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HELPING THE DEVELOPING WORLD 

FIGHT TERROR FINANCE 

HEARING 

BEFORE THE

TASK FORCE TO INVESTIGATE 

TERRORISM FINANCING 

OF THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

SECOND SESSION 

MARCH 1, 2016 

Printed for the use of the Committee on Financial Services 

Serial No. 114–77 

( 

(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

JEB HENSARLING, Texas, Chairman 

PATRICK T. MCHENRY, North Carolina, 

Vice Chairman 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

SCOTT GARRETT, New Jersey 

RANDY NEUGEBAUER, Texas 

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 

KEITH J. ROTHFUS, Pennsylvania 

LUKE MESSER, Indiana 

DAVID SCHWEIKERT, Arizona 

FRANK GUINTA, New Hampshire 

SCOTT TIPTON, Colorado 

ROGER WILLIAMS, Texas 

BRUCE POLIQUIN, Maine 

MIA LOVE, Utah 

FRENCH HILL, Arkansas 

TOM EMMER, Minnesota 

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 

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 

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 

JUAN VARGAS, California 

SHANNON MCGAHN, Staff Director 

JAMES H. CLINGER, Chief Counsel 

(III) 

TASK FORCE TO INVESTIGATE TERRORISM FINANCING

MICHAEL G. FITZPATRICK, Pennsylvania, Chairman 

ROBERT PITTENGER, North Carolina, Vice 

Chairman 

PETER T. KING, New York 

STEVE STIVERS, Ohio 

DENNIS A. ROSS, Florida 

ANN WAGNER, Missouri 

ANDY BARR, Kentucky 

KEITH J. ROTHFUS, Pennsylvania 

DAVID SCHWEIKERT, Arizona 

ROGER WILLIAMS, Texas 

BRUCE POLIQUIN, Maine 

FRENCH HILL, Arkansas 

STEPHEN F. LYNCH, Massachusetts, 

Ranking Member 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

AL GREEN, Texas 

KEITH ELLISON, Minnesota 

JAMES A. HIMES, Connecticut 

BILL FOSTER, Illinois 

DANIEL T. KILDEE, Michigan 

KYRSTEN SINEMA, Arizona 

(V) 

C O N T E N T S 

Page 

Hearing held on: 

March 1, 2016 ................................................................................................... 1 

Appendix: 

March 1, 2016 ................................................................................................... 43 

WITNESSES 

TUESDAY, MARCH 1, 2016 

Adams, James W., former Vice President, East Asia and Pacific Region, 

World Bank ........................................................................................................... 10 

Kimmitt, Hon. Robert M., Senior International Counsel, WilmerHale ............... 6 

Lowery, Hon. Clay, Vice President, Rock Creek Global Advisors; and Visiting 

Fellow, Center for Global Development ............................................................. 8 

Wechsler, William F., Senior Fellow, Center for American Progress .................. 12 

APPENDIX 

Prepared statements: 

Adams, James W. ............................................................................................. 44 

Kimmitt, Hon. Robert M. ................................................................................. 47 

Lowery, Hon. Clay ............................................................................................ 52 

Wechsler, William F. ........................................................................................ 59 

(1) 

HELPING THE DEVELOPING WORLD 

FIGHT TERROR FINANCE 

Tuesday, March 1, 2016 

U.S. HOUSE OF REPRESENTATIVES, 

TASK FORCE TO INVESTIGATE

TERRORISM FINANCING, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The task force met, pursuant to notice, at 2:39 p.m., in room 

2128, Rayburn House Office Building, Hon. Michael G. Fitzpatrick 

[chairman of the task force] presiding. 

Members present: Representatives Fitzpatrick, Pittenger, Ross, 

Wagner, Barr, Rothfus, Schweikert, Williams, Poliquin; Lynch, 

Sherman, Ellison, Himes, and Sinema. 

Ex officio present: Representative Waters. 

Chairman FITZPATRICK. The Task Force to Investigate Terrorism 

Financing will come to order. The title of today’s task force hearing 

is, ‘‘Helping the Developing World Fight Terror Finance.’’ 

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

the task force at any time. 

Also, without objection, members of the full Financial Services 

Committee who are not members of the task force may participate 

in today’s hearing for the purposes of making an opening statement 

and questioning the witnesses. 

The Chair now recognizes himself for 4 minutes for an opening 

statement. 

Thank you, everyone, for joining us today for the seventh hearing 

in the House Financial Services Committee’s Task Force to Investigate Terrorism Financing. Today’s hearing is entitled, ‘‘Helping 

the Developing World Fight Terror Finance.’’ 

I would like to again thank Chairman Hensarling and Ranking 

Member Waters, as well as my colleagues here, for their unwavering support as we continue to investigate the threat of terror finance. 

Our last hearing focused on trade-based money laundering and 

the international cooperation which is required to effectively combat it. The testimony from that hearing revealed that the developing world is often a target for trade-based money laundering and 

other illicit forms of value transfers due to the lack of effective government institutions. 

Throughout the lifetime of this task force, one fact has remained 

consistent: Combating terror finance is and must continue to be an 

international effort. The countries of today’s world are more interVerDate Nov 24 2008 17:13 Jun 22, 2017 Jkt 023720 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 K:\DOCS\23720.TXT TERI
2 

connected than they have ever been before, especially when focusing on the financial system and the global trade system. 

With this much integration, the weakest link in the system becomes the target for exploitation by criminal organizations and terrorist groups. Many nations in the developing world simply do not 

have the financial means or the technical knowledge to establish 

institutions to combat these threats. This puts them in a situation 

where they are reliant on help from the international community. 

However, there is no central coordinating body mandated to facilitate anti-money laundering and combating the financing of terrorism capacity-building efforts on a global level through training 

and technical assistance. With no plan to guide the international 

community, many countries and NGOs act on their own. 

Within the United States there are several agencies and offices 

charged with providing bilateral AML and combating the financing 

of terrorism technical assistance. According to the United States 

Department of State in a 2015 report to Congress on money laundering and financial crimes, the United States provided this type 

of support to more than 100 countries in 2014. These countries received technical assistance to improve the quality of their financial 

intelligence units, customs enforcement, and law enforcement and 

prosecutorial capabilities. 

I believe that today’s hearing, with this expert panel of witnesses 

before us, will help illustrate how the international community is 

addressing this issue, how efficient the United States is when delivering technical assistance, and how coordination between United 

States agencies and our international partners can be improved. 

At this time, I would like to recognize this task force’s ranking 

member, my colleague Mr. Lynch from Massachusetts. He has been 

a valuable asset and trusted bipartisan partner from the start of 

this investigation. 

I now recognize the ranking member of the task force, Mr. Lynch 

from Massachusetts, for an opening statement. 

Mr. LYNCH. Thank you, Mr. Chairman. Thanks for your kind 

words. 

I want to thank Ranking Member Waters and Chairman Hensarling, as well as Vice Chairman Pittenger, for holding today’s 

hearing. 

I also want to thank our witnesses for your willingness to help 

this task force with its important work. 

Today’s hearing will focus on how the United States can 

strengthen our institutional capacity to combat terrorist financing 

in developing nations. It is a special problem, a unique challenge, 

I think, for the developing world. 

Weak financial institutions in the developing world are breeding 

grounds for corruption that can be exploited by terrorists looking 

for innovative ways to move funds and to finance terror. A lack of 

strong leadership, and ineffective institutions in developing countries, have fueled the rise of ISIS and Boko Haram and other terrorist groups. 

I am pleased that we are holding this timely hearing to examine 

what can be done to combat terrorist financing in the developing 

world. 

3 

Just last week, the Wall Street Journal reported that cash is 

traveling in and out of ISIS-controlled territories on various routes 

that run through Turkey and Jordan, among others. One of these 

routes starts near Istanbul’s Grand Bazaar and ends in the ISIScontrolled city of Mosul, Iraq. Another route connects Amman, Jordan, with ISIS-controlled areas in Iraq’s Anbar Province. Yet another route connects southern Turkey near Gaziantep and Kilis 

with Raqqah, Syria, ISIS’ administrative capital. 

We have to work with Turkey and Jordan to cut off these funding routes within their borders. We must also be willing to provide 

technical assistance to help them shut down the many companies 

that recently founded within their borders solely to move money for 

ISIS. 

In Iraq and Syria, poor leadership, a week economy, and inadequate infrastructure helped create the political and social environment that fostered the growth of ISIS. We need a holistic, longterm approach when determining what an effective regime to combat terrorism financing will look like in that region. 

According to the United States Department of State, the support 

provided to combat money laundering and terrorist financing to 

over 100 countries in 2014, both bilaterally and with other donor 

nations and international organizations, has been extremely helpful. 

I am pleased with the U.S. leadership in this field, but it is important for us to consider how to prioritize where this technical assistance is placed and how to effectively implement our efforts. If 

we are providing assistance to countries that do not want to make 

real progress to combat terrorist financing within their borders, our 

efforts will ultimately be futile. 

I look forward to hearing the testimony from our witnesses so we 

can examine the most effective models to help the developing 

world, and I would like to yield my remaining minute-and-a-half to 

the ranking member of the full Financial Services Committee, Ms. 

Waters from California. 

Ms. WATERS. Thank you very much. 

I would like to thank our witnesses for joining us here today, as 

well as Chairman Fitzpatrick and Ranking Member Lynch for holding this hearing that recognizes the need for strong U.S. engagement in the world if we are to solve some of the most difficult problems we face in a world that is increasingly interconnected. 

Active U.S. global engagement is critical to our own national security and economic interests. We must remain vigilant in understanding the depth and dimension of the threats we face and the 

challenges we must meet in order to uncover the identities and intentions of fanatics who are plotting violence against innocent people. 

In a global system, everyone’s institutions and practices are relevant, which is why U.S. efforts to curtail the financing of terrorism are impeded in many ways by a lack of institutional capacity in many developing countries. Effective international efforts will 

require strong U.S. leadership over the long term as well as, I believe, an international body with the mandate and the expertise to 

coordinate efforts to combat a problem that, by its very nature, requires a global response. 

4 

I thank you, and I yield back the balance of my time. 

Chairman FITZPATRICK. I now recognize the vice chairman of the 

task force, Mr. Pittenger of North Carolina, for 1 minute. 

Mr. PITTENGER. Thank you, Mr. Chairman, and Ranking Member 

Lynch. 

And I certainly thank Chairman Hensarling and Ranking Member Waters for their leadership, as well. 

Thank you for your continued dedication on this important assignment to track terrorism financing. 

Technical assistance is an important concept that attempts to integrate developing countries into the legitimate network of global 

financial institutions. When implemented properly, in theory technical assistance can open markets in developing countries, offering 

new investment opportunities and generating economic growth. 

This hearing is an important step for this task force to determine 

the effectiveness of technical assistance in developing countries, especially with regard to staving off terrorism financing. It is essential that this task force learn what works, what doesn’t work, and 

what Congress can do to improve this initiative. 

For example, I am interested in exploring whether or not technical assistance for economic crimes could be expanded or merged 

with resources, including asset forfeitures and other foreign aid we 

have provided to so many countries around the world. 

In Turkey, the United States has provided an average $10 million a year for the past decade in foreign aid. This is in addition 

to the vast amount of foreign military sales we provide to Turkey. 

What if some of these dollars and programs came tied to combating 

economic crimes in Turkey and creating additional accountability 

regarding terror financing? 

Thank you, and I yield back. 

Chairman FITZPATRICK. For the time remaining, we recognize the 

gentlelady from Arizona, Ms. Sinema, for 1 minute. 

Ms. SINEMA. Thank you, Chairman Fitzpatrick and Ranking 

Member Lynch, Ranking Member Waters, and Mr. Pittenger. 

As we continue to work to build our global capacity to combat 

terror financing and money laundering, we should consider and 

evaluate U.S. policy responses to determine whether our counterterrorist financing tools are capable of diminishing terrorists’ everevolving source of funds. We must ensure that our efforts to extend 

technical assistance and capacity-building are effective and sufficiently resourced and that Congress is proactive in providing any 

new legislative authorities required. 

What are we doing here and internationally to develop and hone 

our ability to quickly identify and eliminate key revenue sources 

for terrorists? What changes do we need to make in U.S. policy and 

law to ensure that we are leading this effort and have a standardized process, not an ad hoc response to terrorists as they become 

a threat? 

I look forward to hearing more from our witnesses today about 

how we can improve our efforts to prevent the financing of terrorism in developing countries and around the world. 

Thank you, and I yield back. 

Chairman FITZPATRICK. We now welcome our witnesses. 

5 

Ambassador Robert Kimmitt currently serves as senior international counsel at WilmerHale. Ambassador Kimmitt has 40 years 

of experience working at senior levels of the Federal Government. 

Most notably, he served as Deputy Secretary of the United States 

Treasury from 2005 until 2009. 

Prior to joining WilmerHale in 1997, Mr. Kimmitt was also our 

ambassador to Germany. He has held several other distinct titles, 

including Under Secretary of State for Political Affairs, General 

Counsel to the Treasury Department, and Executive Secretary and 

General Counsel of the National Security Council at the White 

House. 

Ambassador Kimmitt received his law degree from Georgetown 

University. 

