a

GAO

United States Government Accountability Office

Report to Congressional Requesters

September 2004 FOREIGN REGIMES’ 

ASSETS

The United States 

Faces Challenges in 

Recovering Assets, but 

Has Mechanisms That 

Could Guide Future 

Efforts

GAO-04-1006
www.gao.gov/cgi-bin/getrpt?GAO-04-1006. 

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Joseph A. 

Christoff at (202) 512-8979 or 

christoffj@gao.gov, or Davi M. D'Agostino at 

(202) 512-8678 or dagostinod@gao.gov. 

Highlights of GAO-04-1006, a report to 

congressional requesters 

September 2004

FOREIGN REGIMES’ ASSETS 

The United States Faces Challenges in 

Recovering Assets, but Has Mechanisms 

That Could Guide Future Efforts 

The approach the U.S. government takes to recover foreign regimes’ assets 

varies depending on the foreign policy and national security goals pursued. 

Treasury officials stated that the goal of economic sanctions is to freeze 

assets of a sanctioned jurisdiction or targeted designee and prohibit U.S. 

persons from dealing with them. In certain cases, once the foreign policy 

goals of the sanctions are met, the assets are returned to a country. The 

Departments of Justice, State, and the Treasury, as well as intelligence and 

law enforcement agencies, work together in the targeting process. 

Identifying the location of financial assets throughout the international 

financial system requires the cooperation of U.S. and foreign financial 

institutions. The United States has procedures to freeze assets of targeted 

regimes located in the United States or under the control of U.S. persons. 

Pursuant to executive orders issued by the President under various 

authorities, Treasury’s Office of Foreign Assets Control (OFAC) issues 

regulations that can require assets to be frozen and transactions to be 

blocked and administers sanctions programs. 

U.S. government agencies and financial institutions involved in recovering 

targeted regimes’ assets face a number of challenges. First, U.S. agencies 

may not be able to readily obtain accurate and complete information on 

targeted entities, such as the spelling of names, addresses, and dates of birth. 

Financial institutions can also lack complete identifying information on their 

clients. Second, the laws of some foreign governments complicate the ability 

of overseas branches of U.S. financial institutions to comply with OFAC 

regulations. In these situations, the U.S. government encourages the relevant 

foreign governments to allow U.S. financial institutions to freeze or transfer 

assets in a manner consistent with U.S. law or Treasury issues a license to 

allow U.S. financial institutions to comply with local laws. Third, OFAC’s 

ability to monitor financial institutions’ compliance with its regulations is 

limited because it relies on financial regulators to monitor financial 

institutions’ OFAC compliance programs. 

The United States has used a variety of legal authorities and coordinating 

bodies in its recent effort to recover Iraqi assets; some of these mechanisms 

could be applied to future efforts. The USA PATRIOT Act of 2001 allowed 

the United States to take ownership of $1.9 billion of Iraqi assets and 

transfer them for use in Iraq reconstruction efforts. United Nations Security 

Council Resolution 1483 has resulted in the transfer of about $847 million in 

frozen Iraqi assets to a fund for Iraq. However, factors that include existing 

claims against the assets and other countries’ laws have slowed the transfer 

of an additional $2.9 billion held in other countries. In addition, some 

mechanisms developed to combat money laundering and terrorist financing 

might be applicable to recovering foreign regimes’ assets. Although the U.S. 

government has used various legal authorities and coordinating bodies to 

recover foreign regimes’ assets, it has yet to compile lessons learned from 

past efforts that could guide future efforts. 

For many years, the United States 

has used economic sanctions, 

including the freezing of foreign 

regimes’ assets, when such regimes 

have been determined to be a 

threat to the nation. In light of 

recent efforts to “recover”—or 

target, identify, freeze, and 

transfer—Iraqi assets, GAO was 

asked to examine overall U.S. 

efforts to recover foreign regimes’ 

assets. This report (1) describes the 

approach the U.S. government uses 

to recover foreign regimes’ assets, 

(2) examines the challenges the 

United States faces in recovering 

foreign regimes’ assets, and (3) 

examines the mechanisms the 

United States has used to recover 

Iraqi assets and their applicability 

to future efforts. 

