secretary, is the actual shipment of what is going on right now over the Turkish border. We have been largely unsuccessful in interrupting that oil 

flow. And I was in Irbil in Kurdistan recently. I actually had a 

chance to talk to the foreign secretary in Turkey. 

And I have to say, between our intelligence and what we heard 

on the ground there, there is widespread abuse and sale of oil by 

ISIL forces over the Turkish border, and we have to get at that. 

We have to disrupt that. And I am not confident that is happening 

now, and I am not at all confident that we are getting cooperation 

from the Turkish government. 

The same situation is ongoing in Syria in Al-Qaim. There are 

smuggling routes there that have been in use for about a thousand 

years. We weren’t able to stop them. Back when we had the oil embargo against Saddam Hussein, after the fact, we found out that 

was porous, that there were dozens of countries that were taking 

illicit oil. 

So there are two ways we can get at this. One is to—eventually, 

this oil is going to find its way to a legitimate country and a legitimate company to which you could apply sanctions. 

But before it gets there—back in 2006–2008 in Iraq, we had 

Threat Finance Cells—and we used this as well in Afghanistan— 

where we actually partnered up Treasury folks and DOD. 

We had military. So it was a joint operation where they actually 

had boots on the ground. They could identify shipments that were 

going over the Turkish border, like they are right now, and we 

were able to disrupt that. 

And I am just curious why we got away from that model where 

we had military paired up with Treasury folks and were actually 

doing a pretty good job at disrupting that oil flow? It is commodity 

exchanges now cross-border that is really financing about 75 percent of ISIS’ revenue. 

So I would just like to hear your thoughts about what we might 

do in the future, if we could restart those Threat Finance Cells and 

maybe reestablish some type of control. 

Mr. COHEN. On the issue of the Threat Finance Cells, as I noted 

earlier, I think I would like to address that in a closed hearing. 

More broadly, we are enhancing our efforts to collect intelligence, 

including intelligence on these smuggling networks, which you 

know have been in existence for thousands of years. 

That doesn’t mean that we can’t get better fidelity on who is involved, where it is going across the border, and how we can stop 

it, including through financial actions that we can take to designate those who take the oil and are in some respects part of the 

25 

formal economy. We can use financial tools against them. We are 

also engaging with the private sector to stop this. 

But there are other mechanisms that rely on intelligence, and I 

hope at some point we can get into more detail on that. 

Mr. LYNCH. Thank you, Mr. Chairman. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentlelady from Minnesota, Mrs. 

Bachmann, who also serves as a valued member of the Intelligence 

Committee. 

Mrs. BACHMANN. Thank you, Secretary Cohen, for being here. 

And thank you, Mr. Chairman. 

The State that I represent, Minnesota, has a tragic nexus to terrorism. We are the only State that has a convicted member of AlQaeda from 9/11. That was Moussaoui. 

My largest city in my district is St. Cloud, Minnesota. That was 

the site where Moussaoui went to receive his instruction in how to 

fly a plane. He was interested in how you take off a plane. He 

wasn’t so interested in how you land a plane. He became the only 

convicted terrorist from 9/11. 

Since that time, we have had over 50 Minnesotans go and fight 

on behalf of Al-Shabaab. We also have the largest number of Americans who have left the United States to fight on behalf of the Islamic State. The first two Americans killed, fighting on behalf of 

the Islamic State, were both from the State of Minnesota. 

We know that today there are those who are American citizens, 

with American passports, who have left the United States, who 

knowingly have gone to fight with the Islamic State, who have 

been involved with beheadings, shootings, raping of innocent 

women, killing of innocent children, burying alive in August innocent women and children in mass graves. 

We also know that these individuals are being allowed to transit 

out of Syria and Iraq back to western nations, whether it is Europe, whether it is in the UK, or whether it is in the United States 

of America. 

Our country today is freely allowing the return of terrorists who 

have given allegiance to the Islamic State back to the United 

States on the basis of their American citizenship and on their passport. 

That makes a lot of Americans very nervous, especially people in 

my State of Minnesota, wondering, with battlefield experience, 

with relationships, and with perhaps directives from those who are 

giving the orders in the Islamic State to come back and begin plots 

in the United States. 

I am wondering what is being done to follow these individuals, 

whether it is through financial transactions or any other way. I am 

wondering why they are allowed back into the United States? I 

wonder why in the world we don’t pull their passports and prevent 

them from coming to the United States in the first place? 

Why do we allow them in? 

Why are they allowed to resume their lives after they have joined 

a murderous band that is killing innocent women and children 

across the country? Why are we allowing that? Why aren’t we 

using our resources to thwart this? 

26 

There has only been one serious investigation of terrorist financing since 2008, and that is the Holy Land Foundation trial. It was 

a Muslim charity in the State of Texas. That happened in 2008 

from the Department of Justice. 

I assume that you are working, Mr. Secretary, with the Department of Justice closely on this matter. And I am wondering, what 

sort of prosecutions are going on? 

Because I can tell you, from my State of Minnesota, this has not 

receded. This has only gone up tempo. What sort of prosecutions 

are going on? Why is it that 6 years later there have been zero 

prosecutions coming out of the Department of Justice? Are you 

working with the Department of Justice? Are you identifying individuals? 

There are over 40 known individuals who have now returned to 

the United States who are terrorists, who have participated in terrorist activities, and who are freely walking about. It seems they 

have more protections than the American people. This is concerning to us now. 

We also know that the Department of Justice has boxes and 

boxes and boxes of documentation—known documentation from the 

Holy Land Foundation trial. Have they allowed you to look through 

those boxes? This is material that identifies known terrorist networks for terrorist financing. We, as Members of Congress, have 

not had one bit of access to those boxes of documentation. 

I would ask you, Mr. Secretary, are you aware of these boxes of 

documentation regarding terrorist financing with the Holy Land 

Foundation trial? Have you requested those boxes? Have you 

looked through those boxes? What do you know about that? And 

what are you doing to prevent terrorists from returning to a wonderful American life and putting innocent American citizens at risk 

from plots and attacks here in our homeland? 

Mr. COHEN. In the time I have remaining, let me try and address 

that. 

The effort to identify both individuals from the United States 

who are traveling to Iraq and Syria as foreign terrorist fighters and 

those who seek to return is one where there is an enormous 

amount of energy and resources dedicated, including from the 

Treasury Department, in trying to understand how to identify 

these people through tracing their financial transactions. And my 

counterparts, in particular the Department of Homeland Security 

and the FBI, allowed them to describe it in more detail. 

But you can rest assured that the threat of the foreign terrorist 

fighter flow both going to Syria and Iraq and coming back, whether 

into Europe or especially into the United States, is something that 

this Administration is highly— 

Mrs. BACHMANN. Secretary Cohen, I don’t rest very well because 

they are allowed free reentry into the United States. 

Chairman HENSARLING. The time of the gentlelady has expired. 

The Chair now recognizes the gentleman from Georgia, Mr. 

Scott. 

Mr. SCOTT. Thank you very much, Mr. Chairman. 

I am over here, Mr. Cohen. Over here in the corner. How are 

you? 

27 

An area that I think we are not putting enough attention to is 

on our Arab and Muslim nations who are over in the Middle East. 

I don’t believe for 1 minute that we are getting the level of cooperation, the level of backbone and insert into this issue as we should. 

We are never going to solve the Middle East problem. We are 

never going to solve this problem of terrorism and certainly not 

this problem of financing the terrorists if Saudi Arabia, if Jordan, 

if Egypt, if the United Arab Emirates, if Turkey, if Iran—if these 

countries and these nations do not come 100 percent and buy into 

this, then they will look at it and look as if they are playing the 

American people for fools. And I, for one, am not going to stand for 

that. 

Now, I believe one of the weak points within the Administration’s 

effort on this is a failure to come to Congress and get the type of 

resolution with the backbone and the balls in it that will do some 

good. We give Egypt, we give Saudi Arabia, $6 billion, $7 billion 

every year. It is Congress who controls the purse strings. 

And if we had the resolution, the Administration would be much 

stronger now, because in that resolution there are enough of us in 

Congress who would demand that Saudi Arabia, that Egypt, that 

Turkey, that the United Arab Emirates, all would come in or else 

they would feel the sting of our pulling back the billions of dollars 

that taxpayers’ moneys are going into it. 

Now, money laundering—do you think they could launder this 

money without the cooperation of those nation states who have the 

banking system in place to do it, the oil that they are getting so 

much of their money from? Do you think that they could do that 

without Turkey’s cooperation? No. 

And so, unless we get very serious about this—and if the Administration has 62 nations in this coalition, this Congress ought to 

know what they are doing to stop this financing. 

Finally, we wouldn’t have these terrorist groups if it weren’t for 

Saudi Arabia. Do you think we would have Al Qaeda? Osama bin 

Laden comes right out of the royal family there. Do you think we 

would have ISIS if we did not have Al-Qaeda in Iraq and if we did 

not make sure we contain that area? 

So what I am saying is that we need to send a message back to 

the world that Congress wants in on this. The people elected the 

Congress of the United States not to just sit back and twiddle our 

thumbs. 

We need to reach out and give this President the backbone he 

needs, if we are going to solve this financial situation, and demand 

that these Arab nations, these Muslim nations, not only put their 

boots on the ground to fight and take back their religion that has 

been hijacked, but put forth every effort they can and to work cooperatively with us to make sure that in no way are they contributing 

to this. 

And if they are, we would look like fools in America to continue 

to give millions of our taxpayers’ dollars to these nations while 

they, on the one hand, take our money and, on the other hand, support these terrorist groups, as Iran is doing. They have Hezbollah 

and Hamas. Saudi Arabia originated Al Qaeda. You have AlShabaab, Egypt coming up with the brotherhood—the Muslim 

Brotherhood. Come on. Only a joint, strong resolution, working 

28 

with the President, then this Nation will take the United States seriously on this. 

What do you say about that? 

Mr. COHEN. Congressman, let me just address your last point 

about a resolution coming out of Congress. And, indeed, the Administration has requested authorization for the effort against ISIL. 

I think the President and the Administration have been very 

clear that we are stronger when Congress, as you say, has its backbone into this, and I think the Administration is looking to work 

with Congress for authorization for this plan. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from Florida, Mr. 

