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95–071 PDF 2015

A DANGEROUS NEXUS: TERRORISM, 

CRIME, AND CORRUPTION 

HEARING 

BEFORE THE

TASK FORCE TO INVESTIGATE 

TERRORISM FINANCING 

OF THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

MAY 21, 2015 

Printed for the use of the Committee on Financial Services 

Serial No. 114–27 

( 

(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: 

May 21, 2015 ..................................................................................................... 1 

Appendix: 

May 21, 2015 ..................................................................................................... 41 

WITNESSES 

THURSDAY, MAY 21, 2015 

Asher, David, Member, Board of Advisors, Center on Sanctions and Illicit 

Finance, Foundation for Defense of Democracies; and Adjunct Senior Fellow, Center for a New American Security .......................................................... 8 

Barrett, Richard, Senior Vice President, The Soufan Group ............................... 10 

Farah, Douglas, President, IBI Consultants LLC; Senior Non-Resident Associate, Americas Program, Center for Strategic and International Studies; 

and Senior Fellow, International Assessment and Strategy Center ................ 12 

Realuyo, Celina B., Professor of Practice, William J. Perry Center for Hemispheric Defense Studies, National Defense University ..................................... 6 

APPENDIX 

Prepared statements: 

Asher, David ..................................................................................................... 42 

Barrett, Richard ................................................................................................ 79 

Farah, Douglas ................................................................................................. 85 

Realuyo, Celina B. ............................................................................................ 95 

(1) 

A DANGEROUS NEXUS: TERRORISM, 

CRIME, AND CORRUPTION 

Thursday, May 21, 2015 

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 10:06 a.m., in room 

2128, Rayburn House Office Building, Hon. Michael Fitzpatrick 

[chairman of the task force) presiding. 

Members present: Representatives Fitzpatrick, Pittenger, Stivers, 

Ross, Barr, Rothfus, Schweikert, Williams, Poliquin, Hill; Lynch, 

Sherman, Meeks, Green, Ellison, Himes, Foster, Kildee, and 

Sinema. 

Ex officio present: Representatives Hensarling and Waters. 

Chairman FITZPATRICK. The Task Force to Investigate Terrorism 

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

is, ‘‘A Dangerous Nexus: Terrorism, Crime, and Corruption.’’ 

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 3 minutes for an opening 

statement. 

I would again like to thank Chairman Hensarling and Ranking 

Member Waters for working to establish this important task force 

and reaffirming this committee’s commitment to using its role to 

address the threat of terrorism, as well as my colleagues here 

today who will work to ensure its success. 

At our last hearing we demonstrated the breadth and scope of 

terrorism throughout the world, as well as how these groups have 

evolved in the face of a strong American response. While the 

United States has seen some success in shutting these groups out 

of the international financial system, like squeezing a balloon, this 

has lent itself to the creation of more sophisticated and diverse 

funding avenues for these terror organizations. 

Terrorist groups have become entwined with transnational criminal syndicates, or in some cases have evolved into the role themselves, engaging in criminal activities which yield greater profits 

than simply relying on state sponsorship or big pocket donors. 

2 

These activities range from, but are not limited to corruption, drug 

trafficking, human smuggling, and extortion. 

Place these funding methods on top of other non-traditional 

means discussed in our last hearing and it is easy to see that today’s terror organizations are often better financed than their predecessors even a decade ago. Today’s terrorist groups and 

transnational criminal syndicates thrive in highly insecure regions 

of the world. Terror organizations contribute to the continued regional instability and internal conflict, while organized crime exploits these environments for financial gain and corruptive influence. 

To witness the impact of this dangerous union, the United States 

has to simply look to the Tri-Border Area. This is a relatively lawless region along the frontiers of Argentina, Brazil, and Paraguay. 

It has become the base for Hezbollah’s illicit activities to fund its 

terror operations in the Middle East and around the world. 

Hezbollah has engaged in several of the criminal activities mentioned, and through them has succeeded in raising a substantial 

amount of money to bankroll their actions. In fact, according to a 

2009 Rand Corporation report, Hezbollah has netted around $20 

million a year in this area alone. 

It is this type of connection—the intersection between terrorism, 

crime, and corruption—that today’s hearing will focus on, including 

current techniques being used by these groups, effectiveness of the 

current U.S. policy in combating them, and where these tactics can 

be improved. Groups like Hezbollah, the Islamic State, and Boko 

Haram can no longer simply be considered terrorist groups. They 

have evolved into sophisticated global criminal conglomerates. 

In order to effectively combat such volatile threats, U.S. policy 

must evolve as well. That is the purpose for the formation of this 

bipartisan task force. It is my hope that today’s dialogue between 

our diverse group of members and the expert panel of witnesses 

joining us leads us to a better understanding of the challenges facing us and shapes our discussion of long-term solutions moving forward. 

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

member, and my colleague, Mr. Lynch from Massachusetts. 

Mr. LYNCH. Thank you, Mr. Chairman. And I want to thank 

Chairman Hensarling and Ranking Member Waters for their work 

on this, as well as your own, and that of Vice Chairman Pittenger. 

And of course, I thank our panelists this morning. Thank you for 

helping the task force with its work. 

Today’s Task Force on Terrorism Financing hearing will examine 

the dangerous nexus between terrorism, crime, and corruption. 

This hearing is particularly timely. The Director of National Intelligence, James Clapper, identified terrorism and transnational organized crime as among the top eight global threats to U.S. national security when he testified this past February before the U.S. 

Senate’s Committee on Armed Services. 

According to Director Clapper, both terrorist and transnational 

criminal groups thrive in highly insecure regions of the world, with 

terrorist groups contributing to regional instability and internal 

conflict, while transnational organized crime groups exploit these 

environments for financial gain and corruptive influence. 

3 

One example of this can be found in Venezuela. Earlier this 

week, The Wall Street Journal reported that the U.S. Drug Enforcement Agency and U.S. prosecutors in New York and Miami 

are investigating multiple high-level Venezuelan government officials, including Venezuela’s National Assembly president, on suspicion they have turned the country into ‘‘a global hub for cocaine 

trafficking and money laundering.’’ The investigations are a response to an explosion in drug trafficking in that oil-rich country, 

U.S. officials say. 

I bring up the example of Venezuela because Douglas Farah’s 

prepared remarks for today’s hearing discuss how a bloc of countries, led by Venezuela, now operate jointly both as a political 

project with an underlying goal of harming the United States and 

as a joint criminal enterprise. These countries are creating alliances across the globe with terrorist organizations, including 

Hezbollah, and the drug trade seems to be a huge source of the revenue propelling it. 

The U.S. Department of the Treasury’s Office of Foreign Asset 

Control previously sanctioned corrupt Venezuelan government officials pursuant to the Foreign Narcotics Kingpin Designation Act for 

acting for or on behalf of the Revolutionary Armed Forces of Colombia, which is the narcoterrorist organization. And that is often in 

direct support of its narcotics and arms trafficking activities. 

Furthermore, it is important to note that this crime, terrorism, 

and corruption nexus may not only play out in Venezuela, but in 

other parts of the world. As reported by the State Department in 

its April 2014 Country Reports on Terrorism, the Tri-Border region 

of South America that the chairman has just identified is reflective 

of the interrelationship between criminal activity, terrorism, and financing. 

According to the report, the Tri-Border Area of Argentina, Brazil, 

and Paraguay continues to be an important regional nexus of arms, 

narcotics, and human trafficking, counterfeiting, pirated goods, and 

money laundering, all potential funding sources for terrorist organizations. 

I hope that this hearing will shed more light on the scope and 

pervasiveness of such threats. I look forward to hearing the testimony from our witnesses so we can further examine these issues 

and potential solutions. 

Mr. Chairman, I thank you for your courtesy, and I yield back 

the balance of my time. 

Chairman FITZPATRICK. Next, I would like to recognize the vice 

chairman of the task force, Mr. Pittenger, for 1 minute. 

Mr. PITTENGER. Thank you. Thank you, Chairman Hensarling, 

for your leadership and vision in establishing this task force, and 

thank you, Ranking Member Waters, Chairman Fitzpatrick, and 

Representative Lynch for your leadership. Also, I really would like 

to thank the witnesses for joining us today. This will be a very important and very meaningful hearing. 

Understanding the link between terrorism and crime is a vital 

step towards understanding what efforts we can take to deter terrorism financing. How are terrorists coordinating with drug lords 

and for what benefits? How are they working with transnational 

criminals to move money through the financial system? How are 

4 

they utilizing the same smuggling routes today that have been 

used for years in the past? And what means that have previously 

not been utilized, like cyber warfare, should we be preparing for 

today? And the bigger question, what are we going to do to stop 

it? 

Knowing that we have ended the Threat Finance Cell, there are 

strong concerns that we don’t have the capabilities and the intelligence necessary to be effective in our goals. I also have concerns 

about the current effectiveness of intergovernmental cooperation to 

undermine the flow of money to terrorists. 

I look forward to hearing from the witnesses on these issues, and 

continuing the task force’s effort to counter terrorist financing. 

Thank you, Mr. Chairman, and I yield back. 

Chairman FITZPATRICK. The Chair recognizes the ranking member of the full Financial Services Committee, Ms. Waters, for 1 

minute. 

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

I applaud the bipartisan efforts surrounding this task force and 

believe it will serve us well as we work to guard against key 

threats to our national security. 

Today the task force will explore a dangerous new trend, the 

growing convergence of terrorism and crime. While terrorist organizations motivated by ideology and criminal enterprises driven generally by greed have generally been thought to operate independent 

from one another, the testimony from our witnesses today makes 

it clear that this is no longer the norm. Furthermore, in an age of 

globalization, the growing convergence of terrorists and criminal 

groups means that illicit networks once seen as a local or regional 

concern now have global security implications. 

While a whole-of-government approach is certainly necessary to 

tackle these issues effectively, I am hopeful that this task force can 

serve as a catalyst for action on these issues that fall squarely in 

our jurisdiction. In my view, a careful review of the deterrent value 

of our current anti-money-laundering and counterterrorism financing enforcement regime would be a good place to start. 

I yield back the balance of my time. 

Chairman FITZPATRICK. The Chair now recognizes the gentleman 

from Arkansas, Mr. Hill, for 1 minute. 

Mr. HILL. Thank you, Mr. Chairman. I am honored to be a member of this task force. My thanks to the leadership for its formation. 

I think it is important that we focus on: first, the transnational 

criminal organizations that are driven by profit; and second, how 

they interact with foreign terrorist organizations who are driven by 

ideology. When you combine those two things, you have a toxic 

soup. And we have seen many scary examples, as noted this morning, of the relationship between criminal activity and terrorist organizations that interconnect throughout the world. 

I am looking forward to this morning with our fine panel of witnesses to learning more about that and finding out how we can 

interdict that process and stop it. 

I appreciate it, and I yield back, Mr. Chairman. Thank you. 

Chairman FITZPATRICK. The Chair recognizes the gentlewoman 

from Arizona, Ms. Sinema, for 1 minute. 

5 

Ms. SINEMA. Thank you, Chairman Fitzpatrick and Ranking 

Member Lynch. 

Terrorism is an undeniable threat to our country’s security and 

global stability. Terrorist networks constantly develop new ways to 

finance their deadly operations and threaten America. 

Terrorists frequently leverage criminal networks for financing. 

To keep our country safe, we must be one step ahead of them, cutting off their funding and stopping their efforts. 

The Islamic State is one of the world’s most violent, dangerous, 

and well-financed terrorist groups. In 2014, ISIL generated approximately $1 million per day, predominantly through the sale of 

smuggled oil. That is why I have recently offered an amendment, 

which was accepted, to the National Defense Authorization Act 

(NDAA) to direct the Secretary of Defense, in coordination with the 

Secretary of State and the Secretary of the Treasury, to pursue efforts to shut down ISIL’s oil revenues and report on resources 

needed for these efforts. 

ISIL also recently captured the famed archaeological sites of Palmyra, raising the possibility that they will destroy or sell priceless 

artifacts to fund their militant violence. I look forward to working 

with my colleagues on both sides of the aisle to keep money out of 

the hands of terrorists and to find solutions that strengthen America’s security. 

I yield back. 

Chairman FITZPATRICK. We now welcome our witnesses. 

First, Ms. Celina Realuyo is a professor of practice at the William J. Perry Center for Hemispheric Defense Studies at the National Defense University. Professor Realuyo has been a U.S. Diplomat; an international banker with Goldman Sachs; a U.S. Foreign Policy Adviser under the Clinton and Bush Administrations; 

and a professor of international security affairs at the National Defense, Georgetown, George Washington, and Joint Special Operations Universities. 

As the State Department Director of Counterterrorism Finance 

Programs, Professor Realuyo managed a multi-million-dollar foreign assistance program aimed at safeguarding financial systems 

against terrorist financing. Professor Realuyo is a graduate of the 

Harvard Business School, the Johns Hopkins University School of 

Advanced International Studies, and the Georgetown University 

School of Foreign Service. 