GAO recommends that the 

Departments of State and the 

Treasury (1) work with U.S. 

intelligence and law enforcement 

agencies to improve target 

identifiers and (2) develop and 

document lessons learned from the 

Iraq effort that could assist with 

future efforts. State agreed with 

these recommendations. Treasury 

did not comment on them. GAO 

also recommends that Treasury 

seek legislative authority to allow 

financial regulators to share 

complete information from their 

examinations with OFAC. Treasury 

said it was working on this issue 

and is uncertain that a legislative 

change is needed to allow OFAC 

access to information from 

financial regulators’ examinations. 
Page i GAO-04-1006 Foreign Regimes’ Assets

Contents

Letter 1

Results in Brief 2

Background 5

The U.S. Government’s Approach to Recovering Foreign Regimes’ 

Assets Varies Depending on the Goals Pursued 6

U.S. Government Agencies and Financial Institutions Face a 

Number of Challenges in Recovering Foreign Regimes’ Assets 12

Mechanisms the United States Has Used to Recover Iraqi Assets 

Could Be Applicable in Future Efforts 18

Conclusion 27

Recommendations for Executive Action 29

Agency Comments and Our Evaluation 29

Appendixes

Appendix I: Objectives, Scope, and Methodology 32

Appendix II: Targeted Foreign Regimes Since 1979 35

Appendix III: Key U.S. Legal Authorities Used to Recover Foreign Regimes’ 

Assets 39

Appendix IV: Efforts to Recover Iraqi Assets 40

Appendix V: Roles of U.S. Entities in Recovering Iraqi Assets 47

Appendix VI: Comments from the Department of State 50

Appendix VII: Comments from the Department of the Treasury 52

GAO Comments 55

Appendix VIII: GAO Contacts and Staff Acknowledgments 56

GAO Contacts 56

Staff Acknowledgments 56

Table Table 1: Targeted Foreign Regimes Since 1979 35

Figures Figure 1: The United States’ Approach to Recovering Foreign 

Regimes’ Assets 7

Figure 2: Assets Frozen in the United States 47

Figure 3: Assets Seized in Iraq 47

Figure 4: Assets Identified and Frozen in Other Countries 48

Figure 5: Hidden Iraqi Assets 49
Contents

Page ii GAO-04-1006 Foreign Regimes’ Assets

Abbreviations

CPA Coalition Provisional Authority

DFI Development Fund for Iraq

FATF Financial Action Task Force

FBI Federal Bureau of Investigation

FIU financial intelligence unit

IEEPA International Emergency Economic Powers Act

NEA National Emergencies Act

OFAC Office of Foreign Assets Control

OIG Office of Inspector General

SDN Specially Designated Nationals

SEC Securities and Exchange Commission

U.N. United Nations

UNPA United Nations Participation Act

USA PATRIOT Act Uniting and Strengthening America by Providing

 Appropriate Tools Required to Intercept and Obstruct 

 Terrorism Act

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Page 1 GAO-04-1006 Foreign Regimes’ Assets

United States Government Accountability Office

Washington, D.C. 20548

A

September 14, 2004 Letr

The Honorable Michael G. Oxley

Chairman

The Honorable Barney Frank

Ranking Minority Member

Committee on Financial Services 

House of Representatives

The Honorable Sue W. Kelly

Chairwoman

The Honorable Luis V. Gutierrez

Ranking Minority Member

Subcommittee on Oversight and Investigations 

Committee on Financial Services

House of Representatives

The United States has used economic and trade sanctions, including the 

freezing of financial assets and blocking of transactions, to achieve various 

U.S. foreign policy and national security goals. These sanctions can be 

targeted against foreign countries, terrorists, international narcotics 

traffickers, and those engaged in the proliferation of weapons of mass 

destruction, among others. Some foreign regimes, whose assets were 

frozen by the United States, had accumulated billions of dollars in illegal 

assets. For example, in March 2004, we reported that, between 1997 and 

2002, Saddam Hussein’s regime accumulated an estimated $10.1 billion 

through oil smuggling and surcharges against oil sales and illicit 

commissions from commodity suppliers.1

In light of recent efforts to recover Iraqi assets, you asked us to examine 

overall U.S. efforts to recover foreign regimes’ assets. In this report, we use 

“recovering foreign regimes’ assets” to refer to the process of targeting, 

identifying, freezing, and, in some cases, transferring assets to legitimate 

governments of targeted nations.2

 This report focuses on U.S. government 

1

GAO, Recovering Iraq’s Assets: Preliminary Observations on U.S. Efforts and Challenges,

GAO-04-579T (Washington, D.C.: Mar. 18, 2004).