Posey, for 5 minutes. 

Mr. POSEY. Thank you, Mr. Chairman. 

Mr. Secretary, is ISIS engaged in any narcotrafficking? 

Mr. COHEN. Congressman, not that I am aware of, sitting right 

here. But let me ensure that—there is something I don’t know 

about. But I am not aware of any narcotrafficking by ISIL. 

Mr. POSEY. Okay. I know they have given the Taliban credit for 

almost 100 percent of the heroin trade and FARC, the Colombian 

rebels, almost 100 percent, ultimately, of the cocaine trade. 

And, one way to go after terrorist funds is for Americans who are 

terrorized—or victims of terrorism to sue their attackers and go 

after their frozen assets under Section 201 of the Terrorism Risk 

Insurance Act, known as TRIA. The plaintiffs cannot, however, currently seize the funds of terrorists related to narcotraffickers. 

And my question for you is going to be what you are doing or 

what steps you are taking to help change that. But I guess, until 

you can qualify your position on ISIS being involved in narcoterrorism, this might not be the right time. 

Mr. COHEN. Congressman, as I say, I am not aware that ISIL is 

involved in narcotrafficking. I will follow up on that with you. 

On the broader issue of attacking terrorist organizations’ use of 

narcotrafficking as a way to raise funds—you mentioned the 

Taliban; you mentioned the FARC—we have been aggressive in the 

use of our authorities to try and prevent that, disrupt that. We use 

the Kingpin Act as a way to identify the major narcotics traffickers 

and then to build out the networks and apply sanctions against 

those who are involved in that activity. 

I can assure you that, if we see in the ISIL situation something 

akin to what we have seen with the Taliban or with the FARC, we 

won’t hesitate to use those same authorities in this instance. 

Mr. POSEY. But, again, with Kingpin, there is a big hole there 

for narcotrafficking. And, of course, it has been the subject of one 

of the hearings that we had previously. And some would say we 

really need to be locking that up as much as we can. 

Mr. COHEN. So I am not aware of the particular deficiency that 

you are identifying, but I am happy to follow up on that issue. 

Mr. POSEY. Okay. Thank you, Mr. Chairman. 

Chairman HENSARLING. The Chair now recognizes the gentleman 

from Texas, Mr. Green, the ranking member of our Oversight and 

Investigations Subcommittee. 

Mr. GREEN. Thank you, Mr. Chairman. 

And I thank the witness for appearing today. 

29 

My feelings are ambivalent on this topic of kidnapping for ransom. It is my understanding that ISIL has received as much as $20 

million. I also understand that this undercuts the goal of eliminating their access to funds if we don’t take a strong position on 

these kidnappings. 

My feelings are ambivalent because I have a constituent who has 

a son who is being held captive. We are not sure who is holding 

her son captive. 

But I visited with this mother and father, and I know that they 

want their son returned home safely. And while I understand that 

we can’t pay ransoms, I have been with them. And while I don’t 

feel their pain, I have seen the evidence of it. 

And you are in a tough position. But I want you to do all that 

you can, please. Please do all that you can to try to get these people 

who are being held hostage returned home safely. 

It is a balancing act. It is contrary to what our policy is. And I 

understand this. But we have to do everything that we can to prevent these dastards—that is with a ‘‘d,’’ not a ‘‘b’’—from performing 

the dastardly deeds that have been shown worldwide. 

If you could, please, sir, kind, sir, kindly give some indication as 

to the balancing act and what we are trying to do to make sure 

that this mother gets her son returned home safely. 

Mr. COHEN. Congressman, I think you have put it beautifully. 

And I think it is an incredibly difficult issue. I share your feelings 

that you described. I can’t imagine the pain that a family goes 

through in this situation. 

Our policy is one, as you note, that is intended to protect Americans by removing the incentive to take hostages in the first place 

and to not provide another source of funding to these horrific organizations that take hostages, and commit other terrorist acts. 

We have seen evidence that it, in fact, does protect Americans, 

as these terrorist organizations choose not to take Americans hostage because they know that they will not get paid ransom. It obviously does not work in every instance, as the situation you are citing identifies and reflects, but it protects our citizens over the long 

term and as a whole. 

In terms of getting our citizens back who are held hostage, I am 

sure you are aware over the summer there was a rescue attempt 

made to try and free James Foley, who was being held hostage by 

ISIL. It unfortunately was not successful. 

But the fact that we will not pay ransoms or make other concessions to terrorists does not mean that we are leaving our citizens 

in the hands of these dastardly people. We try everything we possibly can ourselves and working with partners to free our hostages, 

short of conceding to their demands for ransom payments or other 

concessions. 

It is, as you say, an emotionally fraught, difficult issue, but it is 

a policy that I think we need to employ ourselves and, frankly, we 

need to get our partners around the world to employ because it is 

to the benefit of all of our citizens ultimately. 

Mr. GREEN. Thank you, Mr. Chairman. 

Chairman HENSARLING. The time of the gentleman has expired. 

30 

The Chair now recognizes the gentleman from Missouri, Mr. 

Luetkemeyer, the vice chairman of our Housing and Insurance 

Subcommittee. 

Mr. LUETKEMEYER. Thank you, Mr. Chairman. 

Secretary Cohen, I want to frame my remarks—or my questions 

this morning with regards to the United States banking system 

providing access and being complicit in terrorist financing and 

money laundering. 

I am kind of concerned about the things that have been going on 

recently with regards to activities by different banking regulators 

and DOJ and how they are carrying out their duties. And, in fact, 

I think you are going a little too far with it. I certainly support 

their going after the bad actors. 

But, anyway, in your remarks that you made earlier this week 

with regards to derisking, while I think it is essential we have laws 

in place to combat terrorist financing, our regulators have no—I 

am concerned that the broad derisking we have seen in financial 

institutions is having a negative situation. I know that there was 

concern voiced also by the Comptroller of the Currency recently 

about this. 

And in your remarks—I have a copy of your speech you gave to 

the ABA Money Laundering Enforcement Conference earlier this 

week—you talk about that. And I would just like for you to tell us 

how you believe banks and bank regulators should judge risk and 

how it should not be done on a case-by-base basis. 

Mr. COHEN. Congressman, the foundation of our anti-moneylaundering regulatory regime is a risk-based approach where we 

ask our financial institutions to assess the risks of the customers 

that they have on board or they are thinking of taking on board 

on a case-by-case basis and make a judgment whether the risk profile of that particular customer is one that the institution feels that 

it is in a position to manage. 

The concern that I was addressing in the speech earlier this 

week was that some institutions were acting in sort of a wholesale 

manner to just cut off entire categories of customers, entire jurisdictions from correspondent account relationships, without an assessment of the actual risk posed by that particular customer. 

And what I was advocating was that institutions and those of us 

in Government who are responsible for overseeing the institutions 

adhere to the risk-based approach and to a case-by-case analysis— 

Mr. LUETKEMEYER. Perfect. 

Mr. COHEN. —in approaching that. 

Mr. LUETKEMEYER. Thank you for that. 

You are an expert on terrorist financing. And I am just kind of 

curious. Can you tell us what types of activities lead to ISIS financing? 

Some of these regulators are going after folks with firearm sales, 

fireworks sales, payday lenders, tobacco sales. Are these folks who 

engage in terrorist financing activities? Have you run into any—let 

me rephrase it. Have you had any actions against any of these 

folks for terrorist financing activities? 

Mr. COHEN. I am not aware of any actions against any of the entities you just described for terrorist financing— 

Mr. LUETKEMEYER. Any of those industries. Yes. Okay. 

31 

Mr. COHEN. —certainly with respect to ISIL. 

Mr. LUETKEMEYER. Very good. 

I know that the Financial Crimes Enforcement Network, 

FinCEN, put out a paper earlier this week, in fact, with regards 

to money service businesses laundering money for terrorists. And 

they are concerned about the same thing that you are talking about 

in derisking, about the banks indiscriminately terminating accounts. 

How closely do you work with these folks? You work with them 

every day, I assume. Right? 

Mr. COHEN. These folks work for me. 

Mr. LUETKEMEYER. Work for you. Okay. There we go. 

So you are aware of this paper. You are aware of this statement 

and support their conclusions as well, I assume. 

Mr. COHEN. Yes, sir. 

Mr. LUETKEMEYER. Very good. 

One last question here. Your remarks during the week also mentioned a few reforms needed to make our anti-money-laundering 

capability stronger. 

One of those was a safe harbor from civil liability for financial 

institutions that file a suspicious activity report, a SAR. 

I wholeheartedly agree with that recommendation, which is included in my—a bill that I offered, H.R. 4986, the End Operation 

Chokepoint Act. 

Can you tell the committee why you believe that the safe harbor 

is important and how this will help financial institutions in the 

fight against terrorist financing? 

Mr. COHEN. The issue there is that there is a difference of interpretation in some court decisions about whether—when an institution files a suspicious activity report, whether they could be 

brought into court, subject to civil liability if they didn’t have—are 

unable to prove a good-faith basis for filing the report. 

These reports, which are confidential, based on suspicion of potential illegal activity, that are filed with FinCEN, used by law enforcement to pursue cases, not as the end point, but as an opening 

point into cases, are incredibly valuable. 

And what we are looking to do is to ensure that institutions can 

comply with their obligations to file these reports without fear of 

civil liability. 

Mr. LUETKEMEYER. Thank you. 

Thank you, Mr. Chairman. 

Chairman HENSARLING. The time of the gentleman has expired. 

As a reminder to all Members, we are going to excuse our Administration witness fairly close to 1:00 and empanel the second 

panel, which means that the Chair plans to call upon—I’m sorry— 

noon—excuse me—noon. I don’t want our witness to panic. 

I will call upon Mr. Ellison, Mr. Pittenger, and Mr. Perlmutter. 

And then we will release our first witness and we will welcome our 

second panel. 

So at this time the gentleman from Minnesota, Mr. Ellison, is 

recognized. 

Mr. ELLISON. Mr. Cohen, thanks for your service to our country 

and your hard work to help combat terrorist financing. 

32 

Earlier you mentioned the Money Remittance Improvement Act, 

which is a bipartisan piece of legislation passed through Congress 

earlier this year. Now we are in the phase where we want to see 

it implemented. 