Second, Dr. David Asher is an adjunct senior fellow at the Center 

for a New American Security, and serves on the Board of Advisors 

of the Center on Sanctions and Illicit Finance at the Foundation for 

Defense of Democracies. Over the last decade, Dr. Asher has advised the leadership of SOCOM, CENTCOM, DEA, and the Departments of Defense, Treasury, State, and Justice on top counterthreat finance priorities. 

Dr. Asher conceived of and spearheaded several of the highest 

profile anti-money-laundering actions in history. From 2002 until 

2005, Dr. Asher organized and ran the North Korea Illicit Activities Initiative for the National Security Council and the Department of State. Dr. Asher graduated from Cornell University and received his doctorate in international relations from the University 

of Oxford. 

6 

Third, Mr. Richard Barrett is a senior vice president at The 

Soufan Group, and a fellow at the New American Foundation in 

Washington, the Royal United Services Institute in London, and 

the Center for Research and Security Studies in Islamabad. 

From March 2004 to December 2012, Mr. Barrett served as the 

coordinator of the al Qaeda and Taliban Monitoring Team at the 

United Nations in New York. In 2005, he helped establish what became the United Nations Counterterrorism Implementation Task 

Force following the adoption by the General Assembly of the global 

strategy to counter terrorism in 2006. Before joining the United 

Nations, he worked for the British government both at home and 

overseas. 

And finally, Mr. Douglas Farah is currently the president of IBI 

Consultants LLC. He is also a senior non-resident associate at the 

Americas Program at the Center for Strategic and International 

Studies, and a senior fellow at the International Assessment and 

Strategy Center. Mr. Farah works as a consultant and subject matter expert on security challenges, terrorism, and transnational organized crime in Latin America. 

For the 2 decades before consulting, Mr. Farah worked as a foreign correspondent and investigative reporter for The Washington 

Post, covering the civil wars in Central America, the drug wars in 

the Andean region, conflicts and the illicit diamond trade in West 

Africa led by Charles Taylor, radical Islam, and terrorism financing. 

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

oral presentation of their 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 within which to ask their 

questions. 

On your table, for the witnesses, there are three lights: green 

means go; yellow means you are running out of time; and red 

means stop. The microphone, we are told, is very sensitive, so 

please make sure that you are speaking directly into it. 

With that, Professor Realuyo, you are now recognized for 5 minutes, and we thank you for your attention here. 

STATEMENT OF CELINA B. REALUYO, PROFESSOR OF PRACTICE, WILLIAM J. PERRY CENTER FOR HEMISPHERIC DEFENSE STUDIES, NATIONAL DEFENSE UNIVERSITY 

Ms. REALUYO. Thank you, Chairman Fitzpatrick, Vice Chairman 

Pittenger, Ranking Member Lynch, and members of the task force 

for the opportunity to appear before you today to testify on the 

dangerous nexus of terrorism, crime, and corruption that threatens 

U.S. national security at home and abroad. 

Illicit networks of terrorists, criminals, and their facilitators actively capitalize on weak governance, black markets, and corruption to challenge security and prosperity around the world. After 

examining the critical enablers of these networks, in particular financing, and illustrating the convergence of illicit networks in the 

case of ISIL, I will propose some specific measures to further leverage our financial instrument of national power to combat terrorism, 

crime, and corruption. 

7 

Illicit networks threaten the four key missions of the nationstate: to provide security; promote prosperity; safeguard the rule of 

law; and ensure that the government represents the will of the people. Illicit actors require critical enablers to realize their political 

and revenue objectives. They are leadership, personnel, illicit activities, logistics, communications, weapons, technology, corruption, 

and financing. 

Financing is the most vital enabler, since money serves as the 

oxygen for any activity. Consequently, following the money trail is 

instrumental to detect, disrupt, and dismantle these networks. 

Since 9/11, the United States has countered terrorist financing 

through intelligence and law enforcement operations, including the 

Iraq and Afghan Threat Finance Cells, public designations and 

sanctions, and capacity-building programs. 

As a result of these efforts, the al Qaeda operatives complained 

about a lack of funding for terrorist operations, and the Mexican 

cartels realized that they could no longer easily launder profits 

through banks. Other measures to combat the financing of terrorism and crime have also unexpectedly weeded out graft and corruption at the highest levels of government. 

Terrorism, crime, and corruption have existed since the dawn of 

time, but now they have gone global with record levels of profits 

and violence. In many cases terrorists, cartels, and gangs are better armed and funded than the very government services security 

forces responsible for confronting them. 

We are witnessing a dangerous convergence of terrorism and 

crime that threatens our national security. Convergence is the 

process of coming together and having one interest, purpose, or 

goal. Certain groups are demonstrating a hybrid terror-crime behavior, such as the Haqqani Network in Afghanistan, the FARC in 

Colombia, Hezbollah, and ISIL. 

All eyes are now on ISIL, with its brutal beheadings, military advances in Syria and Iraq, and dramatic foreign fighter flows. It is 

an example of convergence with its ambitions for a caliphate and 

profit-seeking criminal activity. ISIL requires significant financing 

to realize its evil agenda and is considered the richest terrorist 

group in the world. 

As you all know, it derives much of its income from illegal oil 

sales, with additional funding from extortion, kidnapping, stolen 

antiquities, human trafficking, and some donations from external 

individuals. 

One of the nine lines of effort of the U.S. strategy to counter ISIL 

is disrupting its finances. It is focused on disrupting its revenue 

streams, restricting its access to international financial systems, 

and targeting ISIL leaders and facilitators with sanctions. 

On the military front, Operation Inherent Resolve has conducted 

air strikes against ISIL oil infrastructure and supply networks in 

Syria and Iraq. As of May 8th, 152 targets have been damaged or 

destroyed, according to U.S. Central Command. 

This past weekend, U.S. Special Forces conducted a daring raid 

in Syria against Abu Sayyaf, a senior leader considered the chief 

financial officer of ISIL. This operation illustrates the growing importance of targeting ISIL’s finances and how valuable the finanVerDate Nov 24 2008 12:27 Oct 23, 2015 Jkt 095071 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 K:\DOCS\95071.TXT TERI
8 

cial intelligence collected at the target site could be to attack its 

networks. 

To counter illicit networks, we need to further leverage the financial instrument of national power, and I propose the five following 

measures. Number one, increase resources to government agencies 

to investigate and prosecute terrorism, crime, and corruption. 

Number two, retain the Afghan Threat Finance Cell and establish 

new ones to target emerging threats like ISIL. Number three, revitalize the interagency Terrorist Financing Working Group to coordinate all activities across agencies. Number four, dedicate a percentage of the fines from sanctions evasion and money laundering 

to directly support counterthreat finance programs. And lastly, promote public-private partnerships to empower the private sector to 

serve as our eyes and ears to detect financial crimes. 

In conclusion, we must understand the illicit networks that confront us and deny their assets to critical enablers. Stemming the 

flow of funding to groups like ISIL and Hezbollah can neutralize 

their virulent agenda. Only through comprehensive, proactive 

interagency and international strategies can we effectively combat 

terrorism, crime, and corruption around the world, and the financial instrument of national power is a critical tool of which we must 

take advantage. 

Thank you for your time and attention. 

[The prepared statement of Professor Realuyo can be found on 

page 95 of the appendix.] 

Chairman FITZPATRICK. Dr. Asher, you are now recognized for 5 

minutes. 

STATEMENT OF DAVID ASHER, MEMBER, BOARD OF ADVISORS, CENTER ON SANCTIONS AND ILLICIT FINANCE, FOUNDATION FOR DEFENSE OF DEMOCRACIES; AND ADJUNCT 

SENIOR FELLOW, CENTER FOR A NEW AMERICAN SECURITY 

Mr. ASHER. Chairman Fitzpatrick, Vice Chairman Pittenger, and 

Congressman Lynch, it is an honor to speak before you. I actually 

want to say thank you for caring about this issue. This is a very 

important issue. It is really not in the weeds. It is at the heart of 

the matter. Money is the sinew of war. And we are in a war 

against terrorists around the world whether people want to admit 

it or not. 

I want to highlight an experience that I have had. I have been 

involved in nearly 25 years of working against terrorism financing, 

doing financial operations against drug cartels, adversarial governments, weapons proliferation networks. I have sort of seen it all. 

But what I hadn’t seen until 2007 when I started to advise the 

Drug Enforcement Administration—which despite some raps recently is an awesome organization; it actually has done some incredible stuff for our national security, well above and beyond its 

remit—was a case where the United States itself has become the 

largest money-laundering vehicle for terrorists in the world. 

And that is the case involving the Lebanese Canadian Bank 

(LCB), a bank that was under the command and control of 

Hezbollah, and most particularly the element within Hezbollah, it 

appears—and this is still subject to being proven in court—that is 

9 

tied to terrorism, the Islamic Jihad Organization that attacked our 

embassy twice in the 1980s and killed hundreds of Americans. 

That organization is known as the external security organization 

of Hezbollah, and it controls the external security apparatus of 

Hezbollah, which reaches all the way into the United States of 

America itself. 

To garner profit and gain influence, they have engaged in something that I would call the criminal resistance; i.e., they have used 

the $80 billion U.S.-dollarized Lebanese banking system, which is 

the third-largest offshore financial center for dollars in the world, 

I believe, as a center point for their global money laundering empire. 

The United States has dozens of banks with correspondent relationships with Lebanon. The fastest-growing bank in Lebanon until 

3 years ago was called the Lebanese Canadian Bank. That bank 

was under the control of Hezbollah. 

Through DEA’s Operation Titan, which I had the honor to advise 

on from 2007 onward, the DEA was able to use undercover informants and other sources to penetrate. This is all in the public eye. 

I am speaking totally based on unclassified information and from 

a personal viewpoint only. 

This bank was engaged in buying primarily used cars in the 

United States and Europe and textiles in Asia as part of a massive 

money-laundering scheme in partnership with La Oficina de 

Envigado. That is the outfit that Pablo Escobar himself set up in 

the 1980s and 1990s to run the Medellin drug cartel. This is all in 

the Treasury Department’s Office of Foreign Assets Control (OFAC) 

documents you can find on the Web. 

So LCB was buying as much as a billion dollars a year in used 

cars in the United States, cars which were generating almost no 

profit actually, and exporting the cars to West Africa, where the 

money was commingled with narcotics trafficking proceeds coming 

out of Europe. That is the world we live in; it is very complicated. 

The drugs were flowing from Colombia primarily into Europe. 

The money was being couriered back to Lebanon, and being wired 

to the United States to buy used cars here, as well as buying used 

cars in Europe with cash, and it was making its way back into this 

Lebanese Canadian Bank which was at the center of Hezbollah’s 

money-laundering empire. 

So it is the largest material support scheme in the world and it 

remains the largest material support scheme in the world for a terrorist group. 

In 2010, the DEA began constructing a takedown strategy 

against the Lebanese Canadian Bank on which I helped advise. I 

am very proud of what we did. I won’t get into all of the details. 

We organized the designation of the Lebanese Canadian Bank 

under Section 311 of the USA PATRIOT Act. That cut it off from 

the United States, blew up the bank, $5.5 billion Hezbollah bank, 

bankrupt in 3 weeks. Thank you very much. So that was a success. 

We designated the drug kingpin from the Medellin drug cartel, 

Ayman Joumaa, who was at the center of this thing. He was indicted in the Eastern District of Virginia for laundering over a billion dollars a year for Los Zetas. He is indicted for his relationship 

10 

with the Lebanese Canadian Bank and designated as well. He is 

wanted for arrest. 

We went after the car parks in West Africa. We designated those. 

We had never designated a car park before. It was a huge success. 

But I am here to tell you that today, unfortunately, there are 

more cars being exported from the United States itself to West African car parks controlled by Hezbollah than there were when we 

made the designations in 2011 and 2012. 

Our policy is a great success of interagency cooperation, and 

international cooperation. I feel very proud of what the Bush Administration and even this Administration have done to try to 

make a dent in this. Unfortunately, it has not succeeded. I would 

like to discuss with you some measures which might help advance 

that success. 

Thank you. 

[The prepared statement of Dr. Asher can be found on page 42 

of the appendix.] 

Chairman FITZPATRICK. Thank you, Dr. Asher. 

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

STATEMENT OF RICHARD BARRETT, SENIOR VICE 

PRESIDENT, THE SOUFAN GROUP 

Mr. BARRETT. Thank you, Chairman Fitzpatrick, Vice Chairman 

Pittenger, Ranking Member Lynch, and distinguished members of 

the House Financial Services Committee. It is an honor to testify 

before you today on this issue of perennial concern. 