2

Targeting is the process of determining whose financial assets will be sought. Identifying is 

the process of ascertaining the accounts in which the assets are located. The freezing 

process prevents the movements of the assets, and the transferring process transmits them 

to accounts of a new government.
Page 2 GAO-04-1006 Foreign Regimes’ Assets

procedures to recover assets of foreign regimes targeted under economic 

sanctions. It (1) describes the approach the U.S. government uses to 

recover foreign regimes’ financial assets, (2) examines the challenges the 

United States faces in recovering foreign regimes’ assets, and (3) examines 

the mechanisms the United States has used to recover Iraqi assets and their 

applicability to future efforts. This report does not examine other methods 

such as criminal prosecutions, civil and criminal asset forfeiture 

proceedings, asset sharing, and restitution authority, which are enforced by 

the Department of Justice.

We reviewed documents from the U.S. government, United Nations, and 

private firms, including testimonies, reports, and relevant laws. We 

interviewed key U.S. government officials from multiple U.S. government 

agencies. We also interviewed private firm representatives that specialize 

in asset recovery, representatives of U.S. financial institutions responsible 

for complying with orders to freeze assets and block transactions, and 

trade associations representing segments of the U.S. financial services 

industry. 

We conducted our work from May 2003 to August 2004 in accordance with 

generally accepted government auditing standards. (See app. I for 

additional information on our scope and methodology.)

Results in Brief The approach the U.S. government takes to recover foreign regimes’ assets 

varies depending on the foreign policy and national security goals pursued. 

Officials at the Department of the Treasury stated that the goal of 

economic sanctions is to freeze assets of a sanctioned jurisdiction or 

targeted designee and prohibit U.S. persons from dealing with the subject 

of the sanctions. In most cases, once the foreign policy goals of the 

sanctions are met, economic sanctions result in the return of assets to a 

country, as in the case of Afghanistan. Historically, most asset recovery 

efforts have focused on targeting the financial assets of a country’s 

government; however, since September 11, 2001, these efforts have focused 

increasingly on individuals and groups associated with targeted regimes. 

The Departments of Justice, State, and the Treasury, as well as intelligence 

and law enforcement agencies, work together in the targeting process. 

Identifying the location of financial assets throughout the international 

financial system requires the cooperation of U.S. and foreign financial 

institutions. The United States has procedures to freeze assets of targeted 

regimes located in the United States or under the control of U.S. persons. 

Pursuant to executive orders issued by the President under various 
Page 3 GAO-04-1006 Foreign Regimes’ Assets

authorities, Treasury’s Office of Foreign Assets Control (OFAC) issues 

regulations that can require assets to be frozen and transactions to be 

blocked and administers sanctions programs. 

U.S. government agencies and financial institutions involved in recovering 

foreign regimes’ assets face a number of challenges. First, U.S. agencies 

may not be able to readily obtain accurate and complete information on 

targeted entities, such as the spelling of names, addresses, and dates of 

birth. In some instances, according to agency officials, such identifiers are 

classified to protect the sources of the information. Financial institutions 

can also lack complete identifying information on their clients, such as 

dates of birth. For both reasons, it can be difficult for financial institutions 

to accurately or expeditiously identify and freeze accounts of targeted 

entities. Second, according to Treasury officials, some foreign countries’ 

domestic legal systems do not allow their governments to freeze targeted 

assets and, in some cases, prohibit the transfer of assets to a newly 

constituted government. These prohibitions affect branches of U.S. 

financial institutions located in these countries. OFAC officials stated that 

the United States works diplomatically to encourage the relevant foreign 

governments to allow U.S. financial institutions to freeze or transfer assets 

in a manner consistent with U.S. law or, conversely, the Treasury issues a 

license to allow U.S. financial institutions to comply with local laws. Third, 

OFAC’s ability to monitor financial institutions’ compliance with its 

regulations is limited because it does not have supervisory authority over 

financial institutions and, thus, relies on financial institution regulators to 

monitor financial institutions’ OFAC compliance programs. In April 2002, 

Treasury’s Office of Inspector General recommended that Treasury inform 

Congress that OFAC’s ability to ensure financial institution compliance 

with foreign sanctions would be enhanced through a legislative change that 

would enable bank regulators to share information from their compliance 

examinations with OFAC. OFAC agreed that its legislative authority could 

be improved, but as of August 2004, Treasury had not acted on this 

recommendation. 