Mr. Clay Lowery is vice president at Rock Creek Global Advisors 

and is also a visiting follow at the Center for Global Development. 

Mr. Lowery brings more than 15 years of experience to the United 

States Government, primarily at the United States Treasury, 

where he served as Assistant Secretary for International Affairs. 

Mr. Lowery was also one of the original staff of the Millennium 

Challenge Corporation in 2004, and he helped drive its formation 

while serving at the National Security Council. 

Mr. Lowery is a graduate of the University of Virginia and received a Master’s of Science degree from the London School of Economics and Political Science. 

Mr. James Adams is a former vice president for the East Asia 

and Pacific Region at the World Bank. Mr. Adams first joined the 

World Bank in 1974 and he has held a variety of positions there, 

including vice president and head of network, operations policy, 

and country services. Before joining the World Bank, Mr. Adams 

worked as a loan officer for Merchants Bank in Syracuse, New 

York, and with General Agreement on Tariffs and Trade in Geneva, Switzerland. 

Mr. Adams studied at Colgate University and holds an MBA 

from Princeton University. 

Mr. William Wechsler is a senior fellow at the Center for American Progress. His most recent position in government was Deputy 

Assistant Secretary for Defense for Special Operations in Combatting Terrorism. Mr. Wechsler previously served as Deputy Assistant Secretary of Defense for Counternarcotics and Global Threats, 

Special Advisor to the Treasury Secretary, Director for 

Transnational Threats on the staff of the National Security Council 

at the White House, and Special Assistant to the Chairman of the 

Joint Chiefs of Staff at the Pentagon. 

Mr. Wechsler is a graduate of Cornell University and received a 

master’s degree from Colombia University’s School of International 

and Public Affairs. 

The witnesses will each now be recognized for 5 minutes to give 

an oral presentation of their written testimony. And without objection, the witnesses’ written statements will be made a part of the 

record. 

Once the witnesses have finished presenting their testimony, 

each member of the task force will have 5 minutes to ask questions 

of the witnesses. 

6 

On your table are three lights: green; yellow; and read. Yellow 

means that you have 1 minute remaining. Red obviously means 

you are out of time. 

With that, Ambassador Kimmitt, you are recognized for 5 minutes. 

STATEMENT OF THE HONORABLE ROBERT M. KIMMITT, 

SENIOR INTERNATIONAL COUNSEL, WILMERHALE 

Mr. KIMMITT. Thank you, Mr. Chairman, Mr. Vice Chairman, 

Ranking Member Lynch, and members of the task force. Thank you 

for this invitation to appear and, moreover, for your in-depth look 

at this important topic. 

On a personal note, it is a particular pleasure to appear before 

Vice Chairman Pittenger, with whom I welcomed back our hostages 

from Iran when they arrived in Landstuhl, Germany, in January, 

and also Ranking Member Lynch, with whom I attended the Munich Security Conference last month. 

You have heard from many experts in this field, and my fellow 

panelists today will contribute significantly to the depth of your efforts. I thought that I might make a few broader observations to 

start our discussion. 

First, ISIS and other enemies who use illicit financial flows to 

support terrorism against the United States and its allies are 

smart, creative, and adaptable. The world’s financial system, once 

entered, provides a borderless, near-seamless opportunity for our 

enemies to use the system to fund insidious operations designed to 

inflict near-and long-term harm on the United States. We must, 

therefore, be equally smart, creative, adaptable, and especially 

well-coordinated in protecting that system and defending it against 

abuses. 

Second, in 40 years of working at senior levels of government, I 

have learned that the vast majority of high-level attention to an 

issue goes into the passage of legislation or the making of a policy 

decision. Far less attention is paid by principals to the crucial task 

of implementation of laws and policies, and that is why your bipartisan, detailed look at terrorism finance is so unusual and so important. 

Third, we will succeed in our efforts to impede terrorism and 

other illicit financial flows only with a whole-of-governments approach. I stress ‘‘governments,’’ plural. 

Let me use the remainder of my brief statement to make some 

observations and recommendations on point three, a whole-of-governments approach. 

First, host governments with whom we work to provide technical 

assistance and other support in the fight against illicit finance 

must be full partners in the effort. If they believe that the international community is simply and paternalistically imposing a program on them, that program will never have sustained success. 

And one size does not fit all. Each country program will have a 

common core, but will also have unique local features. That is 

where technical assistance is so important. 

U.S. leadership is vitally necessary but never entirely sufficient. 

In addition to working with host countries, we must also enlist 

7 

friends, allies, and even competitors like Russia and China, to join 

us in this fight. 

Where possible, a U.N. Security Council resolution should be 

passed to lay the most effective international foundation for common efforts, since both countries and international organizations 

like the World Bank more quickly allocate priority and resources 

to U.N.-mandated missions. 

Where a U.N. resolution cannot be agreed to, we should look to 

negotiate international compacts, as we did in Afghanistan and 

Iraq, whereby post-conflict and other fragile countries receive assistance but only in return for meaningful commitments on their 

part including, crucially, assigning priority to safeguarding their financial systems from abuse. 

Third, for the United States to be the leader it must be, we need 

to ensure that we work as one government in this existential fight 

against terrorists and their financiers. 

Our national security today is as much about commerce and finance as it is about diplomatic and military capabilities, and each 

of the critical agencies—State, Treasury, Defense, Justice, and 

DHS—must work closely together on an interagency basis under 

the direction of the National Security Council and with the support 

of the intelligence community. 

The interagency meetings at which counterterrorism efforts are 

coordinated and effected are not just in the White House Situation 

Room and elsewhere in Washington; they also take place at embassies and military commands around the world. 

We need to ensure, then, that not only agencies in Washington 

but also their overseas posts have individuals identified to ensure 

counterterrorism efforts are a priority both at home and abroad. 

When Clay Lowery and I were colleagues in government, we increased from 3 to 24 the number of U.S. embassies that had been 

assigned Treasury attaches. We also moved Treasury officers to 

military commands and brought military officers into Treasury to 

support the counter-terrorism finance effort. 

One question you should ask as your effort continues is whether, 

in developing countries of particular concern, Treasury has representation at the U.S. embassy in that country. If not, who in the 

embassy has the lead on countering terrorism finance and how 

often does she or he meet with the ambassador and country team 

to ensure both priority attention and interagency coordination? 

One last point: It is very important to have a close partnership 

with the private sector in seeking to make this whole-of-governments approach effective. As we work with U.S. and overseas financial institutions, let us not forget the law of unintended consequences. If we so harshly regulate banks that they withdraw 

services from post-conflict and other developing countries that are 

ideal breeding grounds for terrorists and their financiers, we will 

drive the work of these financiers into the shadows—unregulated 

and informal financing networks that are difficult to both track and 

disrupt. 

We must expect banks to be held to high standards in this area, 

but not set the bar so impossibly high that the only rational business decision is to withdraw. In addition to feeding the parlous economic conditions that give rise to terrorists, withdrawal of financial 

8 

services, sometimes called de-risking, will make it even harder to 

succeed in the effort you are so diligently pursuing to fight terror 

finance. 

Thank you for this opportunity. I look forward to our conversation. 

[The prepared statement of Ambassador Kimmitt can be found 

on page 47 of the appendix.] 

Chairman FITZPATRICK. Mr. Lowery, you are now recognized for 

5 minutes. 

STATEMENT OF THE HONORABLE CLAY LOWERY, VICE PRESIDENT, ROCK CREEK GLOBAL ADVISORS; AND VISITING FELLOW, CENTER FOR GLOBAL DEVELOPMENT 

Mr. LOWERY. Chairman Fitzpatrick, Ranking Member Lynch, 

and members of the task force, thank you very much for this opportunity. 

Just to the last point that Ambassador Kimmitt just mentioned, 

in 2015 I chaired an international working group for the Center for 

Global Development to analyze whether the implementation and 

enforcement of anti-money laundering and countering the financing 

of terrorism policies was impacting poor countries. Our conclusion 

was a clear ‘‘yes,’’ and in ways that unfortunately could undermine 

the very objectives that these policies were put in place to prevent 

in the first place. 

A very important policy goal of the United States is to prevent 

finance from getting into the hands of bad actors, as we all know. 

A different but also very important policy goal of the United States 

is to allow finance to flow in the most efficient and competitive 

manner possible. 

These two legitimate policy objectives have come into conflict, 

particularly in poorer countries around the world. Those most affected are likely to include the families of migrant workers; small 

businesses that need access to working capital or trade finance; 

and recipients of lifesaving aid in active-conflict, post-conflict, or 

post-disaster situations. 

Under the current AML/CFT approach, banks are asked to prevent sanctions violations and assess and mitigate money laundering and terrorist financing risks, or face penalties. However, 

regulators sometimes send mixed signals about how banks and 

other entities should manage these types of risks, and the penalties 

that we have seen have increased to the point that maybe taking 

zero risk may be the best option for these institutions. 

For instance, in the 5-year period from 2010 to 2014, the number 

of AML/CFT fines more than doubled while the amount of these 

fines went from less than $1 billion in total fines to over $15 billion. 

The imposition of heavy fines on some large banks for egregious 

contraventions of AML/CFT and sanctions laws may very well be 

legitimate, but it is also clear that both the number and amount 

of fines could be chilling on many financial institutions that are 

doing their very best to adhere to the law. 

In essence, financial institutions are, as the Ambassador said, derisking by ceasing, in a wholesale fashion, to engage in activities 

that are seen to be higher-risk, rather than judging the risks of a 

9 

client on a case-by-case basis, creating yet another obstacle for poverty alleviation and economic growth, especially in poor countries. 

While this is not systemic, it is having an effect on things like 

remittance flows and correspondent banking relationships. 

Let’s just take remittances. On a global basis, remittance flows 

to developing countries have risen from being roughly the same as 

official development assistance back in 2000 to now today being 4 

times the amount of official development assistance. Obviously, 

they are very important. 

Yet, despite a high level of commitment by G20 leaders in 2009 

as well as substantial developments in payments technology, remittance costs have barely moved down over the past 5 years. Why is 

this? 

While data does not allow us to isolate the cause of the failure 

as being AML/CFT policies per se, the results from both surveys 

and anecdotal evidence suggest that they are definitely playing a 

role. 

A recent survey by the World Bank has indicated that money 

transfer companies—remittance providers—across a large number 

of countries are reporting trouble obtaining or retaining bank account access, largely because they were considered to be high-risk 

clients. 

The potential consequences of making remittance flows more difficult and expensive are worthy of our concern. Either people who 

depend on these financial flows for their everyday livelihood will 

suffer, or we will see more and more of these funds chased into the 

shadows of the financial system—in other words, undermining the 

very goals that we set for AML/CFT policy in the first place. 

There is no silver bullet to solving this dilemma, but there are 

areas where we can improve the situation. Our group came up with 

five. 

First, as you have mentioned, is to work in poor countries to assist them with supervision, improving compliance, and meeting 

best practice standards. Second, to assess much more rigorously 

the impact of AML/CFT and sanctions enforcement on poor countries. 

Third, to generate and distribute much better data; the data is 

very bad right now. 

Fourth, to clarify and strengthen the risk-based approach in 

some of the international standard—best standards. 

And fifth, to facilitate the know-your-customer issues and lower 

compliance costs. 

On a positive development, in just the last few weeks we have 

seen international financial officials from the G20, the Financial 

Stability Board, the Financial Action Task Force, and the IMF all 

taking steps to make progress in these areas. 

The United States is a leading player in all of these groups and 

is a leading player on the AML/CFT issues, and so I commend this 

committee for addressing this issue front-on. And so I put forward 

a few suggestions for Congress you can follow up in my testimony. 

In order to help developing countries fight terror finance, technical assistance is critical. But we also need to understand the 

problem better; we need to clarify terms and rules; and we need to 

try to lower the cost of compliance. 

10 

In these ways, I think we will truly be making—working with developing countries to help us all meet the different policy goals and 

not be in conflict with each other. 

Thank you very much. 

[The prepared statement of Mr. Lowery can be found on page 52 

of the appendix.] 

Chairman FITZPATRICK. Thank you. 

Mr. Adams, you are recognized for 5 minutes. 

STATEMENT OF JAMES W. ADAMS, FORMER VICE PRESIDENT, 

EAST ASIA AND PACIFIC REGION, WORLD BANK 

Mr. ADAMS. Chairman Fitzpatrick, Ranking Member Lynch, and 

members of the task force, the issue of addressing illicit financial 

flows is understandably receiving increased attention in today’s 

world. The rapid and accelerating growth of international trade has 

involved dramatic increases in financial flows, particularly in developing countries. 

As the chairman noted, it is perhaps inevitable that over time, 

the global financial system would increasingly become a target for 

the full range of criminal and terrorist actors. Moreover, given 

their weaker institutional capacities and systems, it is perhaps inevitable that developing countries, particularly lower-income developing countries, would become preferred targets for criminal and 

terrorist actors. 

Gaps in banking supervision capacities and weak technical skills 

make these countries attractive targets. Moreover, governance and 

corruption issues within government bureaucracies can often undermine even the efforts of honest governments in these areas. 