I wonder if you might elaborate on how you see the bill being 

adopted, absorbed into the financial community, so that we can 

stop bad people from getting money and allow the decent people to 

remit money. 

Mr. COHEN. Congressman, I think this is an important piece of 

legislation. I commend you for pushing it through the House and 

getting it signed. 

Mr. ELLISON. I had help even from the other side. 

Mr. COHEN. Exactly. 

The way that it will be used and be effective is it allows the Federal regulators to rely on State examinations for purposes of overseeing compliance with the anti-money-laundering regulations. 

That will expand our ability to get insight into the quality of the 

anti-money-laundering efforts across the country, particularly in 

the money services industry. And that will, I think, enhance the 

confidence that financial institutions have in taking on money service businesses as customers. 

So to get back to the derisking question, what we are hoping to 

foster is an environment where institutions do, in fact, engage in 

a—continue, really, to engage in a case-by-case analysis of risk. 

And the better the information, the better the foundation for that 

risk assessment, I think the better off we all are. 

Mr. ELLISON. Thank you. 

Now I want to just say I would like to work with you to help 

more financial institutions understand what is available under the 

Act. 

Let me ask you another question. And then I will pass it so we 

can have as many people as possible ask you a few questions. 

Do you feel like our international partners—we have enough cooperation with people in the Middle East, and the European world? 

Do you think we have enough international cooperation to identify 

and freeze off some of the sources of terrorist financing in dealing 

with ISIL? 

Mr. COHEN. That is a big question. 

The answer is, we have cooperation. It varies, as you might expect, from country to country. We have some partners that are 100 

percent committed and effective, and other partners where I think 

there is work to be done. 

One of the things that we do at the Treasury Department is travel around the world to try and enhance the effectiveness of partners in cutting off terrorist financing. It is a big part of my job, and 

a big part of the job of the folks who I work with. 

We have made enormous progress over the last decade or so in 

improving international efforts to combat terrorist financing. But, 

this is a task that is never going to be complete, and there is still, 

obviously, some work to be done. 

Mr. ELLISON. Thank you again. 

And I yield back. 

Chairman HENSARLING. The gentleman has yielded back. 

33 

The Chair now recognizes the gentleman from North Carolina, 

Mr. Pittenger. 

Mr. PITTENGER. Thank you, Mr. Chairman. 

Secretary Cohen, following up on Congressman Pearce’s questions, during Operation Desert Storm we had an average of 1,100 

strikes a day. Twelve years later against Saddam Hussein, during 

Operation Iraqi Freedom, we had 800 strikes a day. In the last 2 

months against ISIS, we have had a total of 412 strikes, an average of 7 a day. 

Is this limited amount of air strikes as a result of not having the 

intel on the ground as a result of precipitously pulling out our 

forces several months ago or is it a lack of the will by the Administration to take out particularly these transfers of oil out of country? 

Mr. COHEN. Congressman, I am not sure it is either of those. But 

I am really not in a position to comment on the military campaign. 

Mr. PITTENGER. Secretary Cohen, are you in dialogue with DOD? 

Are you in conversation? Are you in meetings with them regarding 

our approach and how we would seek to dismantle, disrupt, and destroy these transports of oil out of country, given that is the most 

significant manner of which—that ISIS has obtained their $1 million to $2 million of revenue a day? 

Mr. COHEN. Absolutely. And the conversations that I am involved 

in, as you might expect, are conversations about policy and broad 

approach. I don’t sit at CENTCOM. I am not doing targeting on the 

day-in-day-out basis. 

But in terms of the overall policy direction and the contribution 

that I cited that the Defense Department can make to efforts to undermine ISIL’s financial strength, that is something that, as part 

of the overall integrated strategy that General Allen is leading, is 

part of the conversation. 

Mr. PITTENGER. Do you believe it—number one, that it is in our 

best interests and, also, the best strategy if we would seek to destroy all of the transports out of country? 

Mr. COHEN. All of the illicit oil transports? 

Mr. PITTENGER. Illicit transport of oil out of the country. 

Mr. COHEN. It would seem to me that one of the ways we can 

impair the oil trade is to stop them from bringing it out of the 

country. What I am not in a position to comment on is the practicality of doing that. It is just not my area of expertise. 

Mr. PITTENGER. I appreciate that. 

Please convey our continued concerns on the manner of the limited approach that we have had in terms of our commitment to air 

strikes in various capacities, but particularly related to trying to 

disrupt the income flow back to the ISIS. 

On another matter, I mentioned earlier the availability of technology. There are very robust analytic software programs. I have 

worked for a dozen years with major software companies, originally 

related to Medicaid fraud. 

But, in these discussions, we have transferred now to talking 

about how we can dismantle the terrorist funding and the transfer 

of it outside the United States and inside the United States. 

And, as such, I wrote Jennifer Calvery, the Director of the Financial Crimes Enforcement Network, on September 4th and requested 

a meeting to make sure that the Department is utilizing every posVerDate Nov 24 2008 18:38 Jun 08, 2015 Jkt 092874 PO 00000 Frm 00037 Fmt 6633 Sfmt 6633 K:\DOCS\92874.TXT TERRI
34 

sible analytic support software available, and I would appreciate 

your help and response so I could meet with Ms. Calvery. It would 

be most appreciated. 

Mr. COHEN. Certainly, Congressman. 

And I can tell you that FinCEN, which Director Calvery oversees, has recently gone through an IT enhancement. It has some 

advanced analytical tools available to it. 

And they are using those tools to go through the reports that 

they receive from U.S. financial institutions to identify potential 

fundraising for ISIL and to push that out on a very rapid basis to 

our law enforcement colleagues. So that is happening, but I will 

convey your request. 

Mr. PITTENGER. If you could help bring about a meeting with her, 

I would very much appreciate it. 

I yield back. 

Chairman HENSARLING. The gentleman yields back. 

The Chair now recognizes the gentleman from Colorado, Mr. 

Perlmutter. 

Mr. PERLMUTTER. Mr. Secretary, thanks for your testimony 

today. And I want to compliment Treasury and the Administration. 

The stock markets are hitting new highs again today, from where 

we were 6 years ago. 

I want to follow up on the line of questioning Mr. Pittenger was 

just asking you. He was talking about how one of your points was 

we got revenue, we got the flow of money, and we have expense. 

Okay. I get back to basics. Okay? 

So in the revenue side of this, you have the production piece, 

which is what he was talking about, ‘‘Can we eliminate or destroy 

the production?’’ I would rather focus on the price. 

We have had a 30 percent reduction in the price of oil in the last 

5 months. So West Texas Intermediate has gone from 103 down to 

75. Just basic economics would say to me that has to hurt these 

guys somehow, that they have less money for any barrel of oil that 

they have. 

Can you tell us kind of what you see the drop in oil prices doing 

to ISIS and its revenue stream? And then I will get to expenses in 

a second. 

Mr. COHEN. Congressman, the price at which ISIL is selling the 

oil that it is stealing has never been at the open market price for 

reasons I am sure you understand. Whether the drop in oil price 

has also forced a decline in the discount that ISIL is taking off the 

oil it is selling, I just don’t know the answer to that question, but 

let me see if there is something— 

Mr. PERLMUTTER. What price in the black market, if you will, do 

you think they are selling it at? 

Mr. COHEN. Can I get back to you on that in a different setting? 

Mr. PERLMUTTER. What—okay. So let me move to the expense 

side. So on the expense side there is some cost to extract oil from 

the ground and then refine. Do we have any sense of what it costs 

them to produce this oil? 

Mr. COHEN. I think not a lot because this is not a sort of sophisticated operation. We have seen them take over wells, but, also, 

sort of in some respects destroy the wells and just—and have the 

oil pool and are taking it that way. 

35 

So I can’t give you a dollar figure on what it costs for them to 

produce a barrel of oil or for them to refine it in one of their mobile 

refineries. There is obviously some expense involved there, but— 

Mr. PERLMUTTER. Yes. I am not trying to stump you on this. 

Mr. COHEN. Well, you did. 

Mr. PERLMUTTER. This is just sort of basic stuff that I am trying 

to understand. Everybody else has kind of gone into monologues 

about what is going on in the Middle East. So, just basic price, production expense of producing this. 

Let me change it just a little bit. On the revenue side, we have 

oil and there is some revenue stream that is coming from oil. And 

I would like a little more specificity from you on how the price of 

oil affects that. 

What other pieces of revenue does this get? Does it get it—you 

mentioned sort of charity from some other countries. Does it have 

other earnings? What other kinds of revenue do they have? 

Mr. COHEN. And just on the price of oil, I can provide you with 

more detail on that. I would just like to do it in a different setting. 

The other sources of funding for ISIL are ransoms from kidnapping, extortion, and crime from within the territory where they are 

operating, essentially forcing people to hand over cash at gunpoint, 

and, to some extent, donations from external sources, from wealthy 

donors overseas. Those are the four most significant sources of 

funding for ISIL. 

Mr. PERLMUTTER. All right. So now moving to their total expense, obviously, they have to be paying their soldiers or whatever 

they are called, their fighters, their terrorist group—they have to 

be paying somebody something. And your point was, at some point, 

whatever revenue they have is going to outstrip those expenses. 

Can you elaborate on that? 

Mr. COHEN. Yes. Particularly as we make progress in squeezing 

down their revenue streams, their expenses for paying fighters for 

attempting to deliver social services of some sort in the territory 

where they are operating will outstrip their revenue. 

Just in terms of the fighters, if you assume that they have 

30,000 fighters, give or take, we have information that they pay 

their fighters about $1,000 a month. That comes to $360 million a 

year in just the expenses for fighters. 

Now, that figure is obviously a soft number. I don’t know if that 

is exactly right. But it gives you sort of an idea of the magnitude 

of the expenses. 

If you look at what the Iraqi government has budgeted—had 

budgeted for this year for the territories where ISIL is currently 

operating for the delivery of social services, it was well over $2 billion. 

Now, nobody expects ISIL to deliver social services to the same 

extent as the Iraqi government was planning to, but ISIL does try 

to portray itself as if it were a government that can deliver social 

services. That is going to be quite a substantial expense. 