Although terrorism, along with other forms of violent crime, 

lacks a profit motive, any terrorist attack costs money, and it is 

reasonable to assume, therefore, that the less money that a terrorist group has available, the less able it will be to mount an attack. And if it does so, limited finances should result in limited impact. 

But terrorism of course by its nature is asymmetric, and it is 

asymmetric in all of its aspects, including financially. And even a 

relatively cheap attack can have a devastating impact. For example, the last al Qaeda attack in a Western country occurred in my 

country. 

On the 7th of July, 2005, four individuals associated with al 

Qaeda blew themselves up on the public transport system in London, killing 52 people. The official inquiry into the attack estimated 

that it had cost less than 8,000 pounds. That is about $13,000 or 

so. 

To quote from the report: ‘‘The group appears to have raised the 

necessary cash by methods that would be extremely difficult to 

identify as related to terrorism or other serious criminality. Khan— 

he was one of the group—appears to have provided most of the 

funding. Having been in full-time employment for 3 years since 

university, he had a reasonable credit rating, multiple bank accounts, each with just a small amount deposited for a protracted 

period, credit cards, and a 10,000 pound personal loan. He defaulted on his personal loan repayments and was overdrawn on his 

accounts.’’ 

So it was very difficult to detect. But despite the low cost of that 

attack and the unremarkable financial activity associated with it, 

11 

it had a devastating impact, of course, on the United Kingdom beyond the deaths. The cost to the U.K. economy was estimated at 

2 billion pounds just in the rest of 2005 alone. And the cost of the 

official inquiry itself, I might say, was put at 4.5 million pounds. 

So even an unsuccessful attack, which might therefore cost even 

less, can have a huge impact. Just think of the costs resulting from 

another plot that originated in the United Kingdom, the 2006 plot 

to blow up 7 airlines traveling to North America. The additional security checks imposed on airports as a result have cost billions of 

dollars. 

The point I am trying to make is that terrorism does not have 

to be expensive to be effective, whether in its primary objective of 

making people afraid or in its secondary objective of forcing governments to react. 

The second point is that terrorists can fund their operations 

through legal means, quasi-legal means, and illegal means. Legal 

means might include donations or the self-financing of the London 

bombings. Quasi-legal means might include the raising of income 

through traditional means by terrorist groups that control territory: taxing income; selling natural resources; and so on. Whereas 

illegal means of course might include kidnap for ransom or all of 

the other things we have heard about. 

And it is my belief that although terrorists have few qualms 

about how they raise money, they don’t have any preferred means. 

They do whatever is easiest and most effective. And they will raise 

money according to opportunity, aiming all the while of course to 

minimize effort and risk while maximizing their returns. And this 

complicates countering the financing of terrorism as the money 

used by terrorists is not necessarily criminally tainted before it is 

collected. 

Increasingly, terrorists are attracted to less governed areas of the 

world where they can establish bases and control territory. And inevitably too, these areas are ones that criminals use for their own 

transshipments of drugs or other contraband and things like that. 

And to this extent, terrorists have established a close relationship both with crime and with criminal gangs, though in my view 

they are more likely to take a cut from the criminal gangs than to 

join their rackets or compete with them. 

Terrorists and criminals who operate for profit are not natural 

bedfellows. Criminals see terrorists as dangerous both in and of 

themselves, and also in that they are likely to bring attention from 

the authorities. An official might easily be bribed to allow conventional criminal activity, but is less likely to agree to turn a blind 

eye to terrorism. Likewise, terrorists are suspicious of criminals as 

people who have no sympathy with their cause and might well attack or betray them if they saw profit in doing so. 

So the point I wanted to make, Mr. Chairman, was that although 

there is undoubtedly an association between terrorism and criminality, it is not necessarily straightforward nor even universal. 

Thank you. 

[The prepared statement of Mr. Barrett can be found on page 79 

of the appendix.] 

Chairman FITZPATRICK. Thank you, Mr. Barrett. 

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

12 

STATEMENT OF DOUGLAS FARAH, PRESIDENT, IBI CONSULTANTS LLC; SENIOR NON-RESIDENT ASSOCIATE, AMERICAS 

PROGRAM, CENTER FOR STRATEGIC AND INTERNATIONAL 

STUDIES; AND SENIOR FELLOW, INTERNATIONAL ASSESSMENT AND STRATEGY CENTER 

Mr. FARAH. Members of the task force, thank you very much for 

the opportunity to testify about the dangerous nexus among terrorism, crime, and corruption. I speak only for IBI Consultants and 

myself, not on behalf of the institutions with which I am affiliated. 

I am going to focus my remarks on Latin America, where we are 

seeing a convergence of these three factors in new and dangerous 

forms. 

The convergence of terrorism, transnational crime, and corruption are the core of what I believe is a significant strategic threat 

to the United States. I have described this emerging tier-one security priority as criminalized states. That is, states that actively use 

transnational organized crime as an instrument of statecraft, rely 

on the revenues from illicit activities to fund themselves, and often 

overlap this protective mechanism with terrorist organizations. 

In our hemisphere we are primarily seeing this in the network 

that emanates, I would argue, from Venezuela in the Western 

Hemisphere, where you have the political project, the joint political 

project among multiple nations whose underlying goal is harming 

the United States, as well as operating in a conjoined criminal enterprise. Rather than being pursued by law enforcement and intelligence services in these states in an effort to impede their activities, transnational organized criminal networks and protected terrorist groups are able to operate in more stable, secure environments, something that most businesses, both licit and illicit, crave. 

Rather than operating on the margins of the state or seeking to coop small pieces of the state machinery, these criminal groups in 

these states are able to concentrate their efforts at the state on 

multiple levels. 

Within that stable environment, a host of new options become 

available, from the sale of weapons to the use of national aircraft 

registries, shipping registries, the easy use of banking structures, 

the use of national airlines and shipping lines to move large quantifies of unregistered goods, and the acquisition of diplomatic passports and other identification forms. 

The threat originating in Venezuela is not confined to Venezuela. 

The late Hugo Chavez, acting in concert with his allies, Rafael 

Correa in Ecuador, Evo Morales in Bolivia, Daniel Ortega in Nicaragua, and Cristina Fernandez de Kirchner in Argentina, set out 

to redefine the political landscape in Latin America. Senior members of El Salvador’s current FMLN government are also allied 

with this movement. 

To a large degree this movement, self-described as the Bolivarian 

alliance, has been successful. Unfortunately, what their policies 

have wrought internally are massive corruption, rising violence, a 

disdain for the rule of law, and the collapse of institutions. 

On the strategic level this has brought new alliances with Iran 

and Hezbollah, Russia and Russian organized crime, China and 

Chinese organized crime, as well as Mexican drug cartels and the 

Colombian criminal organizations. The Revolutionary Armed 

13 

Forces of Colombia, FARC, a designated terrorist organization by 

the United States and the European Union, as well as a major 

drug trafficking organization, is directly supported by the 

Bolivarian nations as a matter of state policy. 

Such a relationship between state and non-state actors provides 

numerous benefits to both. The FARC and Hezbollah gain access 

to the territory of Bolivarian nations without fear of reprisals. They 

gain access to identification documents and access to routes for exporting cocaine to the United States and Europe, while using the 

same routes to imports large quantities of sophisticated weapons 

and communications equipment. 

In return, the Bolivarian governments offer state protection and 

reap the rewards of the financial benefits of the individuals, as well 

as institutions derived from the cocaine trade. Iran, whose banks 

have been largely barred from the Western financial system, benefit from access to the international markets through Venezuela, 

Ecuador, and Bolivian financial institutions, which act as proxies 

by moving Iranian money as if it originated in their own 

unsanctioned banking structures. 

There is significant new evidence of the criminalization of these 

states. The first is the recent investigation by Veja, a Brazilian 

magazine, showing that Venezuela, with the help of Argentina, actively tried to help Iran’s nuclear program in violation of international sanctions. 

The Wall Street Journal, as mentioned earlier, has a long list of 

senior Venezuelan administration officials being investigated for 

drug trafficking. The recent book, ‘‘Bumeran Chavez,’’ the ‘‘Chavez 

Boomerang,’’ which was just released, describes in detail from numerous eyewitnesses cocaine dealings at the highest level of the 

Venezuelan government and their contacts with Hezbollah and 

FARC operatives in officially sanctioned meetings and at the highest level. 

And the recent designation of Banca Privada d’Andorra by 

FinCEN as a foreign financial institution of primary money laundering control. 

All of these mechanisms allow for literally billions of dollars to 

slosh through states that are completely unaccounted for, both by 

legislative oversight or by any form of accounting. Understanding 

how these groups develop and how they relate to each other and 

form from outside the region, particularly given the rapid pace with 

which they are expanding their control across the continent and 

across the hemisphere, make this, I would argue, a tier-one threat 

and something critical that we need to understand and something 

that we often don’t look at in the underlying ideological 

underpinnings of the movement. 

Thank you. 

[The prepared statement of Mr. Farah can be found on page 85 

of the appendix.] 

Chairman FITZPATRICK. We thank all the witnesses for their testimony today, and the Chair will now recognize himself for 5 minutes for questions. 

At our first hearing of this task force, which was held last 

month, we had some testimony on the question of the Iraq-Afghanistan Threat Finance Cell. And because it was mentioned again 

14 

here today in Professor Realuyo’s testimony, I will ask a question 

the professor perhaps can respond to, and then I would like to hear 

the thoughts of each of the panel witnesses. 

And the question is whether or not a concept similar to the Iraq 

and Afghanistan Threat Finance Cell, if replicated in Latin America, could be an effective means to combat these terror criminal hybrid franchises that operate there in Latin America? 

Ms. REALUYO. One of the lessons learned, unfortunately, from 

our experiences in Iraq and Afghanistan, has been that interagency, and more importantly, collaborative fusion cells have been 

extremely effective, particularly when you are designing a list of 

targets, and more importantly, harvesting information that comes 

of a financial and economic nature, to actually incorporate it within 

our broader set of understanding these adversaries. 

In terms of Latin America, it would depend on different groups. 

Also, more importantly, since a lot of the activities are drug trafficking related, as well as human trafficking related, we would 

have to try to figure out which of the agencies would be the most 

suited. So it is a concept of actually creating a task force. 

In the case of post-9/11, the joint terrorism task forces that were 

established by the FBI are a model that has been studied by many 

academics such as myself, as well as other ways to actually leverage the know-how and then more importantly the resources that 

each of the agencies brings to bear. 

One other one which we did not discuss today is a very effective 

one under the U.S. Southern Command, which is the Joint Interagency Task Force-South, it is called JIATF-South, based in Key 

West, Florida. It actually is interagency with all of the uniformed 

services, but even more importantly, the intelligence and the law 

enforcement agencies represented there, as well as liaison, full-time 

liaison officers from other countries. 

Their primary mission is countering illicit trafficking, which already reflects the way that they are changing the look of the—it 

used to be just drug trafficking. They are actually are encountering 

a lot of precursor chemicals, as well as, sadly, alien smuggling 

going through there. So there is a greater way of how we can use 

these lessons learned, and then more importantly, apply them to 

what we call emerging threats. 

Chairman FITZPATRICK. Dr. Asher? 

Mr. ASHER. First, Celina is actually spot on. I do feel, though, 

that you need almost like an Untouchables-type approach to this 

stuff. You need a group of people who are in charge to go after this 

money and to have global authority to roam. The money goes global. You see more money being laundered through the Sinaloa drug 

cartel and Hezbollah today in China probably than anywhere else. 

But we also, as I note in my testimony, have a massive amount 

of laundering right through the United States, right through the 

purchase of used cars. We have designated this. We have identified 

it to banks. And guess what? People are still accepting billions of 

dollars a year in payments from places like Lebanon for buying 

used cars that are going to West Africa. 

We need a law enforcement, top-down, task force approach, and 

the law enforcement professionals and the prosecutors need to be 

held accountable for results. We know, based on overt evidence 

15 

that has been presented in court, that this is going on. So why is 

it still happening? 

I think the task force approach that you are interested in is very 

important, but I don’t think it can just be regional. I think it needs 

to be almost threat-specific. 

So Hezbollah, al Qaeda, why have we not applied the racketeering, the RICO charge against al Qaeda? It is a racket. Terrorism 

is against the law. And the reason it would matter on a financing 

level is we could go after, through long-arm capabilities, all their 

assets all over the world. And we have more than enough countries 

in the world that endorse terrorism as a national-level crime. 

Chairman FITZPATRICK. Dr. Asher, on the issue of trade-based 

money laundering, which you talked about in your testimony, what 

is your assessment of current U.S. policy? 

Mr. ASHER. Absolute interest and unfortunate ineffectiveness. 