From a development standpoint, the standard response to this 

situation has been to provide technical assistance—the provision of 

technical experts to fill capacity gaps and providing funds to help 

developing countries strengthen their financial systems and address underlying capacity issues. Indeed, over time technical assistance has typically involved approximately 15 percent of total donor 

commitments. 

Given the substantial amount of funding involved, I wish I could 

argue that the development record of technical assistance has been 

sterling; unfortunately, I cannot. While there are many success stories, the fact is, overall, technical assistance has not been an area 

of great success for the development community. 

There are many problems underlying this performance, but a 

quick summary of common issues might be helpful. Often, the recipient government does not provide an appropriate environment 

for either expert staff or the long-term capacity development programs. 

Common problems involve resentment of higher salaries of expert staff, the failure to assign local staff to work with experts, the 

absence of comprehensive ministry plans to ensure that local staff 

training programs are put in place, and sometimes the simple refusal to hire the needed expertise. 

Donor behavior presents problems as well. Coordination is problematic. Experts from different countries will compete for attention 

of senior officials and give conflicting advice; project-based funding 

will frequently end before adequate capacity is established; key 

11 

government staff are poached by donors offering better terms than 

the government does; and often donors push for experts that recipient governments do not feel are required. 

Therefore, while I fully agree that a concerted effort on building 

expertise and institutional capacity to address the challenges of illicit financial flows is a priority, I would at the same time argue 

that approaching this in a business-as-usual mode is unlikely to 

have effective impact. 

In a recent presentation I made on technical assistance, I made 

an initial attempt to outline some steps that can be taken to effectively meet this challenge. I began with developing a number of 

specific steps that need to be taken by recipient governments. This 

effort basically revolves on the need to ensure that governments 

are not simply giving lip service to the issue but instead are firmly 

committed to achieving real capacity improvement. 

A number of suggestions: an explicit long-range plan that would 

set out levels of expertise required and detail the needed training 

to ensure local staff would be an important step that recipient governments could take; an explicit commitment of the local staff required to both work—to work with international experts and to 

eventually replace those experts; and a budgetary commitment of 

the local counterpart resources needed to support all of the activities that are being done to put in place effective capacity. 

At the same time, donors, including the United States, need to 

get their acts together. I see a number of important changes that 

could be made. 

First, a commitment to fully fund recipients’ proposed long-term 

programs of export support and local training. I would note that 

this will often take longer than the typical 5 years of project support that most donors provide. 

Second, an agreement among donors on funding a single T.A. 

program with the assurance that all donor support would be subject to the discipline of an agreed program. The historical practice 

of each donor developing individual programs should cease, and ongoing programs could be folded into a unified program. It is unfortunate that Paris agreements on better aid coordination have not 

been a focus of T.A. programs, and the lack of coordination remains 

a constraint that could be addressed through a unified approach. 

I think a single donor should be given leadership for this effort 

in individual countries. That donor could change across countries. 

I think as scholarship programs and training programs will be a 

key resource, these should be consolidated and treated as a single 

resource. 

I am a believer in the increased use of twinning. The reference 

was made to the very good program that Treasury put in place that 

I saw in some African countries, and I think having people who are 

involved in these issues from developed countries can be an asset. 

And finally, I think some consortium of a limited number of 

donor and recipient governments could be established to oversee 

this program and make sure it remains effective and has the impact intended. 

In conclusion, I would note that none of these actions are that 

hard, but unless a changed approach is taken, I remain skeptical 

that an important impact can be had on this issue. 

12 

I think that the issue of building capacity to deal with terrorist 

financing, in fact, will offer a unique opportunity to attempt a different approach to technical assistance. It has the advantage that 

it is important to both donor and recipient governments. No country can afford to be locked out of the global financial system. 

In addition, considerable capacity exists in developing country 

governments and banks to help deal with this issue, and the costs 

of addressing this issue pales in comparison with the risks of not 

addressing it. 

Thank you. 

[The prepared statement of Mr. Adams can be found on page 44 

of the appendix.] 

Chairman FITZPATRICK. Thank you, Mr. Adams. 

Mr. Wechsler, you are now recognized for 5 minutes. 

STATEMENT OF WILLIAM F. WECHSLER, SENIOR FELLOW, 

CENTER FOR AMERICAN PROGRESS 

Mr. WECHSLER. Thank you very much, Chairman Fitzpatrick, 

Vice Chairman Pittenger, and Ranking Member Lynch. Thank you 

for holding this hearing and for inviting me. 

Very quickly, I have looked at these issues for multiple agencies 

across multiple Administrations and I wanted to offer four lessons 

that I have learned about building partnership capacity, both in 

terms of dealing with terrorist financing and more widely in combating terrorism. Then, I wanted to conclude with just two recommendations, one tactical and one strategic, for you. 

First of all, repeating what some of my colleagues have said, virtually nothing can be achieved unless the host country itself is fully 

committed to reform and fully committed to working with the 

United States to achieve that reform. If that doesn’t happen, it is 

a recipe for wasting taxpayer resources at best, and strategic failure at worst. 

Second, specific programs to build partnership capacity to combat 

terrorist financing should be integrated into a wider strategy to 

build associated capabilities. It does relatively little good to draft 

model anti-money laundering laws and regulations if the host country has little ability to enforce those laws. 

Helping to build another country’s police force isn’t as useful if 

there is no effective judiciary. And even if there are judges willing 

to convict terrorists and their financiers, then there needs to be 

prisons to keep them. 

All of these discrete but interrelated and interdependent elements seem to be woven together. But unfortunately, while there 

is no shortage of other donor countries that are willing to send a 

few lawyers over for a few trips to write model legislation or model 

regulations, there are much fewer that are willing to help a country build prisons, and that is a systematic problem. 

Third, foreign assistance is most effective when it is targeted 

narrowly but executed broadly. Let me explain what I mean by 

that. 

‘‘Targeted narrowly’’ means focusing on building small, elite 

teams, whether it is military or law enforcement or regulators, that 

you can really trust. ‘‘Executed broadly’’ means that when you have 

those teams, you are helping them from soup to nuts. You are 

13 

training them; you are equipping them; you are advising them; you 

are assisting them; and you are even accompanying them in their 

work that they are doing on a daily basis. 

I have found that if you are doing a full range of those types of 

assistance, then your partners most rapidly build up their own 

learning curves. When you instead try to do things at a very shallow level but with an ambitious scale, that is when we end up 

wasting a lot of money. 

Fourth and perhaps most importantly, the entire process of 

building partnership capacity holistically works best in the American system when it is led by an especially capable ambassador in 

the field with a good country team. The country team needs to be 

made up of all the different agencies and departments, as Secretary Kimmitt was mentioning before. 

In the military, we always insisted upon the unity of command. 

A good, strong ambassador brings that unity of command to the civilian side of the work that is being done. People in Washington 

can then focus on supporting that strategy with the necessary resources, including coordinating international donor conferences. 

But unfortunately, we don’t always have the benefit of such 

strong ambassadors. And when that happens, the task of developing the assistance strategy falls back to inside the beltway, 

which is rarely, in my experience, a recipe for success. 

Let me then talk about the two recommendations I have based 

on those findings. 

First and foremost, the Congress—you have already provided, I 

believe, virtually all of the fundamental legal authorities required 

for the Executive Branch to provide technical assistance and other 

capacity-building to combat terrorist financing. Budgets for such 

assistance, however, both at the State Department and other operational agencies, should be increased. 

And equally if not more important, the personnel in key agencies, 

such as Treasury, needs to be expanded, particularly, as Secretary 

Kimmitt said, in the field in the embassies. That is where the work 

needs to get done, and we don’t have enough people out forward. 

The last recommendation I want to say is that there is one additional way in which our coordination of terrorist financing efforts 

might be improved. In the George H.W. Bush Administration, the 

United States led the way by creating FinCEN; and then during 

the Clinton Administration, we led the way through FATF to export that idea of FinCEN to other countries by encouraging them 

to create financial intelligence units and creating an international 

organization, or the Egmont Group, to coordinate amongst those 

units. That was a wonderful success of exporting a good idea from 

the United States abroad. 

The last two Administrations have had another good idea, and 

that was to create the Office of Intelligence and Analysis inside the 

Treasury Department to help all of our sanctions work. That was 

done under George W. Bush, and under the Obama Administration 

that the assistant Secretary has also become the national intelligence manager for the director for national intelligence. 

We still, to my knowledge, are the only country in the world that 

has an element of the intelligence community inside its financial 

ministry. I know from my experience in the United States how inVerDate Nov 24 2008 17:13 Jun 22, 2017 Jkt 023720 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 K:\DOCS\23720.TXT TERI
14 

credibly important that is to the warfighter in the field, and to our 

entire sanctions process. 

If we could use a similar process as we did during the 1990s to 

export this good idea from the United States and encourage at 

least our G7 partners to develop similar if not exactly identical organizations within and coordinated with their financial ministries, 

I think we would all be better off. 

Thank you very much. 

[The prepared statement of Mr. Wechsler can be found on page 

59 of the appendix.] 

Chairman FITZPATRICK. Thank you, Mr. Wechsler. 

I now recognize myself for 5 minutes for the purpose of asking 

questions. 

Ambassador Kimmitt, who determines whether an embassy is assigned, from the Department of Treasury, an attache? How is that 

decision made? 

Mr. KIMMITT. It originates in the Treasury, Mr. Chairman, and 

becomes part of the internal personnel process, the internal budget 

process. It eventually has to be approved through the Office of 

Management and Budget. 

But then to put any non-State Department officer into any embassy in the world, it has to go through a process where acceptance 

of that representative is cleared by the State Department. And 

then if there is a difference, say between Treasury and State, 

which is rare but it has happened, it is resolved by the National 

Security Council. 

Chairman FITZPATRICK. So would there be certain situations or 

conditions where a Treasury attache or a counter finance terror expert from the Department of Treasury would actually be required 

for an embassy, or is it a case-by-case basis and a subjective matter? 

Mr. KIMMITT. It is really a case-by-case basis. When I first 

worked at the Treasury back in the second Reagan Administration, 

we had 36 attaches around the world. By the time I came back in 

the summer of 2005, that had gone down to three embassies: 

Tokyo; Baghdad; and Kabul. 

With Clay’s help, and the help of Stuart Levey and his team, we 

built that back up to 24 nations. In some nations, they needed 

more fiscal and monetary assistance; in others, it was counterterrorism. Clay and Stuart had to split the budget depending on 

which persons went out. 

But it was an initiative we took, strongly supported by OMB, the 

President, and the State Department. I think, again, as I said, I 

would look at the countries of concern and ask who is making sure 

that the issues of concern to you are well-represented around that 

interagency table that is the ambassador’s conference table. 

It could be a full-time Treasury attache; it could be a Treasury 

attache with regional responsibilities; it could be a technical assistance person; it could also be people from other departments or 

agencies. I just want to make sure the function is covered, that 

someone is going in on a daily basis to talk to the principal AML 

people in that government, but also talk to them about fiscal and 

the range of other issues that are quite important. 

15 

I would note one thing: We are an exception in the United States 

in that our Treasury Secretary used to be, but for almost 100 years 

has not been, responsible for the U.S. budget. Almost every other 

finance minister around the world is also his or her country’s budget director. 

So if you want these people to support programs, whether it is 

education spending, defense spending, or AML spending, it is good 

to be in touch with that finance ministry on an ongoing basis. I 

find that works best when a Treasury person is doing that. 

Chairman FITZPATRICK. When you were Ambassador to Germany, you did have a Treasury attache or did not? 

Mr. KIMMITT. I did. The embassy was in Bonn at the time. We 

had our Treasury attache in Frankfurt because that is where both 

the Bundesbank was and also the heart of the financial community. That is true elsewhere in the world. 

If I recall, Clay, we didn’t have the Treasury attache in Brasilia. 

In Brazil, we had that person in Sao Paolo. 

So you try to follow the money, but you want that person to be 

in touch with the government and also the private sector. 

Chairman FITZPATRICK. Could you rattle off a couple of countries 

that do not currently have a Treasury representative at the embassy that should have one? 

Mr. KIMMITT. Mr. Chairman, I talked to Treasury before this 

hearing; I did not ask that specific question. My understanding is 

that it is still roughly the same number of countries that we had. 

I think there have been some changes. 

Clay, I don’t know if you know it, but I don’t have that list, sir. 

Chairman FITZPATRICK. Perhaps Representative Wagner might 

want to weigh in on this at some point in time, given her personal 

experience at the Department of State. But could you suggest why 

such an important department such as the Treasury is not universally represented at every embassy? 

Mr. KIMMITT. I would say that Treasury is an agency that only 

over the past 10 to 15 years has become integrally involved in the 

work of the National Security Council. My own view is the Treasury should be made a statutory member of the National Security 

Council, along with State and Defense. Right now, it is an invited 

member of NSC meetings. 

We had not really developed the interagency culture at the 

Treasury Department. It was rare to find people like Clay Lowery, 

who had served at Treasury, then the NSC, then came back to 

Treasury. So I would say that Treasury itself was not that engaged 

and really didn’t have a cadre who could have played as effective 

a role overseas as they do now. 

I think we have moved into an era where sovereign interest rates 

are as important as nuclear throw-weights. And because of that, we 

need at that interagency table, whether it be in Washington, a 

military command, or in key embassies, people who represent that 

economic and financial component. 