Mr. PERLMUTTER. Thank you, Mr. Chairman. 

Chairman HENSARLING. Under Secretary Cohen, we appreciate 

your testimony today. We will release you at this time and invite 

the witnesses for the second panel to please come to the witness 

table as quickly as possible. 

36 

Mr. COHEN. Thank you, Mr. Chairman. 

Chairman HENSARLING. Thank you. 

We will now turn to our second panel of witnesses, whom I will 

briefly introduce. 

We will first welcome the Honorable Jimmy Gurule, a law professor at Notre Dame Law School. Professor Gurule has notable experience in the field of terrorism and finance, drawing on his 10 

years at both Treasury and the Department of Justice. 

Next, we will welcome Dr. Matthew Levitt, the Director of the 

Stein Program on Counterterrorism and Intelligence at The Washington Institute for Near East Policy. Dr. Levitt previously served 

as Deputy Assistant Secretary for Intelligence and Analysis at 

Treasury. 

Last, but not least, Dr. Patrick Johnston is a political scientist 

at the RAND Corporation, where he specializes in counterinsurgency and counterterrorism, especially in Afghanistan and the 

Phillipines. 

Without objection, your full statements will be made a part of the 

record. 

I am not sure who has testified before Congress before, but like 

the traffic light system, we have a green, yellow, and red lighting 

system. The yellow will go off when you have 1 minute to go. I ask 

that you each observe the 5-minute time allocation. 

Professor Gurule, you are now recognized for a summary of your 

testimony. 

STATEMENT OF THE HONORABLE JIMMY GURULE, LAW 

PROFESSOR, NOTRE DAME LAW SCHOOL 

Mr. GURULE. Thank you, Chairman Hensarling, Ranking Member Waters, and other distinguished members of the House Committee on Financial Services. 

Permit me to begin by thanking you for inviting me to testify before the committee on the timely and important topic of primary 

sources of funding for the Islamic State of Iraq and Syria, also 

known as ISIS. 

To enhance the U.S. Government’s counter-terrorist financing 

strategy against ISIS, I would like to make several recommendations. 

First recommendation: Targeted blocking actions. The centerpiece of the Government’s counter-terrorist financing strategy is to 

freeze the assets of suspected terrorists, terrorist-related entities, 

deep-pocket donors, and other financial supporters and facilitators 

of terrorism and prohibit such individuals and entities from doing 

business in the United States. The strategy is a preemptive strategy intended to prevent the financing of terrorist attacks and the 

killing of innocent civilians. 

More specifically, the authority to block ISIS-related funds derives from Executive Order 13224 that was actually issued after 

the terrorist attacks of September 11, 2001, by President George 

W. Bush. Unfortunately, the Treasury Department has not yet 

gained its footing with respect to ISIS-related designations. 

The ISIS-related designations by the Treasury Department 

raised two primary concerns. 

37 

First, few individuals associated with ISIS have been designated 

for asset freeze under Executive Order 13224. This year there have 

been only four. Two of the designations did not involve individuals 

involved in any way with terrorist financing. A third individual 

was a relatively lower level facilitator with respect to moving 

money from Kuwait to Syria. And then the fourth was involved in 

raising money from deep-pocket donors and external funding. 

None, unfortunately, of the Treasury designations include individuals engaged in any of the major sources of internal funding for 

ISIS. Absolutely none. I have a very basic fundamental question, 

and that is: Who is the finance minister for ISIS? Who is he? And 

why is that individual not on the Treasury list under Executive 

Order 13224? 

It seems to me that there needs to be a direct nexus between the 

Treasury Department’s designations and the principal sources of 

internal funding for ISIS. Whether, again, we are talking about illicit oil trade, ransom payments, trafficking, trading in stolen artifacts in Iraq and Syria, extortion payments, those are the individuals that the Treasury Department should be focusing on for designating blocking their assets, if any, in the United States. 

It seems to me—and I don’t know if this is the case—that it 

would seem to make good sense that there should be financial intelligence teams focused on each of the principal sources of internal 

fundraising for ISIS. 

There should be a financial intelligence team dealing with the 

payment of hostage ransom payments and where those monies go. 

There should be an intelligence team dealing with oil—the illicit oil 

trade and how that is happening, who is involved in that, and designating individuals involved in the illicit oil trade. 

Second recommendation: Enhanced terrorist financing prosecutions. There has already been some discussion of this, so I will keep 

my remarks on this front very brief. 

The bottom line is that the Department of Justice has a mixed 

record on prosecuting terrorist financing cases. Since the September 11, 2001, terrorist attacks, there have been very, very few 

major terrorist financing cases. 

I am aware of one, which there has been reference to, the Holy 

Land Foundation case. It was a charity and, by the way, a charity 

that was involved in raising money for Hamas. 

I am not aware of any significant terrorist financing prosecutions 

dealing with terrorist financiers of Al Qaeda and certainly none 

dealing with terrorist financiers of ISIS. 

To increase the number of terrorist financing prosecutions, my 

recommendation is that the Treasury Department should intensify 

and accelerate its efforts in sharing financial intelligence information with DOJ so the DOJ has the evidence that it needs to bring 

criminal indictments against terrorist financiers and take those indictments to successful prosecution. 

The last recommendation has to do with the Bank Secrecy Act 

(BSA). And I would just add that under the BSA, there have been 

over the last 10 years only two enforcement actions by FinCEN 

where fines have been imposed on banks for noncompliance with 

the BSA dealing with terrorist financing. I think that effort needs 

to be enhanced. 

38 

Thank you very much. 

[The prepared statement of Professor Gurule can be found on 

page 71 of the appendix.] 

Chairman HENSARLING. Dr. Levitt, you are now recognized for a 

summary of your testimony. 

STATEMENT OF MATTHEW LEVITT, PH.D., DIRECTOR, STEIN 

PROGRAM ON COUNTERTERRORISM AND INTELLIGENCE, 

THE WASHINGTON INSTITUTE FOR NEAR EAST POLICY 

Mr. LEVITT. Thank you, Chairman Hensarling, Ranking Member 

Waters, and distinguished members of the committee. It is an 

honor to be here to discuss this timely and important issue. 

The U.S. Government effort to counter the Islamic State, or ISIS, 

is focused on five mutually enforcing lines of effort, one of which 

aims to stop ISIS financing and funding. That may prove to be a 

difficult task in large part due to the differences between the funding models employed by ISIS and Jabhat al-Nusrah or other Al 

Qaeda affiliates, but not one that is beyond the international community’s capabilities. 

Combating ISIS’s financing is an important component of the 

international campaign against the only group to be too extreme 

even for Al Qaeda. Counter-finance tools have been proven uniquely effective both as a means to stem the flow of funds to terrorist 

groups, but also as sources of actionable financial intelligence that 

can then be leveraged to even greater success. Sometimes, you let 

the money flow so you can watch it and tag it. 

There is no doubt that in those areas where ISIS financing 

crosses international borders or leverages the international financial system, especially the formal financial sector, but, banks, but 

even alternate—alternative financial transfer mechanism, like 

hawalas—in those cases, the traditional tool set developed in the 

years since 9/11 will continue to prove to be effective means of 

countering ISIS financing. 

This includes ISIS’s income from illicit oil smuggling, donations 

from those few deep-pocket donors we know about in the Gulf and 

elsewhere, kidnap-for-ransom payments, efforts to access the antiquities black market to sell looted ancient artifacts and more, but 

this is unlikely to be enough to fully dismantle ISIS. 

Unlike Al Qaeda and other groups, ISIS was financially self-sufficient for about 8 years as a terrorist and insurgent group before 

committing itself to running a proto-state. Remember that before 

it renamed itself the Islamic State, it was ISIS, before that, the Islamic State of Iraq, Al Qaeda in Iraq, Majlis Shura al-Mujahidin, 

Jamaat al-Tawhid wa-l-Jihad. It went through many iterations. 

And then, like other groups which are reliant on state sponsors, 

major donors, or abuse of charities, AQI, now ISIS, was financially 

independent for years by virtue of engaging in tremendously successful criminal activity enterprises domestically within Iraq. 

Today, criminal enterprise still accounts for significant ISIS financing, complementing the group’s other lucrative sources of income, especially the sale of illicit oil. But on its own, criminal enterprise is an insufficient source of funding for a group committed 

not just to terrorist and insurgent activity, but to capturing, holding, and administering territory, which involves significant expendVerDate Nov 24 2008 18:38 Jun 08, 2015 Jkt 092874 PO 00000 Frm 00042 Fmt 6633 Sfmt 6633 K:\DOCS\92874.TXT TERRI
39 

itures and, therefore, requires much more significant revenue 

streams. 

Therefore, while it is true that ISIS criminal enterprises within 

Iraq are currently beyond the reach of traditional law enforcement 

and regulatory action, we do not have an Iraq Threat Finance Cell 

on the ground in Iraq like we once did. Focusing even only on those 

areas that are vulnerable to current tool sets will effectively deny 

ISIS the money it needs to hold and administer the Islamic State. 

Meanwhile, while military tools would, under other circumstances, be the last thing one would think might be—one might 

think of as a logical means of combatting crime, the fact is that air 

strikes against ISIS have already significantly undermined some of 

the group’s criminal enterprises, and further such strikes should 

continue that trend. They don’t hold territory. They can’t tax people in that territory. They can’t abuse domestic resources, et cetera. 

And while the prospects of real political reform in Iraq are bleak 

today, should the Iraqi government at some point re-prioritize governance and the rule of law over sectarianism and corruption, then 

perhaps local Iraqi law enforcement could at some future point investigate and prosecute ISIS criminal enterprises in their country 

as the domestic criminal activities they are. 

Treasury’s ISIS strategy focuses on imposing financial sanctions 

on anyone who trades in ISIS’s stolen oil, inducing our foreign 

partners to put an end to kidnap-for-ransom payments, targeting 

external donor networks for sanctions, restricting ISIS’s access to 

the international financial system, and employing targeted sanctions against ISIS’s leadership and facilitators. 

I think those should be done in those places where it will make 

the most difference, not where we will feel good about ourselves in 

the morning. If, in fact, most of those things are happening domestically in Iraq, targeting them with Treasury designations actually 

doesn’t do a thing. 