And it is not for lack of effort. Everybody I have worked with, I 

have had a great honor and pleasure to work with. There are great 

people in our government. There is awareness of these issues that 

we never had before. There is awareness that we should go after 

the financial networks as a means to tackle the whole network. It 

is a revolution. I am very proud of it. But it is not working. There 

is more Hezbollah money being garnered in the United States 

today than there was in 2011 when we took the action. 

So we have to look at charging strategies like RICO. We need to 

approach these things more like organized criminal rackets than 

just terrorism. Terrorism almost honors these people. And we need 

to impose our OFAC penalties with much greater impunity and cut 

our financial system off, when necessary, from threats. 

Chairman FITZPATRICK. At this point, I am going to recognize 

Ranking Member Lynch for 5 minutes. 

Mr. LYNCH. Thank you. 

And, again, I want to thank the witnesses. We have had a chance 

to read your testimony, and it is very helpful. 

Dr. Asher, for a while there with the Lebanese Canadian Bank 

we had great success using Section 311 sanctions identifying them 

as primary money laundering concerns. And it was not just us, it 

was the financial community that saw them as toxic, and everybody backed away. So it basically shot them out of the legitimate 

banking system, especially the United States. 

Would this work if we expanded 311 to go after, say, the auto 

dealers in Benin or West Africa that are operating? If we continue 

to use that 311-type mechanism, would that be enough to choke off 

some of this funding? 

Mr. ASHER. Yes. In my written testimony I recommend that we 

need to look at imposing Section 311 against the actual nation of 

Benin. It can be done. It is a very extreme measure. I would propose that it is a very temporary measure. I don’t want to obliterate 

the economy of a West African state that is growing very fast. But 

their fastest-growing area is used cars coming from the United 

States that are going to provide material support for a terrorist organization. 

We have Section 311, which is a regulation, okay, and it can be 

lifted very easily to protect our Nation’s financial system against 

money laundering. There is most definitely massive money launVerDate Nov 24 2008 12:27 Oct 23, 2015 Jkt 095071 PO 00000 Frm 00021 Fmt 6633 Sfmt 6633 K:\DOCS\95071.TXT TERI
16 

dering going on here and most definitely it is going to a terrorist 

organization. And more of it is going to the military wing, we believe, of a terrorist organization, the one that has killed hundreds 

of American citizens in the past and is engaged in activities against 

their interests right now in the Middle East. 

We don’t have these laws on the books for nothing. But I do believe an enforcement approach is also critical. We can’t just impose 

sanctions and penalties and force the banks to be the enforcers of 

the law. We really need law enforcement to get into gear and to 

build financial cases against these complex conspiracies. They are 

very complicated, and they are very hard to prosecute, but it can 

be done. 

So I support a hybrid approach. But at the end of the day— 

Mr. LYNCH. Let me stop you there. I have another question. I 

don’t want to use all of my time. 

We have a problem coming up, which is the agreement that the 

Administration is trying to pursue with Iran. We have sanctions 

against Iran and a number of banks that had previously worked 

with them on nonproliferation issues, and those are major sanctions, the Iran Sanction Act, the Iran-Syrian Sanction Act. And the 

President is negotiating taking away those sanctions, dropping 

those sanctions in return for assurances and verification that Iran 

is not actively pursuing a military nuclear program. 

On the other hand, we also have a whole set of sanctions that 

are based on the work that you have been doing, which is Iran has 

also been financing Hezbollah, Islamic Jihad. According to Juan 

Zarate’s book, they even gave money to al Qaeda. 

So those activities, if we were to drop the sanctions and allow 

their economy to grow, what is to stop them from continuing that 

activity with respect to some of the work that the Islamic Revolutionary Guard is perpetrating, which is directly supportive of some 

of this illicit activity, the criminal activity that is happening in so 

many other countries? 

Mr. ASHER. There will be moral and human outrage if those laws 

are rescinded. Okay? At the end of the day, the terrorism record 

stands. For those of us who worked in the war in Iraq, we had 

more involvement in EFP and other IED-related attacks from Iran 

than almost certainly any other nation-state. 

I was the senior adviser to the United States Government for the 

Six Party Talks with North Korea. I know what multilateral nuclear diplomacy looks like. I also worked on the dark side to go 

after their finances in North Korea. I understand we have to have 

a hybrid approach sometimes in nuclear counterproliferation. But 

on terrorism we have to draw the line. 

Mr. LYNCH. Right. And so is your understanding that those sanctions, 311, things like that, that are targeted towards the criminal 

activity that have been enforced by banks, these banks that don’t 

want to do business with any bank that is doing business with Iran 

because of the criminal activity, those should remain, right? 

Mr. ASHER. The terrorism record stands. 

Mr. LYNCH. Right. Okay. 

Chairman FITZPATRICK. The Chair now recognizes the vice chairman of the task force, Mr. Pittenger, for 5 minutes. 

Mr. PITTENGER. Thank you, Mr. Chairman. 

17 

Dr. Asher, last March I asked Secretary Lew about the effectiveness of our intergovernmental communication and coordination as 

it relates to stopping the financing of terrorism, specifically, U.S. 

Customs and their full access of data with limited access by 

FinCEN. 

Do you believe that we should be looking more seriously at better 

coordination, particularly as it relates to trade-based financing? 

Should we be looking at and targeting this type of better cooperation? 

Mr. ASHER. I don’t want to dominate all the questions here. 

First, U.S. Customs is an awesome organization. Everyone deserves to take a look at what they do. They don’t get nearly enough 

credit. I have been so impressed by their data systems. They have 

probably stopped more terrorism than any other organization, including the CIA and the FBI. 

However, sharing data is very important. They are very good at 

receiving data. I think the ability to take some of their data and 

use it, for example, in organizations like FinCEN would be very 

proper and to the greater good because so much of the trade-based 

money laundering is going on in a way that is very difficult to 

measure. And one of the only ways to measure it is through things 

like bills of lading, these customs receipts that occur when you export something. 

And so to the extent that those data systems aren’t linked together, it holds us back in enforcing the law against these tradebased schemes. And trade-based money laundering is where it is at 

today for money laundering writ large. 

Mr. PITTENGER. Yes, sir. You mentioned Section 311 and how effective that was with the Lebanese Canadian Bank. And of course 

we saw how important it was in the Bank of Macau as it related 

to North Korea and other instances. 

Do you believe that this is a central focus we should have in 

terms of trying to force some of these institutions to not be able to 

exist utilizing 311? Do you think that there are other institutions 

out there that—clearly, we are in an unclassified briefing—should 

be a focus of our efforts? 

Mr. ASHER. Yes, it is the most powerful lever we have ever developed in financial warfare against adversaries. And it is something 

that needs to be utilized not every day, but periodically. It is an 

incredible coercive or tool. And there is nothing like cutting someone off from the United States financial system. It is not our job 

to offer access to terrorist groups and criminals to our financial system. When we see it happening, we should be allowed to cut it off, 

and 311 offers that opportunity. 

Mr. PITTENGER. Mr. Barrett, in your testimony you talked about 

smuggling and the link between terrorism and crime in some measure. Could you briefly compare ISIL oil smuggling and the smuggling used by Saddam Hussein to evade the Oil for Food Program? 

My sense is that ISIL is using the same routes and mechanisms 

and perhaps the same people, but the United States. And our allies 

haven’t succeeded in stopping this. Why haven’t we been able to 

deal with this the second time around and what should we be doing 

to stop it? 

18 

Mr. BARRETT. It is an interesting question, Vice Chairman 

Pittenger. Of course, the Oil-for-Food Programme was a huge 

agreement by the international community through the Security 

Council in 1991 with Saddam Hussein, as you said, with the government, and did allow a certain amount of export of oil in order 

to be able to allow the Iraqi government to feed its people. And 

that was open to many abuses, and it was indeed abused. 

But the scale on which Saddam Hussein was operating as a government, of course, was very different from the scale on which the 

Islamic State is able to operate, whereas Saddam Hussein, I think 

over the 12 or 13 years of the Oil-for-Food Programme, probably 

sold about $50 billion worth of oil. Of course, the Islamic State is 

selling perhaps now up to $2 million a week, so $100 million a 

year. 

And, also, whereas, the export of oil under Saddam Hussein was 

authorized and, therefore, done in a regular way, in the Islamic 

State, it is done very much in small scales out of sort of almost 

homegrown refineries into trucks, which may take it into Turkey, 

may take it into Kurdish areas, may even sell it to the Syrian government, or most of it, in fact, was probably sold and consumed 

within the area controlled by the Islamic State itself. So this makes 

it much harder for outside powers to control them, possibly Turkey. 

But, generally speaking, it is difficult. 

Mr. PITTENGER. Thank you very much. 

Professor Realuyo, you mentioned the transport and the illicit 

sale of oil going out of Iran through Turkey. 

Have we been effective at all in trying to minimize that? And 

what else could we be doing? 

Ms. REALUYO. There is the decision specifically to target the oil 

infrastructure through the military campaign that I described in 

my testimony, and there has been damage done. But the bigger 

problem is that we cannot actually outright destroy the actual supply routes that feed the regular illicit economy as well as the movement of people who are actually the innocents who are basically in 

the way of a lot of the ISIL. 

A lot of the market is actually driven by more localized consumption. So I have been asked a lot—having worked on Wall Street at 

one point, looking at oil markets, it is not—actually, this oil is not 

entering global OPEC markets. It is actually a question of how to 

stem the demand locally. A lot of it is crossing into Turkey, which 

is disturbing. But, more importantly, it is driven by those who are 

daily looking for a cheaper gallon of gasoline. 

Chairman FITZPATRICK. The gentleman’s time has expired. 

Mr. PITTENGER. Thank you. 

And correction: Iraq, that is through Turkey. Thank you. 

Chairman FITZPATRICK. The Chair now recognizes the ranking 

member of the full Financial Services Committee, Ms. Waters, for 

5 minutes. 

Ms. WATERS. Thank you very much. 

I would like to continue with the discussion about money laundering, and I am interested in pursuing information or closing, in 

time, money-laundering loopholes for persons involved in real estate closings. And this is, I suppose, a question for Ms. Realuyo. 

19 

An investigation recently conducted by The New York Times revealed the ease by which anonymous foreign billionaires can purchase luxury real estate in the United States with few questions 

asked. In fact, nearly half of the most expensive residential properties in the United States are now purchased anonymously 

through shell companies. 

One of the reasons few questions are asked about a buyer’s identity is because FinCEN has exempted persons involved in real estate settlements and closings from having to ask basic questions as 

part of maintaining an anti-money-laundering compliance program 

in accordance with the Bank Secrecy Act. 

The PATRIOT Act allows FinCEN to temporarily exempt certain 

entities from the requirement to establish anti-money-laundering 

programs. One of the exemptions was persons involved in real estate closings and settlements. 

Do you believe that large cash purchases of luxury real estate by 

anonymous buyers could pose money-laundering risks that need to 

be addressed? 

Ms. REALUYO. That has always been a question in terms of what 

we call covert institutions since, basically, the wake of 9/11, the 

idea that other businesses, including real estate, could be used to 

launder money as well as move funds that are of an illicit nature. 

Under the banking system, you are very well aware of the Know 

Your Customer practice. So there have been moves afoot not just 

in the United States, but around the world, to actually try to enforce a broadening of the coverage of who would be required to 

know your customer and, more importantly, taking a look at things 

such as real estate. 

I do a lot of work in Mexico, where this is a huge issue, of the 

cartels actually buying businesses, but, more importantly, real estate. And now there is a move afoot there for notary publics, who 

are critical in order to actually transact the purchase or the sale, 

to actually also be required to do reporting and due diligence on 

their clients. And it is something that we might be able to consider 

here in terms of the United States. as well. 

A lot of the flows of the money, particularly in real estate here 

in the United States, by foreigners is also suspect of tax evasion 

of their home jurisdiction, which is something that we should also 

be concerned about, particularly if that money is coming from corrupt governments abroad who are coming to seek financial safe 

haven within the United States markets. 

Ms. WATERS. Several years ago, I became interested in money 

laundering because we discovered that one of our national banks 

had purchased a lot of the small banks in Mexico that were known 

to launder drug money. 

And so, in taking a look at that, we discovered that our banks 

were not following any Know Your Customer policy. I don’t even 

think they had a registration on hand for one of the officials at that 

time—I think it was a brother of one of the presidents of Mexico— 

who had large sums of money in this bank. And, of course, the 

same thing was true with the Abacha brothers from Nigeria, who 

had all of their money in our banks. 

20 

While, of course, I am interested in this real estate aspect of it, 

you did mention—you brought up Know Your Customer problems 

with our banks. 

And given that the statute that I referenced allowed only temporary exemptions, do you believe it is time that those involved in 

these types of real estate transactions should be required to implement U.S. anti-money-laundering programs? 

Ms. REALUYO. Yes. And that is actually what we are trying to 

take a look at now. As financial innovations and new ways of moving and potentially laundering money or financing terrorism evolve, 

things such as the virtual world, we need to think about legislation 

that keeps up with these financial innovations in order to preclude 

dirty money from entering the U.S. system. 