The State Department does it well, but I think that most of the 

relationships that they have at embassies would be with the economic and financial team working in foreign ministries and some 

other institutions. I think to be in persistently the finance minVerDate Nov 24 2008 17:13 Jun 22, 2017 Jkt 023720 PO 00000 Frm 00021 Fmt 6633 Sfmt 6633 K:\DOCS\23720.TXT TERI
16 

istries, central banks, and elsewhere, it is important to have someone who understands the way the Treasury operates. 

Chairman FITZPATRICK. Thank you for that. 

I now recognize Ranking Member Lynch for 5 minutes. 

Mr. LYNCH. Thank you. 

Why don’t we just stay right on that? 

I know that initially I was elected, basically the Democratic primary on September 11, 2001, the day of the attacks, I came onboard as the Democratic nominee, and we didn’t have much of a 

race after that. But the first thing we started to do with the antiterrorist financing was travel to the Middle East. 

And at that time we had a gentleman by the name of Joe Parker, 

who was with Treasury, and he was helping us at the ground level. 

We would actually have to go in—I will use Jordan and Afghanistan were good examples. They didn’t have anti-money laundering 

legislation as part of their legal framework. 

So we had to work with King Abdullah and also with their central bank, and they did an extraordinary session of the legislature, 

which they called, and they adopted AML standards. And then 

from there we established an FIU, and then from there we started 

working on some of their issues. 

They were very welcoming, however. They were exceptional. I 

think that is a good example of how—and they are a big banking 

center. 

That model worked very well where you had a reasonably reliable institution there, in terms of finance. 

In some of these countries we are dealing with in Africa, however, it is a whole different ballgame. And by the way, Joe Parker 

was our man in Jordan; he was our man in Afghanistan; he was 

our man in Morocco. So they were doing that North Africa, was is 

it, MENAFATF, I think—Middle East-North Africa Financial Task 

Force. So he was jumping around. I guess they did a regional response there. 

And we were sorely short of people. Treasury has tried very hard 

to make sure there is coverage there, but I just think the personnel 

and the demands on them from a budgetary standpoint are a strain 

on them, and maybe we need to provide them with more resources 

so they can actually step up and do this in every single country. 

But even 2 weeks ago when we went to the Syrian border we did 

Jordan, Lebanon, and Turkey. They were sharing Treasury personnel, in some cases. And in some cases, I believe it was in Beirut, 

they had nobody there. When we asked for a Treasury representative for looking at this problem, because we have terrorist financing 

going across the border there as well, they had nobody assigned to 

the embassy at that moment. 

So it is something we really do need to look at. 

But one of the things we are trying to look at here is the developing world, and Africa in particular, where there is no reliable 

government there. There aren’t really laws on the books that would 

allow us to prohibit this and, secondly, to enforce laws against 

money laundering and also terrorist financing. So we have to really 

start from a basic, basic level of responsibility there. 

One of the examples I think that is a stark example is Somalia, 

where—the usual formula that we use is we explain to countries 

17 

that, ‘‘If you want to be part of the legitimate financial system, you 

have to step up. You have to adopt these laws. You have to act like 

a legitimate government.’’ And a lot of them respond to that incentive. 

They are not responding in Somalia. So as a result, all the legitimate banks are afraid of reputational risk, so they have bailed out. 

Everybody is gone. Even the few rudimentary money transfer organizations that used to be there are no longer in Somalia. 

And our limitation, we have to fly in and we stay at the airport. 

Recently, we are able to travel around a little bit, but it is a lawless failed state. So there are some hawalas and things like that 

in there, but we have no control over that. 

So what do we do in that case? I know it is a long question, but 

what do we do in the Somalia instance? How do we respond to 

that? 

Mr. LOWERY. So, there is a lot in there. A few thoughts. 

One is we have to also figure out how do you multi-lateralize the 

technical assistance aspects. It cannot just be the United States. 

We can’t do it all. 

And so there are other countries that can offer assistance along 

the lines you were saying that Joe—I don’t know Joe, but— 

Mr. LYNCH. Parker. 

Mr. LOWERY. —was offering. The IMF is starting to look at these 

issues a little more carefully. They work a lot with central banks. 

The World Bank and the African Development Bank, they could 

also be of assistance, as well as some of the bilateral donors. 

In a place like Somalia, Somalia is a problem for some of the reasons that I was saying in my testimony. You make a very good 

point: In post-conflict environments like Somalia, where you have 

very, very, very weak governments, it kind of goes to Mr. 

Wechsler’s point, which is you don’t—it is hard to find a government that is able to build up the type of supervisory efforts that 

you need in order to look at how remittance flows are coming 

across the border and so that there are know-your-customer rules 

being done not just at the supervisory level but by the individual 

institutions themselves. 

I think that the international financial institutions, at the urging 

of the United States, can assist, but it is much harder, and you are 

very right, on—in post-conflict environments. 

Mr. KIMMITT. I would add just one thing, if I may, because it 

goes to Will’s point: At least from the U.S. Government perspective, 

it starts with a really good ambassador and a really good country 

team. And the tougher the environment, the more important it is 

that that ambassador has an interagency focus in her or his discharge of duties. 

I would look, for example, at the letter that each ambassador 

gets from the President of the United States laying out what his 

or her responsibilities are at post, because that person is the President’s representative. Does it mention these kinds of issues? If not, 

then does it have the right priority in our government? 

When our ambassadors have their 2-week preparatory course, 

sometimes called a charm course, does anybody from Treasury go 

over and present to them or are the ambassadors expected to ride 

the circuit and talk to people? By the way, do we do the same thing 

18 

in our Capstone program, which is where we train our general officers? I really don’t think we do. 

And so the earlier we can get people into the interagency environment and the more that we recognize that the role of an ambassador today is more analogous to that of the national security advisor—that is, coordinating this interagency group—the more likely 

it is, then, that he or she will designate someone on the staff to 

say, ‘‘We have to keep up with this.’’ And maybe it is an OTA person, like Congressman Pittenger said, who works first and foremost 

to see if we can get a decent economy that takes away opportunity 

for terrorists. But until we get that far, let’s at least stop the flow 

of bad funding. 

But it really, I think, has to start with a terrific country team 

backed up by the appropriate priorities here. 

Chairman FITZPATRICK. The gentleman’s time has expired. 

Mr. Pittenger is recognized for 5 minutes. 

Mr. PITTENGER. Thank you, Mr. Chairman. 

I would just like to ask, do you believe that these special assistance efforts should be tied to foreign aid that we give these countries? 

Mr. ADAMS. Speaking from the multilateral side, I think on a 

technical assistance issue like this tie-in would not be very productive. But I think the point that has been made consistently about 

ensuring that the governments are committed to doing something 

about it is the key determining variable. 

I would also say, to build on Mr. Lowery’s point, that there is 

broad interest in this across the donor community. So in terms of 

mobilizing resources, one would not only, in most countries, be 

looking simply at the United States, but looking across the donor 

community to put in place and to support a program. 

If I could, just to come back to Mr. Lynch’s point, I think if you 

look at Africa and central banks in Africa, it is true there are 

weaknesses, but there is a world of difference from when I started 

working on Africa 40 years ago. And I think the capacity and the 

commitment of governments to commit to a better financial system, 

to commit to central banks that are independent and work across 

Africa, is beginning to make progress. 

In a case like Somalia, where there isn’t basic security but—I 

think the fact is we are still struggling with mechanisms. And in 

fact, this week in the bank, this fragile state we—where people 

working on fragile state are gathering together to try to figure out 

mechanisms to provide support in situations where basic security 

doesn’t exist. And I think those are challenges which really still 

complicate and make very difficult the donor community activities. 

Mr. PITTENGER. Should we be targeting our resources toward 

countries that maintain poor FATF ratings? Countries that have 

poor FATF ratings, should we be targeting our resources toward 

these countries? 

Mr. KIMMITT. Well, I think we should. And again, I think I would 

make raising that FATF rating obviously the responsibility of the 

host government, but I would hope that every ambassador and 

every country desk officer here in the States has that on their todo list as something that is a priority for us. 

19 

Right now, I am not sure that it would be quite as high as some 

of the other political or security objectives, even though I think it 

is a classic security objective. 

Mr. PITTENGER. Does Treasury have FATF ratings on their radar 

screen when they are implementing this technical assistance? 

Mr. KIMMITT. I don’t know that. Again, I have been gone now 7 

years. I was kept, as Deputy Secretary, very closely briefed by Stuart Levey, Danny Glaser, and their team on the FATF process, the 

FATF ratings. When I would meet with visiting people, largely 

from finance ministries and central banks, we would talk about 

that. 

I am sure it is current in the TFI Office, Terrorism and Financial 

Intelligence Office. As to Treasury more broadly, I don’t know, Mr. 

Pittenger. 

Mr. PITTENGER. There is always a ‘‘pay for’’ in these efforts. As 

we look at a means to pay, are asset forfeitures a means that we 

could go to? Are there any restrictions or reasons why that could 

not be a resource for paying for implementing this? 

Mr. KIMMITT. I am sorry, I just don’t know. I know that there 

has been a lot of legislation considered, some passed recently, that 

have allowed certain classes of people to get at certain asset forfeitures. Mostly, they were people who are prisoners or families of people who are killed in terrorist attacks. 

For this specific purpose, I just don’t know what the authority 

would be. I think it is certainly something that would bear exploring because, frankly, I think sometimes we are better at seizing assets and penalizing banks than we are at getting to the root cause 

of what the problem is, as Mr. Lowery also said in his testimony. 

Mr. PITTENGER. In my discussions with President el-Sisi, for example, I found that he was very eager to be in compliant with our 

efforts in tracking the money, but he certainly lacked the resources 

to facilitate what would need to get done. He has extraordinary 

concerns throughout his country. 

How do you believe that we should be assessing and targeting 

how we fund and support these efforts for countries like Egypt? 

How much of a priority should that be for us? 

Mr. WECHSLER. I think it should be a very high priority. I think 

the key question is not only, as you suggested, where are the gaps 

between what the requirements are under the FATF rules and 

where their actual regime is, but going back to a comment that 

many of us have made, what is their willingness, their commitment 

to true reform? And where you have those two things meeting, then 

we should be very much involved in helping them get where they 

need to get. 

The challenge often is is when there is a gap and when the host 

country is not very committed, then we are in a challenge. And 

sometimes we want it more than they do, and that is a recipe for 

failure. 

Mr. PITTENGER. In this instance, what I sense was somebody who 

wanted to be fully engaged but we were not there on their behalf. 

Thank you. I yield back. 

Chairman FITZPATRICK. The gentleman’s time has expired. 

The gentleman from Florida, Mr. Ross, is recognized for 5 minutes. 

20 

Mr. ROSS. Thank you, Mr. Chairman. 

And thank you, gentlemen, for being here. 

I think it is important that as this task force continues its discovery, that we not only learn what is the best multilateral way to 

engage in cooperation with the countries that we are seeking cooperation and to provide technical assistance; I am reminded that 

in our joint combined efforts in the military to fight terrorism we 

perform a lot of intelligence, a lot of surveillance, and a lot of reconnaissance, and we share this. 

But it also comes down to when it is time to take action, nothing 

is done. In fact, many of our sorties that fly over in the Middle 

East come back without executing their ordinances. 

Ambassador, I was over in Qatar last month and I met with Ambassador Dana Smith, whom I think is doing a wonderful job over 

there, by the way. She was bragging about how there was a Treasury attache who was there with her specifically for counter-terrorism financing. 

My question is, what do these attaches do? Do they just do strictly technical assistance? 

Mr. KIMMITT. If they are a Treasury attache, they represent the 

Treasury Department broadly, as would a Defense attache. We also 

have attaches from other departments and agencies, including Agriculture and elsewhere. 

A technical assistance person would have a narrower focus. 

Mr. ROSS. Okay. 

Mr. KIMMITT. They are sometimes called an attache. 

When Clay and I were together in government, the person that 

we had in the Persian Gulf, I think was in Abu Dhabi, so if they 

have moved someone to Qatar now, I think that is great. Qatar is 

very important. 

Mr. ROSS. Yes, it is. 

Mr. KIMMITT. And if they are an attache, they would be doing everything from the AML work that you asked about, but also some 

of the economic work that Congressman Pittenger mentioned. 

Mr. ROSS. Are they empowered only when asked—when only 

asked upon by the host country, or do they volunteer to provide 

certain assistance and guidance and advice, or— 

Mr. KIMMITT. Yes. That is a great question because I think we 

want our forward deployed diplomats to be as proactive as our forward deployed forces, right? 

Mr. ROSS. As aggressive as we possibly can. 

And I agree with you, Ambassador, and I think what you and 

Mr. Wechsler have said, that it really flows from the nature of the 

ambassador how aggressive they can be and how aggressive their 

team can be. 

And, Mr. Wechsler, you hit on something that I think is so very 

important, and I think we are kind of skirting around it here, and 

I think the ranking member talked about this, which is how do we 

incentivize these host countries to enforce? You talk about in your 

testimony maybe we have more judges, maybe we have more prisons. But what is their incentive to want to enforce once we put 

them on notice of anti-money laundering or trying to combat terrorism funding? 