It is a wise strategy using these Treasury tools that we currently 

have, but I encourage people to look beyond these tools, as I am 

sure Treasury already is, to envision the kind of tools Treasury and 

its partners might need to adapt and deal with an evolving illicit 

financial threat. 

I submit there is no agency that does this better, thinking outside the box to develop the strategies needed to deal with tomorrow’s threats. Treasury’s Terrorism and Financial Intelligence 

branch did that after 9/11 to deal with the threat of Al Qaeda. It 

did it in an even more substantial way in 2005, 2006, when it developed tools and strategies to contend with Iran’s illicit financial 

conduct support for terrorism and nuclear proliferation. It came up 

with the Iraq Threat Finance Cell in Iraq, et cetera. And I expect 

that we will see similarly creative tools coming up soon. 

So, a few policy prescriptions. First, I will say this. There is no 

silver bullet to dismantle ISIS financing, let alone to ultimately defeat the organization. ISIS presents a unique set of circumstances, 

and Treasury should continue to do what it does best: assess the 

situation, and develop new tools to deal with an evolving threat. 

But there is circumstantial evidence that Treasury’s full-court 

press is already working far away from Iraq’s borders. Consider the 

case of a jihadist on trial in Germany for joining a group in Syria 

40 

allied to the Islamic State who struggled to send funds to the Middle East largely because of measures Treasury and others have put 

in place. 

The court proceedings in Germany and local media reports describe a picture of a jihadist forced to send a member to Europe for 

supplies because it had become too hard for them to transfer 

money without being traced. 

That is not all. The extremists used the wire transfer service of 

Western Union to send money around the world, but had become 

so nervous of transactions being monitored, they were afraid to 

pick up the money. 

So just a couple of— 

Chairman HENSARLING. If you could summarize quickly, please. 

Mr. LEVITT. Absolutely. 

We have to use the military to disrupt the oil, no question, and, 

also, to move ISIS back from controlled territory so it cannot engage in criminal activities in those areas. 

Even though today major donors are not a big part of ISIS financing, as soon as we have more success in cracking down on its 

existing streams, that will increase. 

And so, as I get into in my written statement, we need to focus 

on Qatar in particular but also Kuwait. The fact that they have 

passed a new law does not in and of itself mean anything. They 

need to enforce the law. 

We need to isolate ISIS from the national financial system to be 

sure. But in the long run, at the end of the day, the only way to 

stop criminal enterprise within Iraq is for law enforcement within 

Iraq to be able to do the job. 

Thank you very much. 

[The prepared statement of Dr. Levitt can be found on page 96 

of the appendix.] 

Chairman HENSARLING. Dr. Johnston, you are now recognized for 

a summary of your testimony. 

STATEMENT OF PATRICK B. JOHNSTON, PH.D., POLITICAL 

SCIENTIST, THE RAND CORPORATION 

Mr. JOHNSTON. Chairman Hensarling, Ranking Member Waters, 

and distinguished committee members, thank you for allowing me 

to testify. 

Today I will discuss how ISIL accumulated the wealth that made 

it the richest terrorist group in the world, how ISIL’s money amplifies the threat that it poses and challenges and opportunities for 

degrading its finances. 

Before I begin, I just want to note that countering ISIL’s funding 

is both difficult and important. The methods ISIL uses to raise and 

move money make it a hard target for traditional counter-terrorist 

finance instruments. 

Nonetheless, money is a critical component of all of ISIL’s activities, and failing to degrade ISIL financially would increase the 

threat that it poses both in the region and to Europe, as well as 

the U.S. homeland. 

So in my testimony I want to make three main points. My written testimony contains a fuller discussion of each. 

41 

My first point is that ISIL raises almost all of its money within 

the territory that it controls. This has been discussed already by 

other members, so I will be belief. 

The funding scheme differs from a lot of the terrorist organizations that some of these tools and instruments that Treasury uses 

now were developed for, and this is challenging, given the way that 

ISIL makes its money internally, which I will discuss in turn. 

I have had a chance to look behind the curtain, to a degree, 

through some historical documents that were captured during the 

second Iraq war between 2005 and 2010 from—that were captured 

from the Islamic State of Iraq before it became the Islamic State 

of Iraq and the Levant. 

And these documents show with meticulous detail how the group 

raised money during this period and how the group spent money, 

and they were fairly comprehensive over certain time periods in 

2005 and 2006 and 2009 and 2010. 

And what these documents show, I think really importantly, are 

two different things. One is that this group has been making its 

money, at least in Mosul, in basically the same way for at least the 

last 6 years and probably longer. 

So this is nothing new, despite the change in the group’s name 

and it creeping up on the United States and the world after the 

U.S. withdrawal, but the group has been there and using a lot of 

the same kinds of methods that it is using now. 

Now, the main difference in really what is going on in Mosul and 

with ISIL is the scale at which it raises funds. And so what we are 

able to see through looking at the group’s captured financial ledgers is that, in Mosul, in 2008 and 2009, the group, known then as 

the Islamic State of Iraq, was making about $1 million total per 

month, on average. And now, as we know, just from oil revenues 

alone, revenues have been estimated between $1 million and 3 million per day. 

So it is an enormous increase and one that I think needs to be 

appreciated when we think about how threatening we viewed Al 

Qaeda and Iraq and the Islamic State of Iraq and then, with the 

additional finances that the group has now, what that might mean 

for their capabilities and then also for their ability to sustain a 

long-term protracted fight against various enemies. 

There are real challenges in disrupting ISIL’s finances through 

targeted sanctions against its leadership and restricting its access 

to the international financial system. I think that Under Secretary 

Cohen is correct that key individuals involved in financial activities 

that benefit ISIL should be targeted for sanctions and that ISIL— 

it does benefit from access to the international financial system. 

But these facts don’t negate another fact, which is that a large 

share of ISIL’s revenue is made internally. It is moved through informal channels or in cash by networks of intermediaries, among 

other methods that are used. And all of these methods combined 

make it difficult to collect the precise financial intelligence that is 

necessary to effectively apply targeted sanctions. 

Absent such intelligence, we are left with a fairly blunt set of financial instruments at our disposal that are unlikely to cut off 

ISIL from key revenue sources that could sustain the organization 

for the next several years or longer. 

42 

My third point covers a few things that could be done to disrupt 

and degrade ISIL’s internal financing. And so this refers specifically to extortion and various types of crime. 

Robust partnerships with local, regional and U.S. Government 

interagency partners will be necessary to collect the high-quality 

intelligence on ISIL’s local funding sources, methods. 

Several steps could be taken, including enhancing intelligence cooperation with Kurdistan and Iraqi partners to identify oil 

facilitators, prioritizing collection on the quantities and prices of oil 

over time that facilitators and intermediaries are smuggling to 

maintain basic situational awareness of ISIL’s financial capabilities 

as an early warning of sorts, and identifying and monitoring all external contracts for areas in and around the territory that ISIL 

controls, allowing action to be taken to reduce ISIL extortion revenue by stopping these contracts if they are not absolutely necessary for the population’s well-being. 

So just to recap, the three main points are the importance of 

ISIL’s internal funding scheme, the challenges associated with targeted financial sanctions and efforts to cut off a group like ISIL’s 

access to the international economy, and to use this as sort of the 

primary tool kit to degrade the specific threats, financial capabilities, and an improved financial intelligence as a way ahead to understand the threat better and then to conduct targeted operations, 

whether by Treasury, DOD, or other agencies. 

Thank you. 

[The prepared statement of Dr. Johnston can be found on page 

86 of the appendix.] 

Chairman HENSARLING. I want to thank each of the gentlemen 

for their testimony. 

The Chair now recognizes the gentleman from Pennsylvania, Mr. 

Rothfus. 

Mr. ROTHFUS. Thank you, Mr. Chairman. 

Professor Gurule, you talked a little bit about the specially designated global terrorists and that we have only had four identified, 

I think, with ISIS, and you made a good point about who is the 

finance minister for ISIS. 

Can you just give us a little historical context going back to the 

early 2000s when you were in public service and individuals we 

would have been identifying within Al Qaeda just to compare and 

contrast? 

Mr. GURULE. Thank you for the question. 

First of all, we have to keep in mind that the method of raising 

money by Al Qaeda is very different than the method that ISIS 

uses to raise money. 

Al Qaeda relied almost entirely on external sources of funding. 

And so, for example, we focused on corrupt charities that were raising money for Al Qaeda and related affiliated terrorist groups. 

And when I was Under Secretary, I think we designated as specially designated global terrorists over 20, maybe—actually higher 

than that—probably closer to 40—charities for that purpose. But, 

again, the focus was on external sources. 

ISIS is very different. It is principally a self-funded organization. 

And so what Treasury has to do is they have to pivot. They have 

43 

to refocus. They have to recalibrate their efforts to the dynamic 

that they are currently facing with respect to ISIS funding. 

And my point is I think they are struggling to make that change, 

to make that adjustment, and it is borne out by the fact that we 

only have—there are only four designations today. 

Mr. ROTHFUS. Do you believe that there would be individuals 

that Treasury would be aware of today that could be designated? 

Mr. GURULE. I would certainly hope so. Because, if they are not, 

then the situation is even more dire than it appears. 

Mr. ROTHFUS. We have talked a little bit with the Under Secretary and other panelists have mentioned some of the countries in 

the area, and I wonder if each of the members of the panel can address this. 

The Under Secretary talked about how there is still more work 

that needs to be done, for example with Qatar and what they are 

doing. We talked about the charity law that Qatar has in place. I 

think the Under Secretary had previously made statements about 

Qatar and Kuwait being permissive jurisdictions for terrorist financing. 

What kind of things could these countries be doing now that they 

are not doing today? 

Mr. LEVITT. A lot. Mostly these are countries that have passed 

fantastic laws on the books when you look at them black and white 

on paper. 

I have gone to the Middle East many times, and sat with some 

of these individuals. They have given me enough copies—hard copies, soft copies—that I could wallpaper my house with them. 

But when you get them privately and you ask them, ‘‘This is a 

great law, 3.1. Have you ever implemented it?’’ ‘‘No.’’ ‘‘Have you 

ever used this?’’ ‘‘No.’’ 