Thank you very much for your interest on this topic. But anything that moves in terms of hiding money, the criminals and terrorists are very good at trying to circumvent our measures. 

Ms. WATERS. Thank you. 

And I suppose you are aware of the extensive article that was 

done about the Time Warner Center. And it is absolutely startling 

to take a look at the purchase of those properties and who is buying them and how it all operates. 

So I think that this information is very instructive, and it certainly should cause us to want to take a closer look at what we do 

about these kinds of real estate transactions. Thank you very 

much. 

I yield back. 

Chairman FITZPATRICK. The Chair now recognizes the gentleman 

from Texas, Mr. Williams, for 5 minutes. 

Mr. WILLIAMS. Thank you, Mr. Chairman. I appreciate it. 

I have two questions: the first one to you, Mr. Farah; and the 

second one to Dr. Asher. 

In your testimony this morning, you spoke about how countries 

likes Iran, whose banks are largely barred from the Western financial systems, have been able to gain access to international markets through countries in Latin America. 

Would you help this committee further understand what implications terrorists or criminal groups who are supported or allowed to 

operate in Latin America have on this country. 

Mr. FARAH. Thank you for the question, sir. 

I think that, if you look at the way Iran has penetrated the financial systems of the Bolivarian states—particularly where I have 

documented it is in Venezuela and Ecuador, where you have Iranian banks setting up under falsified banks and operating as Venezuelan banks or, in the case of Ecuador where the president of Ecuador authorized a small state-owned bank to become a channel for 

Iranian money and authorized it explicitly and they were going to 

have their communications encrypted and the encryption key for 

the financial communications was going to be held in the Iranian 

embassy—that is a little unusual, I would say, for a normal banking structure. 

And I think that what—the problem in this setting is that when 

you have a state sanctioning those activities, no one is going to investigate them and no one is going to move further down the road. 

21 

And that goes the point of the absolute impunity that the state 

cover provides. 

So once you have a state that is willing to use either 

transnational organized criminal organizations or terrorist groups 

or both as part of their state-sanctioned policy as opposed to what 

we see perhaps in Mexico, what do the narcos want? They want a 

judge who won’t condemn them. They want a border guard who 

will let them cross. They want a policeman who will let their things 

go by. 

What these guys—the new construct in Latin America is entirely 

state-protected and state-driven, and I think that is a fundamental 

shift. And I think that opens the door for what you see Hezbollah 

doing in the region, what you see Iran doing in the region, what 

you see ETA from Spain doing in the region, which is having unfettered access to financial institutions in ways that would not be possible without direct state participation. 

Mr. WILLIAMS. Thank you for your answer. 

Dr. Asher, let me visit with you really quick, and go back to the 

used car situation. 

What was the number of used cars you said were going out of 

this country? Was it a billion dollars? 

Mr. ASHER. Just to Benin alone, it may be as much as a billion 

dollars. 

Mr. WILLIAMS. Okay. So my question is: Who is buying these 

cars? Were they buying them in auctions? Were they buying them 

from dealers? Were they buying them from individuals? Where are 

these cars being purchased? 

Mr. ASHER. They are buying them in auctions, typically. The 

money is coming out of Lebanon. It is thousands and thousands of 

people. I think that CBP has probably denied thousands of visas 

for people from Lebanon. It is an unfortunate thing for our relationship with Lebanon, but there are people coming here who are 

being told, ‘‘Go buy cars’’ and they just do it. 

They are going to get a big cut on the payment because it is drug 

money. There is a profit associated with it. So they don’t really care 

how much money can be made on the car transaction itself. They 

just want the car because, without the car, they can’t launder the 

money. So they buy them. 

You see it at a lot of car lots just in the State of Virginia or in 

the City of Baltimore. You go there and you see all these cars sitting there and you never see anyone in the car lot. Ask yourself 

who is running the racket. They season these cars on these lots. 

They sit there for a few days and then they are off on a boat to 

West Africa to car lots owned by Hezbollah. 

Mr. WILLIAMS. Now, did you say that the cars they are buying 

are around $2,500 or do they— 

Mr. ASHER. There are a lot of cars they are buying that are below 

the $2,500 Customs threshold so they don’t come into our statistical database. 

Mr. WILLIAMS. Okay. 

Mr. ASHER. It is sort of interesting. They know our laws better 

than we do. 

Mr. WILLIAMS. So they are beating the system. They know how 

to beat the system. 

22 

Mr. ASHER. They know how to beat the system. These guys are— 

they are really brilliant, actually. 

Mr. WILLIAMS. How are those cars being paid for? Cash, at the— 

Mr. ASHER. No. Typically, it is wire-transferred. So the banks are 

involved, and this is an issue. I don’t want to blame our bankers. 

Our bankers are trying very hard to enforce anti-money-laundering 

and probably are given a hugely onerous responsibility to do so. 

What we need to do is we need to target the Lebanese, who are 

sending the money, and we need to say that this typology, which 

is subject to Section 311 of this USA PATRIOT Act, is a moneylaundering typology for terror and it shall be banned until it can 

be proven otherwise not involved with terrorism. 

Mr. WILLIAMS. And then you said this, but, again, tell us, so they 

get these cars. How are they being used? 

Mr. ASHER. They are being driven around Nigeria by relatively 

poor people who want a cheap car. There is nothing wrong with the 

cars themselves. What is wrong is that they are buying them as 

part of a money-laundering scheme. 

Mr. WILLIAMS. I am in the car business, is the reason I am asking, and I want to talk to you later. Okay? 

I yield back my time, Mr. Chairman. 

Chairman FITZPATRICK. The Chair now recognizes the gentleman 

from California, Mr. Sherman, for 5 minutes. 

Mr. SHERMAN. Much of our U.S. Government is doing an outstanding job. Some agencies aren’t. I have an example that may 

beat the ones of our witnesses, an example where giving money to 

terrorists is not only easy; it is tax deductible. 

In 2009, I brought to the attention of the IRS that an organization called the IFCO, which was a 501(c)(3) organization, had on 

its Web site, ‘‘Give us the money and we will give it to Viva 

Palestinia and then Viva Palestinia will give it to Hamas.’’ 

It took them 4 years to take it seriously. Then, in October 2013, 

the organization put on its Web site the IRS report as to why the 

organization should lose its tax-exempt status and used it as a 

fundraising device, saying, ‘‘Look, the IRS doesn’t like us. Give us 

more money. We will give it to Hamas.’’ 

And even today, somebody who looks at the list of organizations 

to which they can give tax-exempt contributions, can give it to the 

IFCO. So I think just the fact that we make it a little easy for the 

terrorists, I have you beat. We make it tax-deductible. 

Remittances: a lot of ordinary Americans want to send money to 

Somalia to their relatives. Would it make sense for the United 

States to green-list licensed organizations where if you give them 

the money, the money will go to an individual Somali relative? 

Now, of course, there is always a possibility that your relative 

has been seduced by terrorist propaganda and gives some of the 

money to terrorists. But at least, if the money gets to the relative 

of an American, does it make sense for the United States Government to give Americans an avenue where they can feel relatively 

safe? 

Do we have a witness who wants to answer that? 

Mr. Barrett? 

Mr. BARRETT. Can I address that? 

Mr. SHERMAN. Yes. 

23 

Mr. BARRETT. Somalia is a very good example. Many, many Somalians rely on remittances to feed their families and to keep 

going. So it is an essential area of income for them. And, of course, 

in Somalia, they aren’t operating banks. And so, many of these remittances are made through hawalas and so on, informal systems. 

You noticed the other day that, after the Garissa attacks in 

Kenya, the Kenyan government wanted to shut down some of these 

remittance services because they reckoned they were also funding 

terrorism. But, of course, there was a huge outcry internationally 

because it would mean so many Somalis were disadvantaged. 

So I think that your question is absolutely right. What needs to 

be done is to be able to bring these informal systems into a more 

formal structure rather than banning them and trying to push 

them out. And one of the problems that we face now is that formal 

banks are very unwilling to offer banking services to hawalas because they fear the regulations and so on. 

Mr. SHERMAN. Thank you. 

I want to move on to another issue, ISIL and the Iraqi government. One of the best ways ISIL has financed its uppermost successful way is seizing a lot of currency. What various countries 

have done is they have issued new currency, replacing old bank 

notes with new bank notes. This is incredibly inconvenient for 

criminals and corrupt politicians, say in Baghdad, just as it would 

invalidate the bank notes stolen at the Mosul regional bank by 

ISIL. 

First, does anyone here have a good estimate as to the value of 

the bank notes seized by ISIL? I have heard various reports. I don’t 

see anybody— 

Mr. BARRETT. I think it is very hard to say. In Mosul, they were 

alleged to have stolen $500 million worth, but whether that was in 

gold or in bank notes or what— 

Mr. SHERMAN. You would hope that the Iraqi government would 

at least know the gold and currency it had in its bank before its 

American armed troops turned tail and ran and left the money for 

ISIL. But it goes beyond that. 

The government is paying salaries to bureaucrats in Mosul, and 

that money is freely taken by ISIL. It is my understanding—and 

I would like Mr. Barrett or any other witness to respond—that the 

Iraqi government is sending electricity into Mosul free and then 

ISIL gets to collect from the utility users. And I get conflicting arguments or propaganda—well, I don’t want to use the word ‘‘propaganda,’’ ‘‘spin’’ from our government. 

Half of the time the Iraqi government is boasting that they are 

undermining ISIL’s support by making it impossible for ISIL to 

provide good governance, and the other half of the time they are 

saying, ‘‘We care about the people governed by ISIL and want to 

make sure their lives are comfortable.’’ 

Finally, there is the oil that the Professor spoke about, the oil 

wells. It is hard to—we can bomb the oil wells. We have chosen to 

not do that because we want to make sure that Mosul motorists are 

not inconvenienced. 

Ms. REALUYO. More importantly, the bigger question is after you 

bomb the oil wells, whomever is going to hopefully take back that 

24 

territory in a legal manner, this is a bigger question of infrastructure—right?—in terms of—that is actually the question. 

They have been targeting those mobile refineries because they 

are taking a look at the supply chain just like any business in 

terms of— 

Mr. SHERMAN. Professor, I know they are bombing the mobile refineries. I have asked about bombing the oil wells. We didn’t hesitate to bomb factories in France in 1941 and 1942 when we were 

serious. 

I yield back. 

Chairman FITZPATRICK. The gentleman yields back. 

The Chair now recognizes the gentleman from Maine, Mr. 

Poliquin, for 5 minutes. 

Mr. POLIQUIN. Thank you, Mr. Chairman. I appreciate it. 

And thank you all very much for being here today and dealing 

with this new dimension of terrorism financing. I encourage everybody to continue to do your good work to make sure our country 

stays on offense and make sure we do everything humanly possible 

to stop the flow of funds to terrorist groups that threaten our 

homeland. 

I am a little bit concerned today as we go down this path and 

now all of a sudden we see a marriage between organized crime 

and terrorism and so it is an additional source of funding to terrorism. And I know all of us in this country are getting increasingly alarmed by the savagery that we see over in the Middle East, 

in particular, dealing with these organizations. 

I would like to follow up with you, Professor Realuyo, if I can, 

with Mr. Lynch’s question dealing with the Administration’s negotiations currently with respect to a nuclear deal with Iran. 

And if, in fact, sanctions are lifted that are currently imposed on 

Iran, freeing up roughly $125 billion, $150 billion of cash to that 

country, what might that do with respect to the increased marriage 

between organized crime and terrorist funding? 

In particular, could you walk us through, to the best of your 

knowledge, knowing that you have a background in international 

banking and, also, national security, what would happen next? 

Ms. REALUYO. One of the concerns that several of us have who 

are looking at different scenarios of how the Iran nuclear deal 

might turn out—one of the objections that several who are, I say, 

proponents of the sanctions regime, the sanctions brought the Iranians to the negotiating table. That is clear. More importantly, the 

Iranian economy is so suffocated now because of the sanctions. 

One of the scenarios that the Iranians would like is immediately 

upon signature of the agreement that there would be an automatic 

lifting of the sanctions. And it is very hard to put back in place the 

genie that is out of the bottle. The bigger issue, too, is you have 

now a global sanctions regime. 

And you know the United States issues sanctions as well as the 

EU and other countries and then, more importantly, on an international level. Once you actually have countries who are hoping to 

do business with Iran, not necessarily the United States, see the 

opening of the lifting of the sanctions, it will be very hard to actually apply what are these so-called snapback sanctions. 

25 

More importantly, you will see that they will be able to enter 

into the global economy licitly as well as illicitly. And, as we all 

know, Iran is a state sponsor of terrorism, as declared by the State 

Department. But, more importantly, it is the godfather and patron 

of Hezbollah, which we haven’t raised today, and is actually supplying the foreign fighters for the Assad regime in Syria. 