21 

Mr. WECHSLER. There are two ways: from the top down and from 

the bottom up. From the top down it is all the normal diplomatic 

ways that we try to encourage changes in policy. But the other way 

that I was encouraging you also to think about that gets less attention is from the bottom up. And what I have found across multiple 

agencies, whether it is military, law enforcement, or other civilian 

agencies, is when we work on building a very small team of that 

host country— 

Mr. ROSS. So they buy in. 

Mr. WECHSLER. So they buy in. And we are working on a dayto-day basis. The person doesn’t have regional responsibility so that 

they are flying in every other week and trying to check up on them, 

but they are there sitting with them in their offices every single 

day to really build up the common goals of the organization. 

And you find out that organization can be a better way to 

achieve U.S. counterterrorism objectives than— 

Mr. ROSS. Do you think we could do that in Somalia? 

Mr. WECHSLER. Yes. We do that on the military side in Somalia 

quite effectively. And as difficult as Somalia has been, let’s all remember where we thought it was going to be in 2006. We thought 

it was going to be where Syria is now, with lots of external threats. 

In Somalia, we have tens of thousands of African Union troops 

being supported by Americans. We have spent scores of millions of 

dollars to get to where we are now. One of the questions is, perhaps, can a very small proportion of that money be spent to help 

fix the remittance issue as well? 

Mr. ROSS. And that is the incentive, I think, that we are skirting 

around, is it is going to take some foreign aid to incentivize them 

to cooperate with us. 

How do we—yes, sir. Go ahead, Mr. Lowery. 

Mr. LOWERY. And I was just going to say there is a different— 

there is one other incentive besides the ones the two of you were 

just discussing, which is almost like a market incentive, which is 

that if you have good policies in place for AML/CFT, for knowing 

your customer, for supervision in those areas, that could at least 

have—not—maybe it won’t be the biggest banks in the world, but 

it will be the Western Unions of this world will start actually— 

Mr. ROSS. Right. We want to make sure that, yes, we are not 

overburdening— 

Mr. LOWERY. And then that will be a good thing for the people 

of that country, and so that is— 

Mr. ROSS. At least economic development. 

Mr. LOWERY. —incentive for politicians. 

Mr. ROSS. Thank you. I see my time has expired. I will yield 

back. 

Chairman FITZPATRICK. The gentlelady from Missouri, Mrs. Wagner, is recognized for 5 minutes. 

Mrs. WAGNER. Thank you very much, Mr. Chairman. 

And I would like to thank the panel for coming today and appearing to discuss the important issue of stopping terrorist financing in the developing world. 

I also had the great privilege of serving my country as a United 

States Ambassador in the more developed world of Western Europe. But a place like Luxembourg has such incredible financial inVerDate Nov 24 2008 17:13 Jun 22, 2017 Jkt 023720 PO 00000 Frm 00027 Fmt 6633 Sfmt 6633 K:\DOCS\23720.TXT TERI
22 

stitutions and banking, I can tell you we stopped a good deal of terrorist financing from working its way through the banks and institutions of Luxembourg. 

And Ambassador Kimmitt is quite right, as is Mr. Wechsler, from 

the standpoint of the outcome of your work is only as good as your 

ambassador and the team that you have moving forward. 

I felt, Mr. Chairman, because you asked the question, that I did 

not have a Treasury attache at post but I did call upon them on 

a case-by-case basis. They would come out if it was something that 

needed an extra boost. 

But really, at the end of the day, it is like everything in life: It 

is about building relationships. 

If I, as a United States Ambassador, could go to that finance 

minister—there may be certain intelligence that I was aware of, 

but without compromising any of that intelligence, after a number 

of months I was able to build up such a rapport and relationship 

with the government, with the prime minister, and in particular 

the finance ministry, and to say: I need—the world, our country, 

needs these actual assets or bank—these things closed or shut 

down, these institutions, these particular accounts, these folks. And 

they would do it 99 percent of the time really based upon the relationship that we had built and our bond that we had through 

NATO and other experiences. 

So if you would like to comment, Mr. Kimmitt, please do. I have 

some other questions about the developing world. 

Mr. KIMMITT. I would just say one thing. Like you, I was a political ambassador. I spent most of my time in government. I had 

been in the Army. But I went out as a political appointee of President George H.W. Bush, and we have had this real debate about, 

is it good to send political appointees out? 

We are the only country that does it. One-third of our ambassadors are political; two-thirds are career foreign service officers. 

I think that is a tremendous strength for the United States because when you get into countries like Luxembourg, Sweden, 

Singapore, and Switzerland, who punch disproportionately above 

their weight in the financial services community, to have people 

from the private sector who have just sort of an ease of relationship 

with the finance ministers, central bank governance, and so forth, 

is very important. 

That is tough to train late in life for a career foreign service officer no matter how good he or she is. Our political appointees do 

a much better job of covering Treasury’s interests. 

Mrs. WAGNER. I think you are absolutely right. 

Now, as we have seen with ISIS, terrorist groups are thriving in 

the developing countries and failed nation-states. In fact, according 

to the IMF, larger GDP levels and higher quality of domestic, economic, and legal institutions are associated with greater compliance with anti-money laundering efforts and combating the financing of terrorism. 

That is why I think the technical assistance that is offered by the 

United States and other developed countries is so essential to help 

identify and stop terrorist financing in these what I would call priority countries, and why it is important that we fully coordinate 

those efforts in order to maximize the effect. 

23 

In my little time that I have left, Ambassador Kimmitt, or perhaps Mr. Lowery, whomever, I wanted to ask about the U.S. Terrorist Financing Working Group, which has played a primary role 

in this interagency coordination of providing counter-terrorism financing technical assistance internationally. 

According to reports by the GAO, the working group has not convened recently. And in the absence of this working group, how is 

U.S. counter-terrorist financing technical assistance to foreign 

countries being coordinated, if at all? 

Mr. Kimmitt? 

Mr. Lowery? 

Mr. KIMMITT. I will have to defer to the government to answer 

the question of why it has not met. My impression, though, is that 

there is still a very active dialogue and interagency process in 

Washington around terrorist finance. I don’t think it translates as 

well to the field, as I said, but on this working group, I do not have 

that statistic. 

Mr. LOWERY. I don’t have the statistic either, but I can say this: 

The technical assistance in this area, coordination among the different—is not great, and—within the U.S. Government. And that 

is something that can be improved upon, and I think that people 

in the U.S. Government, Treasury and State, it would be good to 

reach out and talk with them about it: How do you improve upon 

this process? 

Mrs. WAGNER. Thank you, Mr. Lowery. 

If I can just reclaim—and with a little bit of the Chair’s indulgence, they have been suspended since July 2015, and that is a 

great concern to me. And I am wondering if it doesn’t have to do 

with a little bit of a power struggle between Treasury and State. 

And I am wondering who would serve as a better leadership role 

in the future, in coordinating these bodies and groups and on this 

particular working group? Would it be the State Department or 

would it be Treasury? 

Mr. Lowery, in your experience? 

Mr. LOWERY. I think that it is probably a combination of the two, 

and if it is not working well enough, especially if people in Congress are unhappy, then that is where sometimes the National Security Council can start taking more of a leadership role, as well. 

Mrs. WAGNER. Any other quick thoughts on that before I yield 

back what zero time I have? 

Mr. ADAMS. And my experience is that the expertise at Treasury 

is absolutely essential to have a constructive technical dialogue. 

Mrs. WAGNER. I believe it is also. 

Thank you. I yield back. I thank you for your indulgence, Mr. 

Chairman. 

Chairman FITZPATRICK. The gentlewoman yields back the balance of her time. 

The gentleman from California, Mr. Sherman, is recognized for 

5 minutes. 

Mr. SHERMAN. Thank you. 

How much money has been seized through the legal process since 

9/11 by our government and by other governments because it is terrorist financing? Does anybody here know? 

24 

Is there a program in—if assets are seized do they become part 

of—do they go to the general fund, or do they support continued 

anti-terrorist financing activities? Does anyone—Mr— 

Mr. KIMMITT. I had focused, as Clay Lowery had, more on the 

fines that have been issued, Mr. Sherman, I— 

Mr. SHERMAN. Okay. 

Mr. KIMMITT. And those do go in the general fund so they can 

be put into other specific purposes. On asset forfeiture or seizures, 

I am sorry I don’t know the answer to that. 

Mr. SHERMAN. Okay. What is the total financing available to 

those entities in State and in Treasury that are primarily focused 

on stopping terrorist financing? 

Mr. KIMMITT. Again, I think somebody from government would 

have to answer that. I will be candid with you: When I talked to 

a few people in government to let them know that I was coming 

up, and just try to refresh myself, I think they were a bit surprised 

that they had not yet been called up, and maybe that is going to 

be later in your process. But I think questions like that, with, 

again, particularly budget detail, I think are best left to the departments. 

Mr. WECHSLER. I believe that a significant proportion of the 

funds that are used for technical assistance flow through the State 

Department’s international narcotics and law enforcement account. 

There is also a little bit through the State Department counterterrorism account, I believe. 

I don’t have the exact number, but I would be surprised to a 

great degree if it was over $20 million to $30 million a year for the 

whole world. In fact, I am pretty sure that there are only four people in the State Department INL Bureau who work full-time on 

managing those resources throughout the world. 

Mr. SHERMAN. With that, I yield back. 

Chairman FITZPATRICK. I now recognize the gentleman from 

Kentucky, Mr. Barr. 

Mr. BARR. Thank you, Mr. Chairman, and thank you for your 

leadership in this important task force. 

And to the witnesses, thanks for your testimony here today. 

A recurring theme from many of you has been the need for these 

host countries to buy in, to be fully willing participants in combating the financing of terrorism activities. And without that buyin, you are not going to have an effective means of limiting access 

to financing and curb access to the financial system. 

My question is, is the United States Government doing a good 

job assessing which countries are fully engaged and committed to 

countering financing of terrorism, versus those that are not fully 

committed? 

I will start with Ambassador Kimmitt. 

Mr. KIMMITT. I think we are doing a good job of that assessment. 

I am not sure that we do as good a job following up on an assessment that said someone needs help. 

I think the way that we talked about it before, what are the incentives for them to get right in this area—I think you have heard 

some interesting things today, including foreign assistance, but importantly, bringing private sector investment, because at the end of 

25 

the day that will never happen if someone thinks they are coming 

into a money laundering cesspool. 

Mr. BARR. And I would love to hear from the others, but the reason why I asked the question is because a recurring theme back 

home in Kentucky among my constituents is, why are we engaged 

in the practice of appropriating funds for foreign aid to countries 

that hate us? And this kind of falls in that category. 

Are we not adequately assessing our foreign aid budget and 

whether or not we are effectively deploying those resources to countries that are truly committed to helping us combat terrorism, 

versus countries that, frankly, are the beneficiaries of our foreign 

aid and are not truly helping us? 

Mr. WECHSLER. If I could suggest, I generally think we do an 

okay job of that assessment. I think that there are two challenges 

for that, though, which may explain why sometimes we may fail. 

Sometimes the country in question the overall U.S. policy has 

made a great commitment to, whether it is Afghanistan and Iraq, 

in so many different ways. And then there is a lot of pressure to, 

‘‘Let’s see if we can work with them on this way.’’ 

The other thing is—and this is what I would suggest before—is 

you can be working with a small unit of people inside the country 

who are actually very cooperative with the United States even 

while the wider policy and the wider population does hate us or 

isn’t very cooperative. That doesn’t mean that you stop working 

with that group if you are really achieving counterterrorism objectives with that group. And that is what I would suggest you focus 

on. 

Mr. BARR. Fair point. And is the U.S. embassy in that country 

in the best position to make that assessment for us? 

Mr. WECHSLER. Yes. If you have a good ambassador who is really 

running the country team that is fully staffed, you should be deferring to that ambassador about really understanding where you can 

find those partners. And sometimes you have people who are on 

the ground for a long period of time before they are able to find 

that partner in the right agency, that one unit, that right element 

that you can work with. 

Mr. ADAMS. Yes. Just to broaden it, I am obviously coming at it 

from a more global perspective from the bank side, but one of the 

special assets you have in this area is access to the global banking 

system is absolutely critical in today’s world. And to the extent the 

issue is linked to that, you will have in countries, regardless of 

where they stand politically or regardless of what economic system 

they are pursuing more broadly, certainly recognize the importance 

of keeping clean with respect to the banking system and trying to 

put in place the improvements to make sure that their banking 

system doesn’t become a target of the United States, the G7, or 

more broadly. 

So in one sense you do have, not only at the smaller technical 

level, which I certainly agree with, but even at the broader political 

level there is certainly a recognition today of the importance of 

maintaining and improving banking systems. 

Mr. BARR. In my remaining time, when I was over in Jordan 

back in October and with our embassy personnel, one of the points 

that was made, and from the government in Jordan, was that as 

26 

important as it is in combating terrorism, killing and capturing terrorists, we have to counter the narrative of radicalization. The testimony is interesting to me about how overzealous enforcement of 

AML and CFT policies could have the counterproductive effective 

of facilitating or impeding economic development, which could facilitate radicalization among the population. 

Any amplification of that testimony? 