There are very few cases, especially in Kuwait and Qatar, of any 

type of implementation, even the case that the Under Secretary 

was able to point to earlier, a case where Qatar did deport someone. 

They didn’t prosecute the individual. They didn’t hold the individual accountable. The individual was deported and is now presumably continuing that activity from someplace else. 

I get into Qatar in great detail in my written report with the concerns—the Financial Action Task Force, the International Monetary Fund and others, including people who have gone to Qatar 

and investigated, like myself, with their ability to implement. 

There are similar concerns about Kuwait. 

If I could just add on the question of the SGDTs, we lose—what 

we should not be asking Treasury is to designate as many people 

as possible. What we want Treasury to do is to designate as many 

people as possible when designating them would have an impact. 

There is an innumerable number of people around the world related to ISIS and other groups that you could under that—the 

threshold—hit the threshold—legal threshold and you could designate them. 

But they don’t have assets here. They don’t have assets around 

the world. In this case, they are doing things domestically in Iraq. 

It would not make a difference just to add them to the list. 

44 

What we want to do ultimately is to make a difference. So what 

we need to be doing in particular is not just focusing on the guy 

who today has the title of finance minister and is in Iraq doing 

things only within Iraq, but those middlemen who are facilitating 

oil payments or anything that crosses borders. That is where these 

designations have teeth. 

Mr. ROTHFUS. Are there leverage points that Treasury—or anywhere in the Administration that we could use to encourage, 

whether it is Kuwait, Qatar, or Turkey or other countries in the 

region, to follow through? 

Mr. GURULE. I think there are. One of the concerns that I have 

is whether or not these vast sums of money that are being generated internally by ISIS are entering banks in Qatar and that we 

should be scrutinizing and working very closely to ensure that 

those banks are implying the—or applying the relevant antimoney-laundering, terrorist financing regulations that they should. 

And, if not, perhaps their banking licenses—if they have U.S. 

branches in the United States, perhaps those banking licenses 

should be revoked or other restrictions should be imposed on their 

ability to do business in the United States. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from Massachusetts, 

Mr. Lynch. 

Mr. LYNCH. Thank you, Mr. Chairman. 

And I want to thank the panel. Thank you very much. You have 

all helped us enormously today. 

Dr. Johnston, I had a chance to read some of your earlier stuff 

back in August and then your testimony today. You indicate today 

that you believe there might be a surplus—that ISIS might have 

a surplus of about $2 billion. 

How do you think they are holding that from a custodial sense? How do you think they hold that reserve of about $2 billion? 

Mr. JOHNSTON. So, this is purely speculation. But I think the 

easiest way to hold it would be in the banks that it overran when 

it overran Mosul and to be able to store the money securely in a 

facility that is intended to store money of a high quantity, I think, 

is a reasonable guess. But there could be wide distribution of it. It 

could be in other countries. And so I suspect it is some of each of 

those. 

Mr. LYNCH. Yes. 

The one vulnerability they have now that traditionally terrorist 

organizations have not had is that they have to defend their turf. 

And I know that your report—I think all of you have hit on this, 

that our response to the traditional financing of Al Qaeda, as the 

Professor has outlined—our response was really sanctions and restrictions on proper banking practices and things like that, antimoney-laundering statutes. 

But the way that ISIS is operating now, they are internally generating this revenue. So they are not relying principally on Qatar 

or Saudi Arabia as Al Qaeda did in the past. So we really have to 

get at the oil revenue. 

I understand, Professor, in your report that you indicate the second largest source of revenue for ISIS is the selling of antiquities, 

but that is an—I think they will exhaust that at some point. It is 

45 

really the oil that is going to be their—if they are going to have 

a sustainable system here and organization, it is going to be the 

oil. 

How do we get at that, Dr. Johnston, in terms of our strategy? 

I know that we are doing targeted missile strikes and bombings. 

But to really take away the capacity to produce oil, you have to occupy the ground. And I am just curious if you think that our current strategy that really looks at population centers like Mosul is 

the right strategy. 

Would it not be better for us to encourage the Iraqis and the 

Kurds to really focus on the oil production areas and try to take 

them away from ISIS control? 

Mr. JOHNSTON. Thanks for the question. 

I think that the appropriate way to do this is pretty much what 

is being done right now, actually, and that is using air strikes to 

limit the freedom of movement and ability to move oil and smuggle 

it as easily as ISIL was able to before the air strikes started, meanwhile buying time for an advise-and-assist effort and capacitybuilding effort to try to stand up, in some cases, local security 

forces or the Iraqi Army to conduct effective operations essentially 

to push ISIL back from the territory that it has controlled. 

Mr. LYNCH. I appreciate that. And I don’t mean to cut you off. But from 2003 to 2011, we spent $24 billion, the United States taxpayer—we spent $24 billion training 938,000 Iraqis how to fight 

and to equip them, train them. And here we have 30,000 Sunni 

that are overrunning the country and Syria. 

And I just—in the race against time, as this ISIS gets stronger 

and stronger, we are back again with this training operation. And 

I just—I just have some misgivings about—what is that saying? 

That the definition of insanity is doing the same thing over and 

over again and hoping for a different result? 

I have just a little bit—I think the training piece in Kurdistan 

where we did not train before is probably money well spent, but I 

am a little skeptical about what we are doing with the folks we 

trained already. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from Kentucky, Mr. 

Barr, for 5 minutes. 

Mr. BARR. Thank you, Mr. Chairman. 

Let me just direct this first question to Dr. Levitt. Would you assess that the primary source of revenue for ISIL is the oil revenue? 

Mr. LEVITT. By far. 

Mr. BARR. Okay. And so how effective have U.S. efforts been so 

far—the coalition’s efforts been so far at targeting the middlemen 

in Iraqi—the Iraqi Kurds or the Turkey—to the Turkish elements 

that are—that constitute the middlemen? How effective have we 

been at identifying those middlemen that are delivering the oil to 

other parties? 

Mr. LEVITT. There is very little in the open source about it. When 

I talk to people privately, my understanding is there has been some 

progress in identifying these people. Then it takes some time to put 

together packages and fully get to the point where you can actually 

designate somebody. But I expect that those types of designations 

will be forthcoming. 

46 

We have seen more success in working with partners in places 

like Turkey and in the Kurdish areas in the north of Iraq where 

the problem isn’t so much criminal middlemen, but corrupt politicians who are involved in this as well. 

Keep in mind these are oil-smuggling routes and individuals 

have been involved in this for years since the Oil-for-Food Programme. And so combatting something that has that kind of traction is difficult. 

Mr. BARR. What about air strikes with these mobile refineries? 

How effective has that been so far? 

Mr. LEVITT. The Military says they have been very, very effective. And if you look at the numbers, we at one point were saying 

that ISIS was making as much as $3 million a day, and now most 

say about a million, maybe even a little less. 

So I would that is about a two-thirds reduction. That is tremendously successful, nowhere near where we need to be yet, but very 

much headed in the right direction. 

Mr. BARR. And to follow up on Mr. Lynch’s line of questioning, 

is there any way—even if we have had some modest success with 

respect to these mobile refineries and the air strikes, is there any 

way that we can truly combat—or is it practical to believe that we 

can truly combat the source of oil revenue without retaking identifiable oil fields from ISIL control? 

Mr. LEVITT. To fully deal with the problem, you are going to have 

to retake the oil fields. But even short of that, if you can deny your 

adversary the ability to extract, to move, to refine that oil, if they 

are sitting on it, but not making money on it or only making as 

much money as they can make domestically, which is happening already, in some cases, then you can further degrade their capabilities. 

Mr. BARR. And how well do we know whether or not the Assad 

Regime is a primary purchaser or a small purchaser of some of this 

illicit oil trade? 

Mr. LEVITT. My understanding is there is no question but that 

the Assad Regime purchases ISIS oil, has been doing so for some 

time. Keep in mind we are talking about oil fields on both sides of 

the border. 

In fact, one of the points I didn’t get to in my oral remarks is 

the need to make sure that we are doing things—including doing 

things combatting their financing not only in Iraq, but also within 

Syria. But the extent of that, which I am sure fluctuates, I don’t 

know exactly. 

Mr. BARR. What about Turkish cooperation with respect to the 

oil trade? 

Mr. LEVITT. My understanding is that Turkish cooperation has 

increased significantly. It is going to be difficult, though. As I said, 

this is something that has been going on for years and years and 

years. 

The price of oil in southern Turkey is very expensive per liter, 

more expensive than if you have ever rented a car in Europe. That 

says something. 

And so there is a built-in supply and demand. Even at the sharp 

discounts that people are selling the oil for in southern Turkey, you 

47 

can still make a profit because the market will bear it because 

market oil is so high. 

Mr. BARR. A quick final—shifting gears to the issue of kidnapping for ransom, Under Secretary Cohen’s testimony was that it 

has been U.S. policy for many years to refuse the payment of ransoms or make other concessions to hostage-takers. 

Can any of you assess how the release of the five Taliban war 

criminals from Guantanamo in exchange for Sergeant Bergdahl impacted the U.S. position with respect to sending that signal to partner nations? 

Mr. GURULE. My response is that it wasn’t helpful. I think it is 

inconsistent, and I think it is sending a mixed message to our European allies who we are being critical of—France and Spain—for 

making ransom payments for the release of ISIS hostages. I think 

it, again, was counterproductive and it undermines our effort. 

At the end of the day, this is a significant—it may not be the most significant source of ISIS funding, but if ISIS is making $20 

million a year—or up to this point, this year, $20 million, that is 

significant, and we need to undercut that ability. And when we are 

engaging in this type of conduct, I think it is counterproductive. 

Mr. BARR. Thank you. 

I yield back. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from Wisconsin, Mr. 

Duffy, for 5 minutes. 

Mr. DUFFY. Thank you, Mr. Chairman. 

A lot of topics have been covered today. But my concern with the 

Administration is its initial designation of ISIS as being a ‘‘JV 

team.’’ 

I looked at the strategy of the Administration in regard to its 

mission to disrupt, degrade, and defeat ISIS. I take issue with the 

way they lay they out. I wish they would just say, ‘‘We are going 

to defeat ISIS.’’ 

But spending $500 million in trying to train 500 ‘‘moderate’’ 

rebels to take on 40,000 to 80,000 jihadists doesn’t seem like a 

sound strategy to defeat this group of radicals. 