It is so complex and convoluted. But if we take a look at it from 

an economic point of view, other countries who would like to do 

trade with Iran or, more importantly, get access to the oil that Iran 

produces, once you lift the punitive measures of the sanctions, it 

would be very, very hard to backtrack and re-impose them. 

Mr. POLIQUIN. Let’s drill down, Professor, a little bit more, if we 

can, please. 

Assuming those sanctions were to be lifted—and, as you stated, 

Iran is a sponsor of terrorism throughout the Middle East, whether 

it be Syria or Somalia or Yemen—what would be the mechanics? 

What would we see if you were involved in the international 

banking community with respect to how the lifting of those sanctions might facilitate organized crime interconnecting with terrorism activities? And how might the Iranian regime be involved, 

specifically, to facilitate that? 

Ms. REALUYO. You would actually list first the financial sections, 

which means that Iran would be able to bank globally, which is 

perhaps the most painful of the sanctions piece. 

More importantly, if we take a look at it from a physical trade 

piece, their ability to actually think about importing or exporting 

components that perhaps could be used for other nuclear aspirations. 

In terms of the bank itself, we all—and when I was working at 

Goldman Sachs, I did a ton of compliance. And, more importantly, 

there are several who are anticipating—not necessarily U.S. institutions, but other global financial actors, who are going to see this 

and seize the opportunity to increase their physical ability to access 

Iran. 

Once Iran actually also lines its coffers with more money, they 

will be able to use that money, particularly since there is not a lot 

of difference between the state and the private sector, the way we 

have it here in the United States, and that is the thing that we 

fear. 

Doug Farah and I spent a lot of time taking a look at how Iran 

and its, let’s say, actors in the region and Latin America could also 

destabilize other parts of the world with its nefarious agenda. 

Mr. POLIQUIN. Thank you very much. 

I appreciate everybody being here. And let’s stay on offense. 

Thank you. 

I yield back my time. Thank you, sir. 

Chairman FITZPATRICK. The gentleman yields back. 

I now recognize the gentleman from Texas, Mr. Green, for 5 minutes. 

Mr. GREEN. Thank you, Mr. Chairman. 

And I thank the witnesses for appearing as well. 

And, Mr. Chairman, I am very much concerned about the notion 

that we should follow the money, but I am also concerned about following the counterfeit money, what is called ‘‘supernotes.’’ 

26 

This currency is so finely tuned that sometimes it is very difficult 

to be detected but for some sort of special technology. As you know, 

the dollar is the reserve currency for most of the world, and there 

is a war for currency supremacy. 

My concern—or maybe I shouldn’t be concerned, and I will let 

you tell me—is whether or not these supernotes flowing in and out 

of our country and into other countries can pose some sort of threat 

to security in this country in the long run. 

I do understand that we retooled our currency, but I am still concerned about nationals larger than terrorist organizations, countries, if you will, that can play a role in devaluing and creating 

mistrust in our currency. 

Does anyone care to respond? 

Mr. ASHER. Having overseen the multiyear initiative for the U.S. 

Government against North Korea’s illicit financial networks, including supernotes, I guess I can comment. 

It has been a very costly endeavor for the United States. We 

have had to redesign our currency twice as a result of North Korea’s national-level counterfeiting of our currency. I do not know 

that they have succeeded at counterfeiting the latest iteration of 

the $50 and $100 bills, though. 

Congressman, I definitely appreciate your interest in this and 

concern. It is a concerning issue. It has cost us hundreds of millions of dollars to redesign the currency over the years. 

And North Korea did spur on several huge bank runs overseas. 

In Taiwan, I think we had over $500 million in bank runs in just 

a period of a couple of weeks back in 2003 or 2004. 

So the amount of money that the regime in North Korea has actually garnered from supernote circulation is probably not as high 

as some people think, but the damage they have done is considerable and the damage they could do. 

And if they can indeed counterfeit the security features on the 

new notes, it would be—first, it would be pretty incredible technologically. But they have been pretty good up to now. They have 

managed to do it four different times, I believe, with notes. 

And we know that they are essentially printing their notes and 

our notes that they are making, their version of our notes, on their 

printing presses. North Korea is using its absolute best capabilities 

here. So, it is a concern. I think that the Department of the Treasury is very much on top of it. 

But the bigger issue is, why didn’t North Korea get prosecuted 

when we investigated them? The State Department played a very 

big role supporting the Department of Justice. The FBI had an incredible investigation into North Korea’s supernote activity, including its ties to the official IRA and its ties to Japanese terrorist 

groups from the 1970s. And it was just wild stuff, featured in Vanity Fair and Wall Street Journal articles and things. 

President Bush, whom I had the honor to serve, decided that it 

was too controversial and we couldn’t press charges against the 

Kim regime at the same time we were negotiating with them. 

And, of course, I was negotiating with them and I was involved 

in trying to press charges against them at the same time. I didn’t 

understand the reason not to do that. The North Koreans knew 

27 

darn well what they were doing, and somebody needs to be held accountable, but we didn’t do it. 

That evidence still exists. In theory, somebody could make a 

case. The statute of limitations probably doesn’t expire against a 

state sponsor of terrorism, if we—at least it was at the time. 

Mr. GREEN. Mr. Asher, if I may, I appreciate your answer. I do 

want to interrupt for this reason. I have one other question for you. 

This one relates to knockoffs. I want to move to a more pedestrian 

level now, if I may. 

Knockoffs: we see a lot of it on the streets. And the question is, 

to what extent are these knockoffs related to either networks of 

criminal activity—not just as individuals, but networks—and, also, 

the possibility of being linked to terrorism? You talked about cars. 

Mr. ASHER. The largest export for North Korea, believe it or not, 

is counterfeit cigarettes coming out of North Korean governmentcontrolled criminally-run factories. They are making maybe as 

much as $700 million to a billion dollars a year in revenue on 

these, and we have them trafficked all the over the United States. 

Frequently, they appear in the press as coming out of China, but 

they are actually just coming through China because North Korea 

doesn’t export directly to the United States, particularly. 

So is it benefiting the regime? Absolutely. Is it benefiting the 

most despicable dangerous elements of the regime? Absolutely. Are 

they tied into transnational organized crime? 100 percent certain. 

And we have proven it in court repeatedly. So you should be concerned. 

Mr. GREEN. Thank you, Mr. Chairman, for the time. I yield back. 

Chairman FITZPATRICK. The Chair now recognizes my colleague 

from Pennsylvania, Mr. Rothfus, for 5 minutes. 

Mr. ROTHFUS. Thank you, Mr. Chairman. 

Mr. Farah, you point out in your testimony that Iran, whose 

banks are largely barred from the Western financial system, benefits from access to the international financial market through Venezuela, Ecuador, and Bolivian financial institutions which act as 

proxies by moving Iranian money as if it originated in their own 

unsanctioned financial systems. 

Can you explain on a practical level how Iran was able to use 

these institutions to evade international sanctions regimes, and 

what the United States has tried to do, clearly unsuccessfully, to 

prevent this? 

Mr. FARAH. Thank you, sir. 

There are two specific cases that I can go into, in some detail. 

One is the Banco Internacional de Desarrollo in Venezuela, which 

was set up as a Venezuelan bank, but all of its directors were Iranian. 

And when I and some others dug up the initial documents showing that, in fact, the directorships were all Iranian citizens and it 

was operating, in fact, as a subsidiary of an Iranian bank, not as 

a Venezuelan bank, as the Venezuelan government had claimed. 

OPAC eventually—the Treasury Department eventually sanctioned 

them. And they are now functioning, but at a much smaller level 

than they were before, but they still have the Iranian influence. 

The other case is the case of COFIEC Bank in Ecuador, where 

we were able to get the records of some investigative journalists in 

28 

the region, and I was able to supplement it with some other stuff. 

I got the records of the meeting between President Rafael Correa 

and President Ahmadinejad in February 2012, and President 

Correa eventually acknowledges these documents were legitimate. 

So we don’t have the debate over whether this was real or not. 

President Ahmadinejad asked President Correa for a bank. President Correa says, ‘‘Oh, I have a bank for you, COFIEC Bank,’’ 

which was a national bank that was virtually nonfunctional at the 

time, but still existed as a bank. So it didn’t have to register the 

bank. 

After they reached that agreement, President Correa sent the 

president of the Central Back of Ecuador with a delegation to Iran 

to negotiate which bank they would—with whom they would have 

correspondent relationships. 

On their way there, they stopped in Russia on the first stop and 

opened an account in a Russian bank that maintains corresponding 

banking relations with Iran. So, therefore, you could have interbank transfers without registering through the Swiss system. 

Then they go down and they negotiate with the Iranian banks. 

There are communications from the people on the delegation saying, ‘‘These are all sanctioned banks. Is it okay?’’ And the Ecuadorian government says, ‘‘Yes. Go ahead.’’ 

Mr. ROTHFUS. Are there policies that we could implement to better prevent this from happening? 

Mr. FARAH. Absolutely. I think that one of the things you are 

seeing now in the construct I have described in Central America 

where you have literally billions of unexplained dollars washing 

through banks is they have regular correspondent relationships 

with the United States, there would be multiple things which Dr. 

Asher led on the Lebanese Canadian bank-type thing. 

The chairman’s first question was, ‘‘In Latin America, would 

those joint task forces be good?’’ Those guys are looking at pocket 

litter and different things and did very well in what they did. 

What we are looking at now is state-run banking systems where 

we have multiple banks in Central America that are growing exponentially with no rational explanation for that. We have banks in 

Panama that are doing exactly the same thing. 

Mr. ROTHFUS. Would any measures we take, though, be moot by 

a lifting of sanctions with respect to Iran’s banks? 

Mr. FARAH. I think that it would make it much more difficult. 

I think that, as Professor Realuyo said, once the sanctions are lifted, the snapback is not going to be very rapid or nearly as enforceable as the initial sanctions— 

Mr. ROTHFUS. Let me bring the professor in for a minute there, 

because in your testimony one of the measures that you identified 

to counter these illicit networks was to maintain a vigorous designation and sanctions regime against state sponsors of terrorism, 

foreign terrorist organizations, transnational criminal organizations, foreign narcotics kingpins, and specially designated nationals. 

I have contended that the sanctions regime in place with Iran 

today is justified completely on the fact that they have been exploiting terror for decades, responsible for hundreds of American 

deaths since 1980, really, if you go back to the rescue attempt and 

29 

the people we lost there and then go through the list of what they 

have been doing, including the killing of hundreds of our soldiers 

in Iraq. That alone justifies a sanctions regime without regard to 

the nuclear program they have. 

I guess my question, Dr. Asher, Professor Realuyo, is if you could 

address whether you think—if we lift these sanctions on Iran, will 

we see more terror financing coming from Iran? 

Ms. REALUYO. It is one of the things that has actually limited 

them from supporting Hezbollah as— 

Mr. ROTHFUS. The current sanctions have? 

Ms. REALUYO. The current sanctions have. 

So if you think about it, if that is the measure and they are actually going to alleviate a lot of the economic stress that the country 

that is a state sponsor is actually—it is a question of—we have 

been able to basically make their pockets smaller—right?—as a 

global sanctions regime. 

And more importantly, the question is, what are they going to 

use with all the income they are going to have once they re-enter 

the global marketplace, whether it is financial as well as the import and export in trade. And there are more than enough other 

countries that are interested in doing business with Iran. 

And, unfortunately, that is the downside of globalization, which 

I also wrote about in my testimony. As we benefited tremendously 

from a productive and interconnected world, unfortunately, the terrorists and the criminals are taking the same advantages. 

Mr. ROTHFUS. I think my time has expired, Mr. Chairman. 

Thank you all for your testimony and for your work in this field. 

Chairman FITZPATRICK. I now recognize the gentleman from Arkansas, Mr. Hill, for 5 minutes. 

Mr. HILL. Thank you, Mr. Chairman. 

And I thank the panel for participating today. 

Dr. Asher, reflect for me on when we put pressure on particularly developed countries and through the financial process, 

through the PATRIOT Act, we squeeze legitimate users and illegitimate users out of those marketplaces relative to the U.K. banking 

system or the American banking system, and Mutual Legal Assistance Treaties (MLATs) have been a big, important tool that we 

have had diplomatically, whether it is finding Noriega’s assets or 

other players around the world. 

What can we do in that arena? Can we expand the MLAT process? Can we amend it? Is there a mini-MLAT that we could use 

with countries with which we don’t have a full treaty? Would you 

expand on that for a minute. 

Mr. ASHER. I think that is a really interesting question, because 

we haven’t really utilized outside of the world of just straight-up 

drug trafficking, the MLAT process of asset forfeiture that effectively. 