Mr. LOWERY. Yes, that was, I think, largely my testimony. The 

worry is that we are in countries—maybe not Jordan, maybe Jordan, but I have seen in other countries in Africa, in the Caribbean, 

and other places, where some of the policies that we are following 

have in some respects chased some of our more formal financial institutions out of those countries because of the fear that they are 

going to incur some fine or they are going to incur reputational 

risk. 

And so I think that in and of itself could actually lead to the very 

problem, one, that that finance is going to go towards very opaque 

sources where we will not be able to see what is going on; and two, 

that this—kind of more as you were getting towards—this 

radicalization where they are like, ‘‘The United States is just cutting us off.’’ It is something that we have to think about and be 

very careful about. 

And I think that people are starting to get it, but it has taken 

a while before we acknowledge that we actually have created our— 

a little bit of our own problem. 

Mr. WECHSLER. Sir, if I could just add very quickly, in the 1990s, 

as Al Qaeda was growing, their center of gravity—a military term 

for the element that allows them to achieve their strategic aims— 

was their financing. That is what turned them from a small group 

of people who were whistling in the darkness to people who could 

commit 9/11—their financing capabilities. 

The center of gravity for the Islamic State is its narrative, is its 

ideological narrative that it gives throughout the world. And we as 

a government, we as an international community, have done a very 

poor job of combating that narrative. 

Chairman FITZPATRICK. The gentleman’s time has expired. 

Mr. BARR. Thank you. 

Chairman FITZPATRICK. The gentleman from Pennsylvania, Mr. 

Rothfus, is recognized for 5 minutes. 

Mr. ROTHFUS. Thank you, Mr. Chairman. 

And I thank our panel for being here today. 

I just want to get a little more education about assets that we 

have out in the field. 

Ambassador Kimmitt, I believe you testified that we now have 24 

Treasury attaches at various embassies around the world, up from 

3 since 2005? 

Mr. KIMMITT. It had gone from 3 to 24 from 2005 to 2009. I understand that it is about that number today, but I don’t have that 

exact number, sir. 

Mr. ROTHFUS. Any idea how many more embassies should have 

that kind of staffing that do not? 

Mr. KIMMITT. Again, when I look back to my first tour at Treasury, which was 20 years before that, we had people out in 36 countries at a time when we didn’t have the concerns about money 

27 

laundering, terrorist finance, and so forth. So my guess is we probably need to increase by about 50 percent the number of attaches 

we have. 

But I will also tell you, Treasury is a very small agency with a 

very small budget, except for the IRS. You look at the Treasury 

budget and think it is big, but 80 percent of it is the IRS. 

And we also, again, do not have people who have been on that 

career track to go out to post and then come back to the United 

States. I think this needs to be just part of Treasury becoming 

more a part of the interagency and national security community. 

But my guess is—and again, I don’t have that list, and would 

defer to the government on that—that they could probably find another 10 to 12 pretty quickly. 

Mr. ROTHFUS. Would you have ideas of what countries we might 

want to staff up in? 

Mr. KIMMITT. Yes. I would certainly have the ideas if I saw the 

current list. And again, when I think of the countries that Clay and 

I and Stuart Levey worked on, one of the ones we came up to immediately was Pakistan. I was going to NSC meetings every week 

on Pakistan where we talked about the tough security situation, 

tough political situation. 

This all came from the fact that there was no economic opportunity, that illicit funds were flowing all over, that there were parts 

of the country in the upper northwest that were off-limits. So we 

put an attache into Islamabad. A tough post, but I couldn’t see how 

Treasury could not have its interests represented there. 

I would have to, again, look at the list today and come— 

Mr. ROTHFUS. Do you know if there are any attaches currently 

staffed in countries that have no real interest in stopping illegal 

money flows? 

Anybody? 

Mr. KIMMITT. Not to my knowledge. 

Mr. ROTHFUS. Have we ever abandoned efforts in any countries 

after coming to the conclusion that a country had no interest in 

stopping illegal money flows? Are there countries out there that 

just—we attempted to get in there and educate them about the importance of this and they just did not show an interest in cooperating? 

Mr. LOWERY. Part of it is whether—if it is a technical assistance 

effort specifically, the attaches can help on that area, but the technical assistance is kind of much more focused on that exact issue. 

I can’t think of any off the top of my head, but I do remember 

that there were countries where we were thinking, ‘‘Boy, we should 

probably do some technical assistance there,’’ and when we talked 

to the country, they were like, ‘‘Yes, we need help in other areas, 

but this is not an area that we really would like to prioritize.’’ 

And so we did focus on kind of some of the points that others 

have made about the areas where we thought we were really going 

to make a difference. 

To remember those countries, it was close to 10 years ago, so it 

is a little hard. 

Mr. ROTHFUS. Is anybody aware of any countries today that we 

really need to be in there providing technical assistance? 

Mr. Wechsler? 

28 

Mr. WECHSLER. Yes. I would suggest you start by looking at the 

list of the countries where the greatest number of foreign fighters 

towards the Islamic State originate from, and then ask yourself, 

‘‘Are there Treasury attaches who are working with those countries?’’ 

If people are moving, money is also moving; other types of facilitation networks are at place there, and we need to bring the full 

range of U.S. Government capabilities, from the military to the intelligence to law enforcement to financial efforts, to combat those 

facilitation networks. 

Mr. ROTHFUS. Mr. Lowery, the Financial Action Task Force has 

issued guidance to help public authorities and the private sector 

apply a risk-based approach to implementing CFT measures. Critics argue that instead of managing these risks, many financial institutions are seeking to avoid risk entirely by eliminating business 

lines. 

Some say this has led to the closing of correspondent banking relationship and the exclusion of many low- and middle-income countries from the formal financial sector. Do you agree with that? 

Mr. LOWERY. Absolutely. It is a big problem. And I know that the 

Financial Action Task Force is trying to clarify some of the terms, 

but that is exactly one of the big problems out there. 

Mr. ROTHFUS. Any suggestions on how regulatory authorities and 

financial institutions can balance robust CFT measures and financial inclusion efforts? 

Mr. LOWERY. Yes. A few thoughts. First, a lot of the information 

that we have right now is on survey data and anecdotal information. I think that there is a lot better data that can be had, and 

so therefore we can look at the impacts much more carefully using 

data and not just stories. 

Second, I think clarifying the rules so that financial institutions 

have a better idea of what is going to be expected of them, where 

are the lines to be crossed or not to be crossed, will be very helpful. 

And then third, working in the countries themselves, on some of 

the technical assistance efforts that we have been discussing before. I think a robust, comprehensive effort in those areas could 

make some improvements, but it is going to be a long slog. 

Mr. ROTHFUS. I thank the panel. 

Thank you, Mr. Chairman. I yield back. 

Chairman FITZPATRICK. The gentleman from Texas, Mr. Williams, is recognized for 5 minutes. 

Mr. WILLIAMS. Thank you, Mr. Chairman. 

And thanks to all of you for your service, and thank you for being 

here today. I appreciate it. 

I wanted to briefly key on some remarks that I think are important to revisit. 

Mr. Wechsler, you stated in your testimony that virtually nothing can be achieved unless the host country itself is truly committed to reform and sincerely interested in working with the 

United States to reform themselves. Now I would say, like most of 

us in this room, certainly none of us want to waste taxpayer money 

on ventures that won’t and often don’t yield meaningful results. 

So how receptive are developing countries to recognizing terrorist 

financing as a priority concern and accepting assistance from the 

29 

United States and other G20 countries to identify and address 

issues in their nation? 

Mr. WECHSLER. By and large, since 9/11 the vast majority of 

countries out there that I am aware of do recognize this as a problem and are interested in improving their efforts about this—not 

only because they want to help the international community, because they want to protect their own countries from these threats 

in the first place. 

The second question is, do they want that assistance from the 

United States? That will differ country by country. But by and 

large, there is a pretty good international consensus that this is a 

problem that needs to be solved. 

Mr. WILLIAMS. How well are internal efforts by agencies like 

Treasury and State coordinated within the United States and with 

other donors? 

Mr. WECHSLER. What I believe is where we have a good ambassador who does this very—who can really lead this, it can be done 

very well. They can have a holistic plan for their country; they can 

understand where all the different pieces are in the different agencies; they can pull it all together, and then the job of Washington 

is resources that for them. They can also coordinate with other ambassadors in the field about their other donor programs. 

The places where I have seen it not work are the places where 

that key position is either unfilled or is filled by somebody who is 

either unwilling or incapable of really playing that role. Then it 

tends to be—the risk goes up for lack of coordination. 

Mr. WILLIAMS. Ambassador, in your testimony you talked about 

host governments to whom we provide technical assistance needing 

to be full partners in the effort and that programs should be—not 

be imposed on them but in an equal partnership that takes into account unique local features. 

I personally believe that most of the time when a Federal program is one-size-fits-all, it usually is doomed from the beginning. 

So can you tell us why technical assistance is not one-size-fits-all? 

Mr. KIMMITT. I think there are some elements, whether it is economic growth or counter-terrorist finance, that are some basic technical assistance skills. But you find, in the case of anti-money laundering efforts, in some countries it is the finance ministry that is 

in charge, in some, it is the central bank, and in some, it is the 

interior ministry. As you know, interior ministries in countries 

overseas don’t take care of national parks; they are really like our 

Justice Department and FBI. 

Some other places where you have the military in an important 

position, they sometimes will take it more seriously because they 

have to fight the effects. 

So I think you have to have the core competency, but then you 

have to have the flexibility to adapt the program to who is the person in that foreign government most likely to help you carry that 

coordinated message. And I find as I look from country to country, 

it is a different person each time. A good ambassador, a good country team will figure that out and really devote the resources in that 

direction. 

30 

Mr. WILLIAMS. At the end of your testimony, you discuss the importance of having a close relationship with the private sector. I am 

a big private sector guy. 

I agree that sometimes we don’t always think about rules or policies that we have put in place and their direct impact on our own 

American businesses, so how do you suggest we partner with the 

private sector to safeguard the global financial system? 

Mr. LOWERY. I think it is a great question. I think if you look 

at some of the private sector actors in these areas, particularly 

companies like Western Union and some of their competitors, there 

are more concerns about know-your-customer rules than almost 

any other entity on the face of the Earth because they don’t want 

to get into a bad situation. 

So if we can work with them, they can—they will actually do 

best practices. They actually do their own technical assistance in 

very poor countries because they want to make sure that the entities where they are transmitting their money also know their customers and do the types of work that we need done in AML/CFT. 

So I think that there are areas where we could be working with 

the private sector, whether—it doesn’t have to be Western Union, 

but with the formal financial institutions that are trying—that are 

sending money in large ways overseas. And I think that—because 

they are going to be very concerned about, how do we do technical 

assistance at the country level. 

I think that is something where the private sector can be just as 

helpful as the public sector. 

Mr. WILLIAMS. Thank you very much. 

And, Mr. Chairman, I yield back. 

Chairman FITZPATRICK. The gentleman from Maine, Mr. 

Poliquin, is now recognized. 

Mr. POLIQUIN. Thank you very much, Mr. Chairman. I appreciate 

it. 

And I thank you all very much for coming here today as we try 

to help figure out how to stop funding for terrorist organizations 

around the world. 

Gentlemen, we all know that what families around the world 

want more than anything is opportunity for their kids, right—and 

safety and security. Now, I am sure this is just as powerful a force 

in developing countries as it is in our own developed country. I 

would argue with you probably more so. 

Now, when countries develop and there are opportunities for the 

next generations, there of course is less of a propensity to gravitate 

toward illicit behavior, and in particular, it is more difficult for terrorist organizations to take hold. 

You have a wealth of experience here at the table. 

Mr. Kimmitt, I would like to start with you, if you don’t mind, 

sir. Can you educate us on two or three common mistakes that developed countries like the United States have made in trying to assist developing countries that lend itself into difficult situations 

with respect to terrorism taking hold and maybe inadvertently 

causing those terrorist organizations to grow? 

Mr. KIMMITT. First of all, I would say you are exactly right. The 

best way to stem the advance of terrorist activities is to foster economic growth. 

31 

Mr. POLIQUIN. Right. 

Mr. KIMMITT. I think very often in the past we have given money 

just for the sake of giving money. I think we have been very paternalistic and just told people, ‘‘This is the way things have to go. We 

have an AID program. Follow our rules and all will be well.’’ 

I think we turned that around with the Millennium Challenge 

Corporation, where we really graded countries on their ability to 

use larger amounts of aid to the good effect for their people. 

Mr. POLIQUIN. Mr. Kimmitt, can I interrupt you there for just a 

moment, because let’s drill down a little bit deeper, if I may. 

So you are talking about organizations like—I know you didn’t 

mention them, but the World Bank, or the IMF, or ADB, or what 

have you—organizations that United States taxpayers fund to provide aid to countries that are developing so they can foster freedom, and better lives, and so forth and so on. 

What I heard you say, I think, is that our country and others 

that fund these donor organizations have not always held developing countries accountable for behavior that would do everything 

it can to prevent terrorist activities from taking hold. 

Could you be more specific, sir, on how we can encourage, incent, 

hold accountable these donor organizations that we fund, as taxpayers, to make sure that doesn’t happen? 

Mr. KIMMITT. Focused on terrorist financing— 

Mr. POLIQUIN. Absolutely. 