The United States has used a variety of domestic and international legal 

authorities and coordinating bodies in its recent efforts to recover Iraqi 

assets; some of these mechanisms could be applied to future efforts. The 

USA PATRIOT Act amendment to the International Emergency Economic 

Powers Act (IEEPA) allowed the United States to vest—that is, take 

ownership of—$1.9 billion of frozen Iraqi assets and transfer them for use 

in Iraq’s administration and reconstruction. Implementation of United 

Nations (U.N.) Security Council Resolution 1483 has resulted in the 
Page 4 GAO-04-1006 Foreign Regimes’ Assets

transfer of about $847 million in frozen Iraqi assets located in other 

countries to a fund for Iraq as of June 2004. However, factors—including 

existing claims against the assets and other countries’ laws governing the 

ability of these countries to freeze and transfer assets of foreign regimes 

under various conditions, such as U.N. resolutions—have slowed the 

transfer of an additional $2.9 billion in Iraqi assets held in other countries. 

Some mechanisms that were initially developed to combat money 

laundering and terrorist financing may generally facilitate the recovery of 

foreign regimes’ assets. For example, in May 2004, the United States used 

one section of the USA PATRIOT Act to designate a Syrian bank as a 

“primary money laundering concern” and propose a rule that requires U.S. 

financial institutions to sever certain accounts with a Syrian bank that was 

used as a conduit for laundering proceeds from illicit Iraqi oil sales. 

Although the U.S. government has used various legal authorities and 

coordinating bodies to recover foreign regimes’ assets, it has yet to compile 

lessons learned from past efforts that could guide future efforts.

In this report, we make recommendations to the Departments of State and 

the Treasury to work with U.S. intelligence and law enforcement agencies 

to improve account identifying information and develop and document a 

compilation of lessons learned from the Iraq effort that could assist with 

future efforts. We are also recommending that Treasury seek legislative 

authority, if necessary, to allow financial regulators to share complete 

information from their examinations with OFAC.

In responding to our draft report, State agreed on the need to improve the 

accuracy and completeness of account identifying information and the 

need to document lessons learned from the current effort to recover Iraq’s 

assets. Treasury did not comment on these two recommendations. With 

regard to the recommendation that it seek legislative authority to allow 

financial regulators to share information from their examinations with 

OFAC, Treasury stated that based on meetings it had held with financial 

regulators, it is not clear that legislative changes are necessary and that it 

expected to have comprehensive arrangements in place shortly to enhance 

information sharing. We agree that further information sharing between 

OFAC and the financial regulators would be helpful, and we encourage 

Treasury to seek whatever legislative solutions are necessary to overcome 

any obstacles to further information sharing. We modified our 

recommendation to reflect Treasury’s efforts and reaffirm the importance 

of ensuring that information sharing is enhanced.
Page 5 GAO-04-1006 Foreign Regimes’ Assets

Background Foreign regimes’ assets can be targeted by unilateral, multilateral, or U.N. 

Security Council sanctions programs. Economic sanctions programs fall 

into two broad categories—(1) financial sanctions and asset freezes and (2) 

trade and commercial embargoes. Sanctions are generally used when other 

efforts, such as diplomacy, fail. Since 1979, the United States has frozen the 

assets of governments, individuals, or entities associated with 12 countries 

(see app. II). Each sanctions program is unique, as are the circumstances 

and objectives.

The United States and the international community have significantly 

increased the number of targeted individuals and entities over the last 

decade. Until the late 1990s, targeting the financial assets of governments, 

persons, and entities was normally part of a broader sanctions program 

aimed at cutting off most or all economic relations with a country. 

However, beginning in the late 1990s, the international community 

acknowledged that broader sanctions programs can take many years to 

achieve their goals and can adversely affect entire populations of targeted 

countries. To reduce these impacts, in recent years, the United States and 

the international community have begun implementing sanctions that 

target the assets of specific persons and entities. 