Something I have advocated against with both ISIL and 

Hezbollah is the use of RICO, which has huge transnational resonance against terrorist organizations as organized criminal entities 

because terrorism is a specified unlawful act, SUA, under the law. 

So if you engage in more than two SUAs that are allowed under 

RICO, you are engaged in a criminal conspiracy that can be prosecuted. 

30 

And the thing about RICO and the way it relates to asset forfeitures is you can charge anyone. For example, if you say, ‘‘I am an 

ISIL member’’ or ‘‘I am an al Qaeda member’’—a lot of people want 

to brag about it—you are charged, technically. It is a pretty interesting tool. But you can moreover go after their money. 

So if we find there is a foundation in a far-flung land, let’s say 

even a country that doesn’t have an MLAT with us or it doesn’t 

honor it, Lebanon, for example—we found $150 million of the proceeds of the forced sale—basically, it was in bankruptcy—of the 

Lebanese Canadian Bank in a bank called Banque LibanoFrancaise. They put their money in that. It was apparently 

Hezbollah’s money. 

Under our law, we have a law called Section 981(k) of Title 18 

that allows substitute assets to be confiscated where the U.S. Government can actually reach those assets. So even though we didn’t 

have an MLAT with Lebanon—and it would have been better, I 

guess, if we did—we were able to freeze the money in the correspondent bank account of Libano-Francaise—it was the proceeds 

the Department of Justice was able to freeze—and forfeit ultimately $102 million of Hezbollah’s money without actually going to 

Lebanon. 

So, of course, if we have MLATs, which we should use strategically more effectively for asset forfeiture, it will be exponentially 

more effective. But even where we don’t have them, we have legal 

tools that can be useful. The key is, we have to deprive financial 

assets from our adversaries’ pockets. 

Mr. HILL. Thank you. 

Mr. Barrett, is there a formalized model you can see in this charitable arena where you have seen maybe a best practice through 

forced disclosure of legitimate charities to warn potential donors 

that they actually have a record of bad acting through the file of 

their 990 report with the IRS, if it is a U.S. charity, or is there a 

way to formalize a receipt of remittances in a foreign country like 

Somalia that might work, that would be a way to better monitor 

those flows? Do you have a further opinion on that? 

Mr. BARRETT. I think you are right. I think public awareness is 

enormously important, and indeed the public who are donating to 

charities have a responsibility also to know how the charities are 

going to spend that money. 

There are regulations which have developed over the years, best 

practices, as you say, in this country, and in the United Kingdom 

as well, which I think require the registration of charities and the 

auditing of their accounts with much more detailed scrutiny than 

there has been in the past. 

And I think that is having a real effect. I think there are fewer 

charities now which can be found to be funding terrorism in jurisdictions where the law is applied properly and fully. 

And on remittances, too. I think that there is a mistake often 

made that hawalas somehow are prepared to turn a blind eye to 

transactions which banks might otherwise stop. But, in fact, 

hawalas have to know their customers even more than banks because, of course, it is based entirely on trust rather than on a purely commercial basis. 

Mr. HILL. Thank you. 

31 

I yield back, Mr. Chairman. 

Chairman FITZPATRICK. The Chair recognizes the gentleman 

from Kentucky, Mr. Barr, for 5 minutes. 

Mr. BARR. Thank you, Mr. Chairman, for calling this important 

hearing to explore and learn more about the dangerous nexus between terrorism and criminal organizations. 

I am particularly interested in whether or not there is substantial evidence of U.S.-based criminal organizations that have 

partnered with Islamic terrorist organizations. And what is the extent of the nexus between—we have heard about international 

drug cartels’ involvement in partnerships with terror organizations. 

But to what extent are American-based, U.S.-based criminal organizations affiliated with Islamic terrorist organizations like 

Hezbollah? Like ISIL? Anyone? 

Mr. FARAH. I think that there are times when you see U.S.-based 

criminal organizations overlapping tangentially in the drug trade 

with Hezbollah activities. I am not aware of any systemic or systematic or larger scale U.S. criminal organizations. I think that is 

the line that most people won’t cross because I think the price 

would be very, very high for them, and they are aware of that. 

I think criminal organizations are largely very rational actors, 

and when the price they would pay would be that high and the 

profit would probably—they don’t need those groups to do what 

they want to do, particularly in drug trafficking. I am not aware 

of that on any significant scale. 

Mr. ASHER. I would just say briefly that the Sinaloa drug cartel 

is not based in the United States, but it derives a lot of income 

from the United States. The Mejia Salazar cartel, which is supporting Sinaloa, but it is basically Pablo Escobar’s empire still living on, is exporting massive amounts of cocaine in the United 

States in partnership with Sinaloa. So they are earning a lot of income here. 

In both cases, there is definitely a partnership going on with 

Lebanese Hezbollah, especially the darkest side of Hezbollah. In 

my work personally, I can attest to that in front of you, that we 

have seen it, and hopefully someday, it is going to be prosecuted 

in criminal court. 

This confluence between these major cartels—and, in criminal 

states, which Doug has done a great job pointing out, like Venezuela, and organizations like Lebanese Hezbollah is really actually almost out of control. 

Mr. BARR. Let me turn to ISIL for just a minute. 

We know from your testimony and from previous hearings that 

the sources of ISIL funds are predominantly in oil and the looting 

of the banks from Mosul and kidnappings and ransom and the like. 

To what extent does the Islamic State have access to and participate in the international financial system? And what could American policymakers do to disrupt the Islamic State’s access to financial institutions? 

Mr. BARRETT. Yes. I think that is really an excellent question 

and one, I think, that is puzzling many experts who look at ISIL. 

But the fact of the matter, I think, is that most of the money is— 

it is sort of a cash-based economy and a self-generating economy 

32 

and then the money circulates within the territories occupied by 

ISIL. 

Insofar as money is coming from the outside, it does seem to 

come into ISIL-controlled territory in cash rather than anything 

else. But I think increasingly we will see the sort of transfer of 

money through the Internet which is becoming more common elsewhere. 

And so people who want to make donations will be able to send 

it to a bank probably in Turkey or in parts of Syria and Iraq which 

are not controlled by ISIL, but it will be cashed and then brought 

over the border. So there will be some sort of interaction with the 

international— 

Mr. BARR. So is Section 311 the best tool available to the United 

States to disrupt those banking activities? 

Mr. BARRETT. I would say that the best tool, really, is to gather 

intelligence on how that is happening and then deal with the individual cases as they come up. 

I think a blanket approach can be very difficult when you look 

at just sort of the variety that may be available and the fact that 

predominantly the cash will come into their territory in physical 

form rather than electronic form. 

Mr. BARR. My time is about ready to expire. 

But if any of you could just offer an opinion on what is the single 

most important policy change that this Congress could enact that 

would disrupt terrorists’ access to criminal organizations. Is there 

any one recommendation that you would highlight? 

Mr. ASHER. I think the Bank Secrecy Act of 1971 needs to be 

fully revised. I think we need to update it. I think there is way too 

much money being spent on unsuccessful attempts by banks to try 

to limit terrorism financing and financial crime and we are not focused on the most important things. 

There is a huge overregulation of the financial system in this 

area. I am one of the guys who pioneered this stuff, but I will 

admit it. It is not working. And that is really why I came before 

you today. 

We could do a much better job with less cost to our financial institutions if we just focused on the problem actors. There are not 

that many drug cartels in the world. 

Our financial institutions need to be told by the Federal Government who is in the cartel, and what they are doing. They need to 

be given some sort of watch-list information like we do with transportation companies. The airlines know if some terrorist gets on an 

airplane. Why don’t we tell the banks that they are banking with 

some terrorists? 

Mr. BARR. Thank you. 

I yield back. 

Chairman FITZPATRICK. The Chair now recognizes the gentleman 

from Arizona, Mr. Schweikert, for 5 minutes. 

Mr. SCHWEIKERT. Thank you, Mr. Chairman. 

There are just so many things we would like to know in this. And 

when we have 5 minutes, we try to do it very quickly. 

Can I just walk through a scenario? Because I am trying to understand flow, and also cost, discounts. The drug cartel sells its illicit products in North America. 

33 

First, how does it get the cash back across the border? Is it converting it to gold? Is it carrying suitcases of cash? 

Mr. Farah, how are they getting it to Central America first? 

What would your opinion be? 

And then I am going to ask, if they end up in Ecuador, what are 

they being charged? What is the cost of money laundering? Walk 

me through a couple of these steps. 

Mr. FARAH. Thank you. 

I think, on the drug trade, a lot of the money goes back in bulk 

cash and a lot of it goes back in wire transfers and bank transfers 

into Central America. The cost is generally about 17 to 22 percent. 

There are banks in Central America where, if you deposit over 

a certain amount of money, generally in the neighborhood of $3 

million or $4 million, and pay the 17 percent, they will provide you 

with a history of justification of that money. 

In other words, they will create all of your tax records, all of your 

employment records, everything, so that money is now untraceable 

as drug money. It is one of the full services that some of the banks 

are offering. 

Mr. SCHWEIKERT. Mr. Farah, how much of that do you think is 

going to a spiff to some of the government leaders? 

Mr. FARAH. Of the drug— 

Mr. SCHWEIKERT. Okay. Let’s say I just spent 22 percent to wash 

my couple million dollars of illicit cocaine money— 

Mr. FARAH. Right. 

Mr. SCHWEIKERT. —that has come back into the country. The 

government has created a charter to allow me to have access to 

this bank. 

What is that president, what is that administration, what is that 

government, taking off of that? 

Mr. FARAH. I think you see right now that the vice president of 

Guatemala just resigned, who was involved—his private secretary—I believe she personally was involved in a really lucrative 

scheme where there were some banks involved and, also, largely to 

avoid taxes coming across the border—Customs taxes. 

And it gets—because, as the states have criminalized, it becomes 

a state operation run by a state. They end up paying a lot. I don’t 

know the exact percentages. I know that, in some cases, the government officials will take up to half of what comes out of there. 

You look at some of the cases that have been prosecuted, like 

former President Portillo in Guatemala, who racked up multi-hundreds of millions of dollars. You have former President Paco Flores 

in El Salvador who was charged with $200 million. You have another former president of El Salvador whose own party investigation showed he had made $450 million. 

Mr. SCHWEIKERT. Don’t we have investigations going on right 

now in Panama and other areas in regard to certain issues? 

Mr. FARAH. There are. I think that what David Asher said is 

true. You have a lot of really good, smart people looking at this, 

operating in severe resource constraints. 

And when I talk—you have, for example, the case of Banco 

Leandro, which is a 311 designation, which collapsed one of the 

major money-laundering operations just a couple of months ago. 

34 

They had three branches operating in Panama, and in that branch we had at least $2 billion from the Venezuelan oil company 

and many in Russian organized crime, China’s organized crime, et 

cetera. 

Okay. When you go to talk to these people—let me finish this 

thought. When you go to talk to the authorities who deal with it, 

they simply don’t have the resources to reach out and do all that 

stuff. They say, ‘‘This is great. It is great information. We would 

like to help. We have 3 people to look at 45 cases and a lot get 

dropped.’’ 

Mr. SCHWEIKERT. About 3 weeks ago, I was actually in Panama 

and sat down with the parliamentarian not from Panama, but from 

one of the countries you have mentioned, and he swears that he actually sat there and watched the check from, ultimately, Iran being 

deposited and has tried to speak about it publicly and has made 

very, very little progress. 

Dr. Asher, walk me through—because I am trying to get my head 

around how formalized this is. We had a hearing a couple of years 

ago that actually talked about that, in Venezuela, there almost was 

a shopping list of your prices. If you are washing 100-dollar U.S. 

currency, you sort of pay this, this, this, and this, and here is how 

it breaks out. Is it that formalized of a corruption? 

Mr. ASHER. It is national policy. It is called a criminal state. It 

is crime being carried out as a act of national policy to benefit the 

leaders of that regime, and they can use it. 

No surprise there is money in the oil accounts. How do you get 

money from the United States? Congressman Barr, I think, was 

asking earlier about, how do you get the money from the United 

States? 

I can’t prove it, but there have been way too many cases where 

you see these oil companies for countries like Venezuela showing 

up in law enforcement cases related to the movement of funds. 

Have you ever heard of Citgo? Who knows what is going on with 

these things. I have no idea at all if any of these companies are 

involved. 

But when you read the law enforcement cases, things pop up like 

PDVSA and there has to be something going on with the use of formalized transactions and trade with a lot of these states, and it is 

concerning, from my think tank perspective, that we are doing perilously little to try to police it because they are being accorded the 

privileges of governments even if they are engaged in criminal activity. 

Mr. SCHWEIKERT. Mr. Chairman, thank you for the time, and 

thank you for letting me go a little over. 

For many of us, we would love to see some of the charting to understand the movement between bad actors in governments, bad 

actors in business, and just plain old bad actors, and see that flowchart. 