Mr. KIMMITT. —in particular? 

Mr. POLIQUIN. Yes, sir. 

Mr. KIMMITT. The question came up earlier, do we condition aid 

on how a country is doing on terrorist financing? 

Mr. POLIQUIN. Why wouldn’t we? 

Mr. KIMMITT. I think that the important thing is whether that 

is a factor that was taken into account in making the allocation decision and for you to make your budget decisions. Conditionality, 

I— 

Mr. POLIQUIN. The taxpayers are funding these organizations, so 

we have the appropriations authority, if you will, before they can 

extend any credit to these—why in the heck wouldn’t we make it 

a function of receiving aid? 

Mr. KIMMITT. I don’t think it would be an irrational decision on 

our part— 

Mr. POLIQUIN. Okay, then we are going to— 

Mr. KIMMITT. —about providing aid to a country that is not going 

to take the employment of that aid seriously in counter-terrorist— 

Mr. POLIQUIN. Okay. What benchmarks have you seen, Mr. 

Kimmitt, if I may—we only have a minute left—what benchmarks 

have you seen where this behavior has worked that we can use as 

a committee going forward to make sure we get this right? 

Mr. KIMMITT. I don’t know what the situation is today, but one 

of the toughest situations that Clay and I worked on in 2007 and 

2008 was trying to find ways to get money into the West Bank. 

And that was something controlled by the Israelis, and one of the 

real hesitations the Israelis had was how serious the Palestinian 

Monetary Authority, the PMA, was about counter-terrorist finance. 

And they understood—the Palestinian Authority at the time—that 

32 

without getting serious on that subject, they were not going to be 

able to get the money they needed to keep that going. 

That was probably as sensitive an area as possible, a trilateral 

discussion among Israel, the United States, and the PMA. I hope 

we are providing that kind of rigor any time we look at providing 

taxpayer dollars or encourage other friends and allies like Israel to 

take actions to move money in a certain direction. 

Mr. POLIQUIN. Thank you, Mr. Chairman. I know I am out of 

time, but if I may, it seems to me it doesn’t make a lot of sense 

for the taxpayers to be involved in the funding of organizations 

that inadvertently foster terrorism that comes back to bite us. 

And so I think we are in agreement on that, Mr. Kimmitt. And 

I know there is a lot more we can learn on how to do this better 

and how to hold these donor organizations accountable for fostering 

peace and stability and opportunity without terrorism around the 

world. 

Thank you, Mr. Chairman. I appreciate it. 

Chairman FITZPATRICK. We will now have an additional round of 

questions, and I recognize Mr. Barr of Kentucky for 5 minutes. 

Mr. BARR. Thank you. 

Mr. Lowery or any panelist who might have any insight in this 

with experience in money laundering matters, are you aware or 

have you heard of any unlawful schemes where educational groups 

are funneling Federal dollars through their nonprofit organizations 

into so-called religious movements? 

Mr. LOWERY. I have heard of it, but I don’t know a lot about it. 

I have seen allegations that there are companies in the United 

States where they are doing educational services and they are receiving some grants, and some of the money is being siphoned off. 

Obviously, if anything like that is happening in a negative way, 

they should be looked into very carefully and investigated. 

Mr. BARR. And you have a background at Treasury. Would 

Treasury have jurisdiction or have oversight over that? What Federal agency would be in a position to best monitor that or take a 

look at that issue? 

Mr. LOWERY. I think that would be probably a combination of the 

Treasury Department and the Justice Department. 

Mr. BARR. Okay. And to the point of the multitude of Federal 

agencies that have jurisdiction over CFT, and many of you have actually made the point that because we have multiple agencies 

claiming jurisdiction over matters pertaining to terrorist financing 

and a need to better coordinate—what is the best—what would be 

the best approach to enhancing that coordination? Which Federal 

agency do you believe would be best equipped to lead that coordination? 

Mr. LOWERY. There are a couple of parts there. One is, I think, 

that it is a combination of the Treasury Department and the State 

Department working together to better coordinate it, and if it is not 

working very well, then I think the National Security Council 

would need to step in. 

I think that going beyond that goes to some of Mr. Adams’ point 

about the—it is difficult to do this huge international coordination, 

but that doesn’t mean that it isn’t an effort that should continue 

to be followed very carefully. 

33 

But I think within the domestic United States, it would be the 

Treasury Department and the State Department, playing in some 

respects a co-lead, because Treasury, to Mr. Adams’ point, has the 

technical expertise a lot of times; the State Department has the 

reach around the world and obviously is the lead representative for 

the United States going abroad. 

Mr. BARR. Is Treasury, and specifically the Office of Technical 

Assistance, doing a good job in terms of prioritizing terrorist financing concerns? 

Mr. LOWERY. When we were in government, I think I would have 

said ‘‘yes’’ pretty clearly, and my guess is that the answer is probably still ‘‘yes’’ today. I just don’t know all the prioritizations anymore. 

Mr. ADAMS. Maybe if I could just make a comment as a consumer: When I was country director for Tanzania and Uganda in 

the bank for 7 years, the one regular visit I got was from the 

Treasury people working on anti-money laundering. It was the only 

developed country that focused on that, and they certainly gave me 

the best information, at the technical level, that I got. 

This was important in these two countries because they were 

both countries that have liberalized their foreign exchange and 

banking systems, so they had created banking bureaus. There was 

a lot of foreign exchange flowing through these bureaus. They were 

private sector entities; they were not government-owned banks. 

And the ability that Treasury brought to me to analyze, to explain where the problems were, and to explain what I had to know 

and what I had to follow up on the bank side—and I am sure they 

provided a similar service to the IMF—was invaluable for our focusing on some of the capacity-building issues and substantive policy issues we were working with Treasury and the Central Bank 

on. 

Mr. BARR. Given the growing threats and the expansion of terrorism, I think the Office of Technical Assistance (OTA) has about 

a $15 million a year budget. Are they adequately funded relative 

to the challenge? And are there a sufficient number of Treasury attaches deployed internationally? 

Mr. LOWERY. Almost assuredly not, but I would have to look at 

their budget and their prioritization. And obviously, they do technical assistance in areas that are not AML/CFT, as well, which are 

very important. But my guess is that they probably do not have a 

big enough budget. 

Mr. BARR. Any other comments? 

Mr. KIMMITT. I was just going to make a slightly related comment, and that is when we talk about funding of the international 

financial institutions (IFIs), and multilateral development banks 

(MDBs), I know that is a tough vote up here, and I think those organizations need to be held to the standard of what are they doing 

to advance U.S. interests for the taxpayer dollars we are putting 

in. 

One thing I would note, though: Isn’t it interesting that the most 

volatile part of the world, the Middle East, is the only region of the 

world that does not have a multilateral development bank? There 

is an Asian Development Bank, an African Development Bank, a 

Latin American, and even a European Bank for Reconstruction and 

34 

Development. There is not one in the Middle East. There is an Islamic Bank; there is an Arab Bank for Reconstruction and Development, but these banks are pretty idiosyncratic. 

If you really want to get at the core of what the problem is, it 

is the lack of economic opportunity in the Middle East. It is a cesspool breeding ground that produces Al Qaeda, ISIS, and the rest 

of these horrific groups. 

We have to go after them on counter-terrorist finance, but at the 

end of the day, if we do not get a growth strategy focused on the 

Middle East, we are going to be dealing with this generationally. 

Mr. BARR. Thank you. 

I yield back. 

Chairman FITZPATRICK. The ranking member of the subcommittee, Mr. Lynch, is recognized for 5 minutes. 

Mr. LYNCH. Thank you, Mr. Chairman. 

I know some of the Members were looking earlier in the hearing 

for a list of sort of bad actors and countries that were noncompliant 

or not helping in—we didn’t have the buy-in from them. FinCEN 

does issue an advisory periodically, and I know they sent this to 

me in January, but it lists a number of countries that are noncompliant to certain degrees. 

The most extreme noncompliance was listed for countermeasures. 

And these are advisories that are sent out to U.S. financial institutions, and they list Iran and the Democratic People’s Republic of 

Korea (North Korea) as being countries that would require countermeasures on the parts of our financial institutions. 

Myanmar is also listed as a country that requires enhanced due 

diligence, so it is sort of a warning to any U.S. financial institutions: If you are doing business in Myanmar, we advise you to be 

very careful and to apply enhanced due diligence in dealing with 

any financial transactions in that country. 

As well, there are a number of other countries here listed for 

structural deficiencies in their anti-money laundering and terrorist 

financing regimes, and those countries are—it looks like alphabetical order—Afghanistan, Algeria, Angola, Bosnia and Herzegovina, 

Guyana, Iraq, Panama, Papua New Guinea, Syria—obviously— 

Uganda, and Yemen. 

So Iraq, Syria, and Yemen you have—and Afghanistan—you 

have civil war, at least in some of those countries, and open conflict 

in others, so they pose a demonstrative—they do note that Algeria 

has made some progress in an action plan to remove those deficiencies. And Ecuador and Sudan, who had earlier been on that 

list, had also made significant progress in adopting technical 

changes and other measures to remove those deficiencies. 

So those are some countries that—in our discussion we were 

talking about which countries would probably require or would call 

out for the assignment of a Treasury official to that embassy, and 

I think all of the countries on that list where we do have embassies 

would probably satisfy that condition, and that is probably something we should look at. And perhaps the task force could advise 

the White House on providing enhanced Treasury presence at those 

embassies to help us in this effort. 

I don’t have any more questions. 

35 

I want to thank you very much for your advice. You have all 

made significant contributions to the discussion here, and we really 

do appreciate your work and your willingness to appear before the 

task force. Thank you. 

I yield back. 

Chairman FITZPATRICK. I thank the ranking member. 

Mr. Pittenger of North Carolina is now recognized. 

Mr. PITTENGER. Thank you, Mr. Chairman. 

And I thank each of you again for being here with us today. It 

means a lot to us, and your advice and counsel has been well-received. 

In the broader sense, we clearly have conflicting issues with Russia and with China. However, both of those countries have 

vulnerabilities from terrorists. Can they be a reliable partner overall in their process of addressing terrorism financing? 

Mr. KIMMITT. I actually find that countering terrorism and terrorist finance is one of the few areas where we do have a good dialogue with those two countries. And I would measure it by the U.N. 

Security Council resolutions that we were able to put into place 

precisely against the two countries mentioned by Mr. Lynch—that 

is Iran and North Korea—that had very strong financial sanctions 

elements in there, because both Russia, with its internal concerns, 

and China, with its concerns about terrorism and attacks, particularly in the western provinces, I have found take this pretty seriously. 

I am not saying that they are gold star recipients on this, but 

I would say that particularly if you work within that Permanent 

Five of the Security Council structure against some of these worst 

actors—Iran and North Korea would be the two exemplars—I have 

actually found that you can have good discussions with those two 

countries—Russia and China— on that subject. 

Mr. PITTENGER. Do you see them coming to the FATF level? 

Would they collaborate with us in terms of their own financial institutions inside their own country? 

Mr. KIMMITT. I think they would probably be more hesitant 

about that, but as their financial institutions seek to both make acquisitions abroad, branch abroad, and so forth, they know they are 

going to be held to those standards. I think it would be in their interest, but you have have to make them see that it is in their interest. 

Mr. PITTENGER. Russia is seeking loans today that seem like it 

may be a good time. 

From my experience, our government works government-to-government very well on issues related to intelligence collaboration. 

For example, with Germany they have worked very closely. However, when you get beyond the government and get down into the 

Bundestag, there has been very little awareness. 

I have had a series of forums to bring these individuals together, 

and met again with a number of Germans this weekend. They 

seem to be a very important asset, these parliament members. We 

had about 100 from 25 countries who have come to 3 different forums we have had. 

Do you believe that we should have a more engaged effort, not 

just with the governments, but to fully implement the issues that 

36 

we have, whether it is related to what we are talking about today 

or the broader context of terrorism financing, that we have to be 

more fully engaged beyond just the central figures of the government, but when they do have parliaments that we need to be full 

impact in terms of communication with them? 

Mr. Wechsler, you seem to have— 

Mr. WECHSLER. Yes. I completely agree. The relationship between the U.S. Congress and other parliaments around the world 

is a vitally important and, frankly, strategically underused tool of 

our—to advance U.S. national security interests, and it is something that I would greatly encourage any Member of Congress in 

the positions that you are in to actively pursue. 

Quite frankly, there have been times—present company here, of 

course, not involved—when Members of Congress have gone to a 

given country and want to meet with the military leaders or other 

maybe not-so-democratically elected leaders, and the U.S. Government policy is to encourage the strength of the parliament. There 

would be nothing better than to have the U.S. Congress meet with 

those parliamentarians and to help encourage them to be seen as 

a center of power in those, and it doesn’t happen as much as it 

should. 

Mr. PITTENGER. Thank you very much. I deeply appreciate you 

being with us today. 

I yield back. 

Chairman FITZPATRICK. The gentleman yields back. 

And I will now recognize myself for a couple of follow-up questions. 

Mr. Wechsler, could you expand on your proposal to encourage 

other countries to establish counterparts to the Treasury Office’s 

Intelligence and Analysis Agency within their finance ministries? 