And then, as I think it was Mr. Rothfus who indicated, on average, seven bombing missions a day compared to what we had previously done in prior engagements seems far too little and somewhat too late. 

So my concern has been with the Administration’s strategy, and 

I am concerned that the lackluster approach that I have just referenced is also taking place on the finance side. 

Does the panel think that Treasury has been adequately engaged 

on the terror finance side of disrupting the money that flows to 

ISIS? 

Mr. Gurule? 

Mr. GURULE. As I stated in my opening statement, I think they 

are struggling. And I think certainly they have good intentions and 

they— 

Mr. DUFFY. Treasury is struggling. 

Mr. GURULE. —but I think they are struggling with gaining their 

traction, gaining their footing. That is reflected in the low number 

of designations. 

48 

Mr. DUFFY. Right. 

ISIS isn’t struggling. Treasury is struggling. Is that— 

Mr. GURULE. Treasury. Yes. 

Mr. DUFFY. To the panel, I think Mr. Pearce asked this question, 

but I am maybe a little bit confused. 

Moving oil is not like moving nuggets of gold or diamonds. Right? 

It is a pretty—there is a large quantity of oil that has to be moved 

from the oil fields and/or the refineries. Is that correct? 

Mr. GURULE. We are talking about 20,000 to 30,000 barrels a 

day. Now, there may be some—it is not an exact figure, but it is 

a significant amount of oil that is being transported every single 

day. 

Mr. DUFFY. And once it is sold, I understand it can be more difficult to identify those who are participating in the finance side and 

the purchase side and the middleman side of oil. 

But does it seem impossible that we couldn’t bomb tankers of oil 

as they leave the refinery or leave the wells? Why aren’t we engaging in military action to destroy the oil as it leaves? Is there—I just 

don’t have the answer to that question. Why aren’t we doing that, 

to anyone on the panel? 

Mr. Levitt? 

Mr. LEVITT. I don’t have the answer to that. It is more of a military question than not. My guess is that, if it were that simple, we 

would be doing it, because there is no one who disagrees with the 

premise of what you are saying. 

Sometimes, they are small trucks. I think that people watch too 

much TV and think that we have complete aerial coverage of everything that is happening at all times. But I don’t have the perfect 

answer to your question. 

I would just say that I am absolutely certain that the approach 

at Treasury is not lackluster in the least. People are working very, 

very hard on these issues. It is the nature of the problem that they 

are facing. 

If what Congress really wanted them to do is just designate 40 

people, we could do that tomorrow. 

Mr. DUFFY. But I am not saying that. 

We are moving large quantities of oil, and we have drones in the 

air. We have air superiority. That we can’t take that out is somewhat of concern. 

And we are not dealing with a small terror network either. We 

are dealing with large amounts of money. And I would imagine 

that it is easier to trace large amounts of money than a few million 

dollars here and there to different terror networks. 

We are talking about hundreds of millions of dollars. Right? 

Mr. LEVITT. Correct. And while you are—yes. I would just challenge the idea that we have complete coverage everywhere at all 

times, but it is better asked to a military person. 

Mr. DUFFY. Fair enough. I want to switch to another topic. 

The United States and Turkey are co-leading an initiative within 

the Financial Action Task Force. Are you all aware of that? 

Is it fair to say that Turkey was just removed from the gray list 

from that task—from the task force? 

49 

Mr. LEVITT. That is right. And that was a lot of Treasury and 

other work to get them listed and then to get them to the point 

where they could be de-listed. 

At the end of the day, though, we don’t have a choice as to who 

sits on the borders of Syria and Iraq. And so, if you can get Turkey 

not only to get off that list, but now to be helpful on this—which, 

by the way, isn’t a favor to us—this is on their border, not ours— 

then that is a good thing. 

But you are absolutely right to expect that we need to sit on 

them very, very carefully. 

Mr. DUFFY. And so, looking at Turkey, Kuwait, Iraq, Qatar, are 

we applying adequate pressure to those countries to get them to 

engage with us on the finance side of ISIS? 

Mr. GURULE. I think there is always more that can be done. And 

one of the points that I made in my written testimony is I think 

that there has been ineffective or inadequate use of the BSA enforcement actions. 

Under the BSA, FinCEN can impose significant civil fines on 

banks that are not complying with the counter-terrorist financing 

regulations. And with respect to counter-terrorist financing, I think 

Treasury, FinCEN, has done a pretty good job on the anti-moneylaundering side. 

But with respect to designating—or I should say fining banks 

that are not in compliance with the terrorist financing regulations, 

I have only identified two banks in the last 10 years, and those include the Arab Bank and the Doha Bank from Qatar. So I think 

we can be doing—Treasury could be doing a much better job in 

that area. 

Mr. DUFFY. Thank you. My time has expired. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from California, Mr. 

Sherman. 

Mr. SHERMAN. ISIS rules territory and extracts money from that 

territory. That is probably its biggest source of revenue. The lights 

are on in Mosul. Okay. Not all the time. But electricity continuity 

is shoddy in much of Iraq. 

Before this outbreak, a lot of the electricity for Mosul came from 

the Mosul Dam. Is that dam still providing electricity to those living under ISIS? Does anyone have an answer? Is ISIS collecting 

money from the people who receive that electricity? 

Dr. Levitt? 

Mr. LEVITT. Yes. My understanding is that the dam isn’t under 

their control. They are not— 

Mr. SHERMAN. I know. 

Mr. LEVITT. —getting money from any of it. 

Mr. SHERMAN. They don’t control the dam. But how are they getting the electricity for Mosul? 

Mr. LEVITT. My understanding is that the government that controls the dam is still allowing electricity to go into the city because 

there are citizens who live there. 

Mr. SHERMAN. And that is basically the point. The electricity 

goes into Mosul. ISIS collects for that electricity— 

Mr. LEVITT. I don’t know that that last part is true. 

50 

Mr. SHERMAN. We do know that they are in a position to collect 

for the electricity. 

Mr. LEVITT. We know that they are in a position to tax for anything they want. 

Mr. SHERMAN. Right. They tax— 

Mr. LEVITT. For the air they breathe or anything else, but I don’t 

know that there is anything— 

Mr. SHERMAN. When we were serious about World War II, we 

didn’t provide electricity or food or anything else to the people of 

France when they lived under Nazi occupation. Yet, you are saying 

the Iraqi government is providing electricity to Mosul. 

Is the Iraqi government being paid for that? 

Mr. LEVITT. I don’t know. But I think that the Iraqi government— 

Mr. SHERMAN. So it supports the economy of Mosul and the other 

areas under ISIS control. ISIS then taxes those people. And it is 

very hard to wage war if you supply strategic assets to areas under 

enemy control. I have never seen that done in a war in the past. 

Mr. LEVITT. I hear your point. 

I just say we are short of world war right now. And if you want 

one sure way for the central government in Iraq to go even further 

to losing the support of more of their constituencies, deny electricity to Iraqi citizens who are— 

Mr. SHERMAN. So let me get this in. 

You supply the economy under ISIS’s control. ISIS then taxes 

that economy, and that is—did we lose the hearts and minds of 

those who were resisting Nazis because we not only did not provide 

free food or electricity to the people of France—obviously, electricity 

wouldn’t have worked, but food—but, in fact, we prevented food imports in France? Didn’t we retain the support of the civilian population that was under Nazi occupation? Is there any other war you 

could point to where free electricity goes from one side to the other? 

Mr. LEVITT. Again, unless you have information, I don’t know 

that it is free electricity. I don’t know if they are taxing electricity. 

But this is a deeply sectarian war more than anything else. And 

so the further you make divisions between the sectarian communities in Iraq, the worse it is going to be. 

Mr. SHERMAN. So you are for a policy of supporting the strategic 

elements of the economy under ISIS control. That is certainly— 

Mr. LEVITT. I think you know that is not what I said. 

Mr. SHERMAN. What? 

Mr. LEVITT. I think you know that is not what I said. 

Mr. SHERMAN. You can clarify for the record in writing what your 

position is. 

Now, I guess that would also apply to petroleum. If you are in 

favor of the lights being on in Mosul, then people ought to be able 

to drive from north Mosul to south Mosul. 

We are preventing them from exporting oil. Have we done everything possible to prevent them from producing enough oil for the 

civilians under their control? 

Professor Gurule?. 

Mr. GURULE. Again, I think this is, as we have already discussed, 

a very important source of income for— 

51 

Mr. SHERMAN. I am not talking about exporting the oil. I am 

talking about providing for the millions of civilians under their control. 

Mr. GURULE. I don’t think it has been a priority. I don’t think 

it has— 

Mr. SHERMAN. So turning off—we did not hesitate to bomb oil 

fields during World War II. We did not think that making sure 

that the people of France could drive around Paris was essential 

to retaining the support of those civilians. 

The idea that there would be people driving civilian cars in 

Mosul, but that somehow the tanks now captured by ISIS would 

not have—obviously, a lot of this hearing is focused on the oil exported by ISIS, but ISIS has no shortage of oil for its own military 

operations and even for the civilians under its control. 

I yield back. 

Chairman HENSARLING. The gentlemen yields back. 

The Chair wishes to announce that we will clear the remaining 

three Members who are in the hearing room and then we will adjourn the hearing. 

The Chair recognizes the gentleman from Virginia, Mr. Hurt, 

vice chairman of our Capital Markets Subcommittee. 

Mr. HURT. Thank you, Mr. Chairman. 

And I want to thank the witnesses for providing testimony today. 

I represent Virginia’s 5th District. And I can tell you that most 

of the people that I represent have concerns about the way this Administration has approached this crisis in Syria and Iraq, and I 

think that there is a lot of concern that the Administration either 

didn’t know or ignored critical information that could have prevented us from being in the situation that we find ourselves. 

With that said, I was interested in the testimony of each of you 

as it relates to the hard work that goes into identifying those who 

should be subject to the sanctions that are allowed by U.S. law and 

law of other countries, and it strikes me that information has to 

be gathered, really, on the ground and it has to come to Treasury 

through, again, Department of Defense and intelligence agencies 

who are in the business. 