Chairman FITZPATRICK. I thank the gentleman. 

Without objection, we will proceed to a second round of questions, if any Member wishes to be recognized. 

I recognize the gentleman from North Carolina, Mr. Pittenger. 

Mr. PITTENGER. Thank you, Mr. Chairman. I appreciate the courtesy. 

35 

And I appreciate the courtesy of each of you. 

When there is a settlement with a bank related to their being 

complicit in money laundering, what happens with the proceeds of 

those settlement funds? Could those funds be used for counterterrorism efforts? And how could we designate that? Who would like 

to take that as an open question? 

Ms. REALUYO. The U.S. Marshals Service actually manages all of 

the assets that are seized. So there is freezing, which you are very 

familiar with, but then there is an actual seizure of assets. This 

has probably been much more popularized through movies that 

kind of look at the DEA and their raids and going after cartels. 

The question then is—it is then divided among the different 

agencies that were involved in that actual operation. And it is actually a very interesting U.S. model that we are exporting to other 

partner nations who are looking at asset forfeiture as a very useful 

tool. 

There are two things that they say in Mexico that the cartel 

leaders are worried about: first, extradition to a solitary cell without a cell phone into the United States; and second, and more importantly, the actual expropriation of their funds, that their children will live less luxurious a life than themselves. 

And I have actually advocated that in the actual seizure of those 

funds, but more importantly, the fines that are levied to the banks 

and institutions that are violating known sanctions, regimes, and 

laundering money, there should be a portion dedicated to actually 

helping those who have actually been involved in uncovering and 

then, more importantly, investigating and prosecuting these 

crimes. 

I think you have heard so much about how within the U.S. Government there are really fantastic experts and analysts who are 

doing this, but because of the shortages of financial and, more importantly, human resources and, unfortunately, too, the fact that 

many of our best experts are actually leaving and going to the private sector, we need to really work on capacity building within the 

U.S. Government for combating terrorism, crime, and corruption, 

particularly through that financial end. 

Mr. PITTENGER. I agree. Resources are critical. And we are talking hundreds of millions and billions of dollars, and the allocation 

of those funds, it seems to me, would be very important in advancing our counterterrorism efforts. 

Dr. Asher, did you want to make— 

Mr. ASHER. In having contributed probably a few hundred millions dollars to the asset forfeiture fund over the years through efforts I have been involved in, I have always wondered whatever 

happens to the money. It is a great question. 

Yes, we have these several billion-dollar pots that are used, but 

far too little of it is allowed to be used proactively, for example. 

Now, this is a very controversial issue, I know, on the Hill here, 

and I respect Members’ opinions on this. 

This whole fast-and-furious fiasco is something that we will always live to regret. I have no idea how something like that could 

happen. But the use of money as a tool to do sting operations, as 

they exist, is indispensable. 

36 

We have to put some money on the table in law enforcement to 

be able to interact with—no kidding—transnational organized 

crime groups with credibility. Undercover operations are critical. 

The asset forfeiture funds are critical. But there is a tiny amount, 

frankly, allowed to be used for any sort of proactive approach, 

which paralyzes the effectiveness of our law enforcement organizations against them. 

So, it is not just the asset forfeiture funds themselves not being 

used for increasing asset forfeiture and there is insufficiency there, 

it is how they are being used. I think we have to get much more 

aggressive like we were in the 1980s and 1990s against the Colombian cartels largely because people are getting shot left, right, and 

center in the streets of Miami. 

Mr. PITTENGER. Thank you. 

Any further comments? 

Thank you, Mr. Chairman. I yield back. 

Chairman FITZPATRICK. The gentleman yields back. 

And the gentleman from Arkansas, Mr. Hill, is recognized. 

Mr. HILL. Thanks, Mr. Chairman. 

I just wanted to follow up. There are so many Members of the 

House and Senate who are so concerned about the Iranian negotiations that are under way between the Administration and Iran. 

And when we had our last hearing, so many of us were, I think, 

shocked at the magnitude of money that would flow back to Iran 

were the proposed treaty to be successful: $50 billion signing 

bonus, then the freeing up of cash in the accounts that had been 

frozen, and then, of course, the flow, as was noted by the Professor, 

of future trade capability. 

In your role of interdicting terror financing and stopping the expansion of terrorism, how would you rank that $120 billion that 

may flow to Iran if this treaty proceeds? 

If 1 is of low importance to our national security and the ability 

to stop the expansion of terror finance and 10 is critical, very important, how would each of you rank the freeing up of that $120 

billion? 

We will start with Dr. Asher and just let each of you rank—give 

me a number and— 

Mr. ASHER. I will give you a rank. I don’t think it is 10. 

Mr. HILL. Yes. 

Mr. ASHER. It may be 5. 

Mr. HILL. Okay. 

Mr. ASHER. It may be 3. But the big thing is, it is Iran’s revolutionary regime and its externalization of that revolution which is 

its top priority as a policy that is the problem. 

When we went to the North Korea six-party talks, we should 

have been focused not just on the fact they were exporting a nuclear reactor to Syria, which probably had something to do with the 

Iranians right under our feet, but we also should have been focused 

on the fact the North Korean regime was not agreeing to negotiate 

about its destiny as a regime. Its whole orientation was against our 

existence. 

That is the problem with the Iranians. Now, maybe there is 

something going on where they are going to change that. I hope so. 

37 

But that, to me, is the problem that concerns me, is they are inimically opposed to us and it is their national ideology as a state. 

Mr. BARRETT. Yes. I think Iran, like all nations, operates in its 

own best interests and it will identify those best interests in different ways according to the context of the international community around it. 

Sure, Iran, if it had more money, might fund actors that the 

United States and its allies would not like to see better funded. 

At the moment, of course, Iran is providing a huge amount of 

money to Syria, for example, to prop up the Assad regime. It is 

paying for various militia in Iraq, which, on the other hand, are 

probably the most effective forces against ISIL. 

And I think that the main way of making sure that additional 

money will not be used in ways that we wouldn’t like is to try to 

bring Iran much more into the international community so they 

identify their interests alongside everybody else’s rather than being 

the sort of outlier who is always trying to sort of find advantage. 

And that, of course, comes back to the fundamental problems in 

the Middle East of sectarianism, the competition between Saudi 

Arabia and Iran, and many, many other complex questions. 

Mr. FARAH. I agree with David Asher. One of the late prosecutors, Alberto Nisman in Argentina, was the one who pointed out to 

me when we were talking about Iran and Latin America—he 

asked, ‘‘Have you ever read the Iranian constitution?’’ And I said, 

‘‘Frankly, no.’’ And he said, ‘‘Read the preamble to the Iranian constitution, their official translation.’’ 

It is state policy to expand using the Revolutionary Armed Guard 

as the armed vanguard of spreading jihad around the world in a 

world conquest. That is written into their constitution. 

So I agree with David that the fundamental nature of the Iranian regime is something that—allowing fungible money into their 

system will almost inevitably point toward much more aggressive 

action outside, including terrorism, because that is their core underlying belief, which they acknowledge and write about extensively. 

Ms. REALUYO. I think it is of grave concern. Here in the United 

States, we focus primarily on the nuclear deal, when at the same 

time a lot of our Arab allies are much more focused on Iranian expansionism, and, more importantly, they talk about the revival of 

a Persian empire. 

You have actually seen now the influence of Iran in four major 

capitals. They call it the Shia Crescent. And several of our Arab 

Gulf State allies are worried about becoming a Shia circle. They 

have, basically, control or influence in Baghdad, in Lebanon, in 

Syria, and, sadly, what you are seeing devolve in Yemen. 

So it is not even a question of a state-sponsored terrorism. It is 

this question about Iran hegemony in the Middle East, which is so 

complex because of the religious angle as well as the historical rivalries. 

It is something I think that we are not really covering here in 

the press as much. Since we are so focused on the Iranian nuclear 

deal, we are not looking at the geopolitical aspirations of Iran. 

Mr. HILL. Thank you, Mr. Chairman. 

38 

Chairman FITZPATRICK. The Chair now recognizes the gentleman 

from New York, Mr. Meeks, for 5 minutes. 

Mr. MEEKS. Thank you, Mr. Chairman. 

And I thank all of you for your testimony. I have been listening 

very attentively in my office to your testimony. 

And let me just ask you first a few questions because my focus 

has been, on this committee, what we can do in Congress to make 

sure that we are not allowing the Internet and others to facilitate 

anti-money-laundering, et cetera. 

Mr. Asher, I guess I will ask you the first question. I think that 

in your testimony, you mentioned that Congress should amend the 

Bank Secrecy Act to facilitate anti-money-laundering data-sharing 

among banks. 

Now, the issue that we recently had the vote—there is a general 

concern among Americans about personal information being widely 

available to a range of institutions with little knowledge about how 

that information is being used. 

So I was wondering if you could elaborate on this conflict and 

how Congress should proceed with improving the Bank Secrecy Act 

while also preserving the individual’s human rights to privacy debate that we have going on in Congress right now. 

Mr. ASHER. That is a great question, and I appreciate you asking 

it. 

Look, the Bank Secrecy Act was actually not passed to protect 

bank secrets or privacy. It was designed to stop any money laundering in 1971. They just changed the name because of concerns. 

I am concerned, as a private American citizen, about personal information being divulged. But unfortunately, the cat is sort of out 

of the bag as we look at the credit rating bureaus. And the amount 

of data that an Experian or someone would have about any of us 

is ridiculous. 

It is ironic, though, that banks are reticent to share data with 

other banks even though that is allowed. Under the USA PATRIOT 

Act, Section 314(a) or (b)—I can’t remember which one—banks can 

share anti-money-laundering data with each other, but they can’t 

pool it. 

If you could pool it, if you could do sort of the Visa or 

MasterCard processing of anti-money-laundering data, you would 

see massive schemes that could be stopped by banks at a relatively 

low cost because you would see that this guy just opened an account at this bank in whatever city and then at this bank in this 

city, and they are smurfing the system. They are setting up a 

money-laundering network. But right now, no one can see that. 

So sharing the data would not only reduce costs dramatically for 

the banking system, it would improve effectiveness. They would 

still be obliged to not share that data with anyone outside of official 

channels. They couldn’t provide it to—they would just be sharing 

with each other. They are allowed to do that. 

It is not going to get divulged any more than it is being getting 

divulged. So I am not that concerned. I just think economy of scale 

does help in trying to stop things from occurring. It also can bring 

down costs. 

Moreover, a consortium could be in the position to receive watchlist data, even classified data, from the U.S. Government. And I 

39 

think we need to consider providing that. We provided it, again, to 

our airlines and shipping lines. If we think there is a Maersk ship 

that is containing a container full of, let’s say, weapons coming into 

the United States, we are going to tell Maersk, ‘‘There is a container. You have to inspect it.’’ 

Do we tell the banks that they are doing business with drug traffickers or Hezbollah? No. Only through public divulgence. And I 

think we should keep these things—we don’t need to publicly approach these issues and tell the terrorists that we are looking at 

them. 

Mr. MEEKS. You know that debate is going on. 

Mr. ASHER. I do. And I think it is a healthy debate. I am concerned, but I don’t think—if this system is done right, it is not 

going to lead to any more divulsion of private information than is 

occurring already. In fact, it just might be more effective. 

Mr. MEEKS. I am running out of time. I would like to have this 

debate more and more. But, again, I am trying to figure out what 

we can do as a committee. 

Let me jump to Mr. Barrett really quick because I think that you 

stated in your testimony that corruption, along with other forms of 

poor governance, particularly in the delivery of justice, is possibly 

the most significant driver of terrorism in the world today. 

So I want to know—maybe you can elaborate on what role the 

Financial Services Committee, with our oversight authority of 

international monetary organizations, can play in better ensuring 

governance in nations struggling with terrorist organizations? 

Mr. FARAH. I think—is that for— 

Mr. MEEKS. Go ahead. Whomever— 

Mr. BARRETT. I think that what you are doing is absolutely right 

because I think that, as corruption, corrupt officials, criminality, 

and so on—the lack of the rule of law is such a driver of terrorism 

in these areas where, essentially, the people are completely dissatisfied with what is provided by government. 

The more you can sanction those individuals as government leaders and others who are involved in the corrupt practices and in the 

financial skullduggery that goes on in the general criminal world, 

then the less—obviously, the less dissatisfied people will be. If they 

see justice being served at least in another jurisdiction, even if not 

in their own, that will be very encouraging to them. 

So I think that it has a knock-on effect on the terrorist problem. 

Chairman FITZPATRICK. The gentleman’s time has expired. 

Again, I would like to thank the witnesses for their testimony 

and their time here today and for the significant expertise that you 

have shared with the task force. We all appreciate that. 

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 12:06 p.m., the hearing was adjourned.] 

(41) 

A P P E N D I X 

May 21, 2015 

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