Are you talking about other G7 and G20 countries? 

Mr. WECHSLER. Yes, that is exactly where I would start. It is 

very important, of course, for other countries to collect intelligence 

and analyze intelligence and to—on financial matters focused on 

terrorist finance, to not just rely on information that, frankly, we 

give to the United Nations or to them bilaterally, but to themselves 

be creators of intelligence. 

What we have found inside the United States is the innovation 

that, again, bipartisan across multiple Administrations and started 

under George W. Bush, was to have an office that is dedicated to 

doing this inside our finance ministry has really been beneficial. I 

have seen the benefits of it to the work that the Treasury Department does, but beyond the work that the Treasury Department 

does to the wider intelligence community and even extending to the 

military side. 

The recent bombings that have taken place where the military 

has targeted cash holdings of the Islamic State is—those happen 

because of the integration of financial-related intelligence to our 

military targeting system. Frankly, I don’t know if that would have 

happened as well as it has happened if not for the innovation of 

the creation of the Office of Intelligence and Analysis in the Treasury Department and the resulting higher priority of that kind of 

intelligence. 

37 

The fact of the matter is that many of the other countries that 

we cooperate with most closely who are wealthy and who can afford 

it have not made a similar commitment to that kind of financial 

intelligence, and then have certainly not made the decision, if they 

have done so, to house part of it in their financial ministry, thus 

giving it the kind of import that we have seen in the United States. 

Chairman FITZPATRICK. Why do you think it has not happened? 

Mr. WECHSLER. Frankly, I think sometimes the United States 

has good ideas first. And that is what we had with FinCEN, and 

over the next decade-plus, that model was adopted by members of 

FATF, starting with the G7. 

I think that it costs money, there are turf battles, like in any 

level of bureaucracy. These are all the things that we had to confront when, undoubtedly, my colleagues in the Administration went 

about the creation of that office. 

But again, it has been a very successful experiment. Not all of 

our experiments in the United States are successful, but this one 

was, and we should very strongly encourage our other partners to 

consider adopting it for themselves. 

When we created FinCEN, we didn’t say that every financial intelligence unit had to be exactly like ours, but we said you had to 

have something like it. 

Chairman FITZPATRICK. The ranking member, Mr. Lynch, is recognized. 

Mr. LYNCH. Thank you. 

What I will do is—Mr. Ellison has just arrived, and I know he 

has been very active, especially on the Somalia issue, and I would 

like to yield 5 minutes to Mr. Ellison. 

Mr. ELLISON. Well, let me thank the ranking member. 

And also, let me thank our chairman today. 

And let me thank all of our panelists today. I have been paying 

as close attention as I could being outside the room, but I have 

been watching and getting notes from my staff about today. 

And I know some discussion has focused on Somalia. At the risk 

of a little bit of duplication, I hope you won’t mind me just making 

a few notes. 

One is that I have probably as many, if not more, people of Somali descent in my district as anyone, in Minneapolis, and we are 

very proud of this community. They do tremendously good things 

for our district. 

And one of the things that came up recently that is really important is that the Somali parliament recently passed an anti-money 

laundering bill. I don’t know if you are aware of that; you probably 

are. 

But I am glad that I can share that with you because one of the 

things that has been holding things up in terms of making progress 

on remittances is Somalia kind of emerging from its civil war and 

sort of stepping into its own and taking on its own sovereignty as 

a nation and responsibility for its financial system. I hope that will 

help improve the situation for Somalia in receiving and remittances. 

They have made substantial progress. They are no longer a failed 

state. They are a fragile state, but they are making progress every 

single day. 

38 

And I wonder if you would mind answering—sharing your 

thoughts on this question. The Treasury Department, the World 

Bank, and others are engaged with the Somali Central Bank, and 

together they have made significant progress in weakening Al 

Shabaab. 

Mr. Wechsler, I wonder if you might offer your views: What 

should Treasury, FinCEN, and other banking regulators do to help 

Somalia stabilize its financial system and receive remittances? 

Mr. WECHSLER. Yes, I think you have touched on a very important issue, because of course for countries that are very poor that 

are in the process of developing and coming out of very difficult circumstances, legitimate legal remittances can be a very significant 

proportion of their gross domestic product. And we want to make 

sure that the people inside the United States who make their 

money legally are able to send it to their grandmother or their 

cousin to help them out. 

And as Secretary Lowery pointed out, the problem is from a commercial point of view, if you are a bank there is very little profit 

to be made by doing business with Somalia, but there is a very 

high reputational risk at stake because of the challenges of actually 

knowing your customer. 

The response from the Treasury Department and wider U.S. policy has, I think, been halfway there. The good part about it is we 

are trying to provide technical assistance and get them to create 

the laws and regulatory structures, which will take time. 

But even after doing it, U.S. banks are not going to be rolling 

into downtown Mogadishu any time soon. 

So if U.S. Government policy is, as it should be, that we have a 

strategic national security interest in building the new legitimate 

government of Somalia—we have literally spent tens, scores, 

maybe even hundreds of millions of dollars over the last two Administrations on military activities, assistance activities, police—to 

help get ourselves into the position where we are now, which is 

when we are about to send an ambassador in there, hopefully soon. 

Mr. ELLISON. Right. 

Mr. WECHSLER. Perhaps we could think of an innovative way to 

take some of the risk onto the United States Government’s shoulders that we have traditionally put on the banks’ shoulders. We 

have told them, ‘‘It is your job to know your customer,’’ which is 

by and large the right thing to do. 

But in this case, we have a market gap. The market is not going 

to fill it any time, so I think it is worth exploring innovative ways 

for the United States to work more actively with the private sector 

to sort of de-risk their activities in dealing with Somalia. 

Mr. ELLISON. Thanks for pointing that out. 

Does anybody else have a comment on what the United States 

should be doing in Somalia to stabilize things? Mr. Lowery? 

Mr. LOWERY. I think the World Bank is trying to figure out 

whether or not you could create some sort of a safe corridor for Somalia. I think those efforts need to be continued. 

I think the IMF could actually be of assistance in that area, but 

it is a difficult problem and I know, Congressman, you have been 

very eloquent on raising this issue for a while now. It is a tough 

issue. 

39 

I do think that it is important that it is kept on the radar screen 

of both our Treasury Department as well as our Federal Reserve, 

because they should continue to push to see whether there are solutions that get towards what Mr. Wechsler is trying to get at. 

Mr. ELLISON. It looks like I am like 17 seconds over. 

I just want to just get your response to this question: It seems 

to me that it is absolutely in the U.S. national interest to stabilize 

Somalia. We know now that failed states are attractive nuisances 

for terrorists, so it is in our interest to have stable, strong states 

so that they can partner with us to ward off these people. 

And yet, some of the policies that we have been pursuing, I think 

aren’t helping, because the remittances are going to Grandma or 

Cousin Joe. They are paying school fees; they are buying food. 

But are they going in suitcases? And if good money is going in 

suitcases, some bad money could also be getting in there by the 

same route. 

So in my view, somebody will hand—somehow coming up with 

something innovative is in our interest to do because we want more 

transparency so we can have more accountability. What do you all 

think about—how do you react to that statement I just made? 

Mr. LOWERY. I guess broadly, I agree. It is how innovative can 

one get, because in the end what will happen, of course, is that 

these are going to be private sector decisions as to whether or not 

I am going to do business in that country or send remittances. 

Mr. Wechsler raises a point—look, I have talked to people about 

it and they said, ‘‘Yes, all right, if the Federal Government steps 

in and indemnifies me maybe I will do this.’’ But that is a hard 

thing for the Federal Government to do. 

Mr. ELLISON. Mr. Lowery, I have never had a bank tell me they 

don’t want to do any business in Somalia. They say, ‘‘We would do 

it. We are trying to make it. We will do it. But the cost and the 

risk has to be commensurate with our business model.’’ 

And so that is really the nut to crack. 

Mr. LOWERY. I completely agree that it is a tough nut to crack, 

and I know that there are people at Treasury who are very concerned about it. They also want to crack that nut, but it is a costbenefit analysis just like you said, and I think that there are institutions that would like to do it but the costs right now—at least 

perceived costs—are too high. And so hopefully, if we could figure 

out a way to lower those costs, that would be helpful. 

Mr. ELLISON. Thank you. 

Chairman FITZPATRICK. The ranking member, Mr. Lynch, is recognized for 5 minutes. 

Mr. LYNCH. Thank you, Mr. Chairman, and thank you for your 

indulgence. 

We just did a survey. We went to the refugee camps right on the 

Syrian border in Turkey and in Jordan and in Lebanon, and talking about the issue of Somalia, they did have a sort of an ATM system set up right on that border. 

They are using IRS scans, but very small amounts of money, but 

they are allowing those refugees, and a lot of them are coming 

right out of an ISIS-controlled area so there is that terrorist concern. But they are able to conduct it in a way that at least small 

40 

amounts of money are getting to those people who desperately need 

it. 

And I am not sure we need—we might want to look at that 

model. The U.N. is running a lot of that program; USCIS is well 

aware of it. But we might want to look at that, as well. 

One of the things that worries me is we have a scorecard system 

that we use in different countries in conjunction with know-yourcustomer (KYC), and it is pretty low-tech. 

For instance, in the West Bank and in Gaza, we asked the Palestinian banking organizations there to report suspicious transactions, large cash transactions, things like that. But when I asked, 

when we were in Ramallah—even though there are high-rises 

going up all over the place, a lot of construction there, a lot of 

cranes; I am a former construction worker—how many suspicious 

transaction reports do we get out of the Arab Bank in the West 

Bank, the answer was zero; in Ramallah, zero. It was a little bit 

better, oddly enough, in Gaza. 

But how do we capitalize or, we use the carrot a lot, inducing 

people to do the right thing. But how do we diminish the ability 

of people from operating outside of the legitimate financial system 

with impunity at times? Is there a more effective way to induce 

compliance? 

Mr. LOWERY. It is a great question. You are getting at a good 

point, which is some of the technology improvements over the last 

few years would suggest that we should be finding more efficient 

ways to deal with the compliance problem. 

Some areas that are worth exploring are—there is something 

called the legal entity identifier, which is basically a way for institutions to know each other through kind of digits. And that is a 

way to try to start getting a better know-your-customer regime 

happening. 

In the country of Mexico, the central bank is actually looking into 

trying to figure out how to do this themselves. They have the same 

problem. Obviously, they are not as poor a country as Somalia, for 

instance— 

Mr. LYNCH. Right. Right. No, I understand. 

Mr. LOWERY. —but they are trying to do exactly what you are 

looking at, which is how do I find a technological solution to dealing with the know-your-customer issues and getting to the point 

where we can’t—there is going to be risk, and so it has to be how 

do you figure out the risks—it can’t be a zero tolerance for risk because otherwise you would just stop doing business. 

Mr. LYNCH. Right. Exactly. You can’t use the death penalty all 

the time. 

Mr. LOWERY. That is right. 

Mr. LYNCH. You are just pushing these people outside the system. There has to be a way for us to use leverage to get compliance. 

Mr. LOWERY. And then if you can find some solutions around 

that, I think your best leverage is the ones we kind of talked a little bit about earlier, which is the market leverage of, hey, I can reduce my costs if things are more competitive; and then some of the 

technical assistance type of leverage of carrots-and-sticks approach 

from our usual kind of tools that we have as a government, or 

41 

international financial tools like the ones that Mr. Adams was talking about. 

Mr. LYNCH. Okay. Last question, and I only have 25 seconds: The 

Hawala problem that the Wall Street Journal article, and I think 

the New York Times actually had a good article as well on the 

same issue, how do we get at that? It is an informal transfer system. Any ideas? 

Mr. KIMMITT. I thought you were moving toward the Hawala 

when you talked about how do we sort of watch the periphery and 

out, because Clay described what we try to do once people come inside, the digital system, and I think we are getting better at that. 

But I think externally, and particularly on the Hawala side, it 

comes down to good human intelligence and good intelligence relationships on the ground with that host country. 

So we have to make sure annually when the intelligence community puts together its NIT, its national intelligence topics, that this 

has a high enough priority for the human collection side of this and 

the collaborative side of it that we are getting that kind of information. 

Sometimes they can think that is pretty small-ball— 

Mr. LYNCH. Yes. 

Mr. KIMMITT. —but it doesn’t cost a lot of money to conduct a 

terrorist operation. 

Mr. LYNCH. Right. 

Mr. KIMMITT. It costs a lot more money to run a proliferation 

network, and you have to have access to the global financial system 

and move money around quickly on that. But for terrorist finance, 

unfortunately the amounts of money are relatively small, particularly to keep them going. 

I would ascribe a particularly high priority to that because by the 

time it comes to Treasury and their Office of Intelligence and Analysis, they are going to do a very good job with what they have, but 

Treasury is not going to have agents on the ground. I think for 

Hawalas and that informal network more broadly, it just comes 

down to human intelligence officers risking their lives to get information that helps save American lives. 

Mr. LYNCH. Thank you. 

I yield back. 

Chairman FITZPATRICK. The second round of questions is concluded. 

I would like to again thank our panel for their testimony here 

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. 

Without objection, this hearing is adjourned. 

[Whereupon, at 4:44 p.m., the hearing was adjourned.] 

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