And so I guess my question is, after listening to Under Secretary 

Cohen for 2 hours, I came away with a little concern that maybe 

he is not, and Treasury is not at the table as much as he indicated 

that it was. 

And I wanted to start with you, Dr. Johnston, and then maybe 

get comments from the other two witnesses. 

But my question is this. Secretary Cohen indicated that he was, 

I think in his words, at the table. There were a lot of questions he 

couldn’t answer, and perhaps that is the nature of an open meeting 

like this in an unclassified setting. 

But I do wonder whether or not he is getting the cooperation and 

the precise information about these targets from intelligence agencies and from the Defense Department and is he getting what—is 

Treasury getting what it needs to be able to make these decisions 

and impose these sanctions? 

And then, secondly, if not, what can be done to make sure that 

Treasury is at the table? Because I think we all agree, those of us 

52 

sitting here today, that stopping the financing is extremely important. 

So, Dr. Johnston, if I could start with you? 

Mr. JOHNSTON. On the first part of the question, I think it is 

hard to say the extent to which he is at the table for any given decision. 

But my sense is that the Treasury has done extremely well in 

working with interagency partners, to include the Department of 

Defense and various parts of the intelligence community, to get the 

capabilities that it needs to make the impact that is desired for policy outcome. 

Mr. HURT. Why do you say that, though? Can you just explain 

that? 

Mr. JOHNSTON. Since 9/11 and the realization that terrorist financing really matters, and that to disrupt terrorist networks and 

terrorist attacks, going after their financing is really a useful instrument to have among the various tools that we have. 

Treasury couldn’t do it alone. It didn’t have the capacity. And it 

has worked successfully with interagency partners in Iraq, among 

other places, during the second war. 

But I think that for the purposes of the current Treasury effort, 

it is still a young effort, and I think that, really, their programs 

and approach is kind of still developing. 

And I think that we will see more as the policy becomes clearer 

and kind of the overall posture and footprint that the Administration wants to have becomes clearer. Treasury’s role and the— 

Mr. HURT. Okay. Thank you. 

Just briefly—we only have a few seconds—but the question is: 

Are they getting enough information? Are they at the table? And, 

if not, how do we—what can we do, as a Congress, to help that out? 

Mr. LEVITT. I think the portion where Mr. Cohen was saying that 

he was at the table, but he couldn’t answer the questions, was on 

military strikes. And I don’t think they are at the meeting where 

specific targets are being selected. 

But not only are they at the meeting at the senior level, his level, 

at the Assistant Secretary level, but Treasury now has its own office of intelligence and analysis, which I once helped run. And because of that, they are not only getting information from, they are 

actually part of, the intelligence community in every way. 

So part of the problem is not that there has not been enough effort, it is not that there are not enough people at the table, but 

that developing the intelligence takes time. It is an excellent question as to why we are only developing that intelligence now. That 

is a very strong question. 

But the interagency structure, the way people from other agencies and departments are located at Treasury and vice versa means 

that they are at the table. 

Mr. HURT. Thank you, Mr. Chairman. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair recognizes the gentleman from Pennsylvania, the vice 

chairman of our Oversight and Investigations Subcommittee, Mr. 

Fitzpatrick. 

Mr. FITZPATRICK. I thank the chairman. 

53 

And I have a question for Dr. Levitt or perhaps any of the witnesses who might want to answer about the mobile refineries. 

What do they look like? More importantly, where are they coming from? Who is manufacturing them? And how are they delivered 

to the regions where the oil fields exist? 

Mr. LEVITT. I would love to know that, too. 

I am not an oil expert, so I can’t answer this in any detail. But 

I think it is quite clear that these were there already. It is not 

something that suddenly has been imported into Iraq from someplace. This is a capability they have had. 

Apparently, they are relatively low tech. So you put—it is a very 

small refinery put in the back of a truck. But more than that I 

don’t think. 

Mr. FITZPATRICK. Do you believe they are manufactured in that 

region or are they being imported from somewhere else? 

Mr. LEVITT. My understanding is that this is something that is 

slapped together. And so it is being put together by people right 

there. I don’t get the sense that this is something that is being imported. 

And to the extent that I am wrong, that this is something more 

sophisticated that needs to be imported, my sense is that this happened some time ago. This is stuff that has already been there in 

Iraq. 

Mr. FITZPATRICK. And then, once the oil is refined, you have testified that the Assad Regime is purchasing some of that oil. 

Some of it is being smuggled into the southern region of Turkey, 

where you said the price of gasoline is higher than we would expect 

here or you would see in Europe. If you are purchasing barrels of 

oil at $30 or so a barrel, you have reason to know that this may 

be illicit oil. 

Are we doing enough at Treasury, the United States, our intelligence agencies, to determine who the middlemen are that are purchasing oil at $30 a barrel and then make sure that we are following that money into what accounts? 

Mr. LEVITT. That is exactly what Treasury and others are doing, 

identifying those middlemen. That is, I think, what Under Secretary Cohen was referring to, and it is what I discussed more explicitly in my testimony. 

I think there is also a significant more diplomatic push to get the 

Turks to do more in southern Turkey. People know that this is illicit oil. They really don’t care. 

Oil costs so much there, people are—have been for years putting 

basically garden hoses across to Orontes River and just air-pumping oil from the Syrian side to the Turkish side. There is lots of 

ingenious ways that this is being moved and there is a market for 

it. 

There are lots of ingenious ways that this is being moved and 

there is a market for it. 

Mr. GURULE. One of the concerns that I have or the banks that 

are helping move the proceeds, the profits from the sale of the ISIS 

oil, if in fact ISIS is making between $1 million to $2 million a day, 

that money is not being transported in shoeboxes and placed under 

somebody’s mattress. 

54 

That money has to be entering into the financial system at some 

point, and I think we need to do a better job. The Department of 

Justice—the Department of the Treasury, needs to be doing a better job or intensify its efforts, let me say that, to identify the financial institutions that are knowingly receiving and transferring 

ISIS-related funds. 

Mr. FITZPATRICK. So where are the gaps in the system then? 

Mr. GURULE. One of the gaps could be the fact that some of that 

money may be going to Iraqi banks. I think principally foreign 

banks, and of course, the United States’ lack of control over foreign 

banks, banks in Qatar, banks in Kuwait, banks in Iraq. I think 

that is the difficulty. But at the same time that those banks have 

U.S. branches in the United States, we do have control over those. 

So there would be an opportunity where we could exert greater leverage with respect to the U.S. branches to ensure that the foreign 

banks aren’t being used to move ISIS, oil money. 

Mr. FITZPATRICK. Nothing further, thank you. 

Chairman HENSARLING. The gentleman yields back. 

The last Member to be recognized will be the gentleman from 

North Carolina, Mr. Pittenger. 

Mr. PITTENGER. Thank you, Mr. Chairman. 

Professor Gurule, in your testimony you stated that there were 

only two banks which had violated our Bank Secrecy Act, the Arab 

Bank in Jordan, and the Arab Bank in New York, if I heard correctly, and that is just over the last 10 years. Is that as a result 

of our lack of capacity to track these folks, or are there others who 

are complicit that we haven’t been successful yet in tracking? 

Mr. GURULE. That is the question. The question is why is it the 

FinCEN I think has done a fairly good job in terms of sanctioning 

banks that do not have compliant AML, anti-money-laundering regimes, that comply with the BSA. 

But with respect to counter-terrorist financing, it doesn’t seem to 

be a priority, and I wonder, is that because of a lack of resources, 

personnel within FinCEN? Maybe there are just not enough bodies 

to be engaged in oversight with respect to whether these banks 

pose a high risk for terrorist financing, or perhaps the weak spot 

may be with the other Federal regulators; that the other Federal 

regulators aren’t focusing and emphasizing on whether or not these 

banks are in compliance with the counter-terrorist financing regulations under the BSA. 

But it seems to me that it is unacceptable that we could have 

only two banks, where if you look at the actual orders issued by 

FinCEN, the only two banks where I could find references in those 

orders to threats regarding terrorist financing. 

Mr. PITTENGER. Yes, sir. In that light, as we look at our partners 

throughout the world, we have relationships with them, many of 

whom we given the tens, and even hundreds of millions of dollars 

of foreign aid, it is always of concern to me of how we are not honored by our relationships with our partners, and particularly in 

this situation that is so critical for our national security and for 

theirs as well. 

To what extent, what would you advise us as a Congress in going 

forward in how we could put greater pressure on these respective 

55 

countries and their banks to be in compliance with our BSA requirements? 

Mr. GURULE. One point that I haven’t made in my testimony 

today, has to do with the Antiterrorism Act. And it does have a 

civil provision that authorizes private litigants to bring civil tort 

actions against individuals who commit actions of international terrorism. And I think that statute could be enhanced through amendment to make it a more effective remedy for victims of terrorism 

including people and entities that aid and abet terrorists. For example, banks that knowingly provide financial services and transfer money to suspected terrorists. 

There is a problem. There are several problems with the current 

legislation as it stands. One, it doesn’t explicitly authorize aiding 

and abetting, and if we are going after the banks, they are really 

the aiders and abetters. So the plaintiffs are left with the dilemma 

of having to prove that the bank is primarily responsible for the 

acts of international terrorism through secondary action by being 

an aider and abetter with respect to the acts of terrorists. 

So I think in that way we could unleash the plaintiffs, we could 

unleash an army of litigants to go after banks and charities and 

other entities that are facilitating the financing of terrorism. And 

again, I think from an equitable standpoint, it is the right thing 

to do. These are victims. These are the surviving family members 

of victims of violent actions of terrorism. 

Mr. PITTENGER. Thank you, I yield back. 

Chairman HENSARLING. The gentleman yields back. 

There are no other Members in the queue, so I want to thank 

our witnesses for their testimony today. 

The Chair notes that some Members may have additional questions for this panel, which they may wish to submit in writing. 

Without objection, the hearing record will remain open for 5 legislative days for Members to submit written questions to these witnesses and to place their responses in the record. Also, without objection, Members will have 5 legislative days to submit extraneous 

materials to the Chair for inclusion in the record. 

This hearing stands adjourned. 

[Whereupon, at 1:07 p.m., the hearing was adjourned.] 

(57) 

A P P E N D I X 

November 13, 2014 

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