The United States, working with the United Nations, has urged the 

adoption of U.N. Security Council resolutions to freeze the assets of both 

terrorists and sanctioned foreign regimes. For example, in October 1999, 

the Security Council adopted Resolution 1267, which called on all member 

states to freeze the assets of the Taliban regime. In response to the attacks 

of September 11, 2001, the Security Council adopted Resolution 1373 in 

September 2001, requiring all U.N. member states to freeze funds and other 

financial assets or economic resources of persons who commit, attempt to 

commit, participate in or facilitate terrorist acts. A subsequent resolution in 

January 2002 (Resolution 1390) called on all member states to freeze the 

assets of Osama bin Laden and al Qaeda. Pursuant to this line of 

resolutions, the United Nations has listed nearly 300 names of individuals 

and entities for worldwide asset freezes. These resolutions target 

governments, political leaders, individuals, or groups. 
Page 6 GAO-04-1006 Foreign Regimes’ Assets

Several U.S. laws authorize the recovery of foreign regimes’ assets, 

including IEEPA, as amended by the USA PATRIOT Act,3

 National 

Emergencies Act (NEA), Trading with the Enemy Act (TWEA), and the 

United Nations Participation Act (UNPA). These laws are generally 

implemented by presidential executive orders and agency guidance that 

provide entities, such as financial institutions, with specific lists of targets 

to ensure that financial assets are blocked or frozen to prevent their 

movement. Appendix III provides a summary of key domestic legal 

authorities used to freeze foreign regimes’ assets.

The U.S. Government’s 

Approach to 

Recovering Foreign 

Regimes’ Assets Varies 

Depending on the 

Goals Pursued

The U.S. government’s approach to recovering assets of foreign regimes 

varies depending on the U.S. foreign policy and national security goals 

pursued. This process can involve targeting, identifying, freezing, or 

blocking assets, and, in some cases, transferring assets of governments, 

political leaders, individuals, or groups to legitimate governments. Over the 

last decade, the efforts of the United States and the international 

community have focused more on individuals and groups associated with 

targeted regimes than entire countries. Assets can be located throughout 

the international financial system; identifying their location requires the 

cooperation of U.S. and foreign financial institutions. The United States has 

procedures to freeze targeted regimes’ financial assets located in U.S. 

financial institutions and has transferred assets back to a country in a few 

cases. Figure 1 illustrates this approach, outlines the various agencies and 

institutions involved in the asset recovery process, and identifies the legal 

authorities used.

3

Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept 

and Obstruct Terrorism Act of 2001 (USA PATRIOT Act), Pub. L. No. 107-56, 115 stat. 272 

(2001).
Page 7 GAO-04-1006 Foreign Regimes’ Assets

Figure 1: The United States’ Approach to Recovering Foreign Regimes’ Assets

Figure 1 illustrates that the approach can involve four parts: targeting or 

determining whose financial assets will be frozen; identifying or 

ascertaining the accounts in which the assets are located; freezing or 

immobilizing the assets; and transferring or transmitting assets to accounts 

of a new government. It also identifies the various government agencies 

and financial institutions that can be involved in the approach and the legal 

authorities used for implementing the approach. Additionally, figure 1 

provides examples of various outcomes of a foreign regime asset freeze: 

transfering of blocked assets; unfreezing of assets in place; or vesting 

(taking ownership of) and transferring assets, as illustrated by the cases of 

the former Yugoslavia, Afghanistan, and Iraq.

Several U.S. Agencies Are 

Involved in Targeting Assets 

of an Increasingly Greater 

Number of Foreign Regime 

Entities

The Departments of Justice, State, and the Treasury, the Central 

Intelligence Agency, and the National Security Council have been key 

actors in foreign regime asset recovery. Domestically, the Department of 

State, in consultation with the National Security Council and other 

executive branch agencies, generally determines whose financial assets 

will be targeted, under what authority the action will be pursued, and 

Freeze

regime's

assets

Identify 

regime's assets

Transfer

blocked assets

Vest and

transfer assets

Unfreeze 

assets in place

Examples of various outcomes Target

foreign regime

U.S. and foreign financial institutions;

OFAC; intelligence and law

enforcement agencies

United States through

presidential 

executive orders

National Security Council; State,

Treasury, and Justice departments;

intelligence and law enforcement

agencies

Account B

ACCESS

DENIED

Iraq

The former

Yugoslavia

Afghanistan

Sources: GAO; Art Explosion (images).

International community

through U.N. Security

Council resolutions

U.S. and

foreign

financial

Institutions

Bank X

Account B
Page 8 GAO-04-1006 Foreign Regimes’ Assets

whether the effort will be undertaken unilaterally or multilaterally, as under 

U.N. Security Council resolutions. Once a decision is made, the President 

of the United States issues an executive order that gives U.S. executive 

branch agencies the authority to undertake these actions. 

The mandate of OFAC, the administrator and enforcer of U.S. economic 

sanctions programs, is to require all U.S. persons, including financial 

institutions, to freeze targeted assets located in the United States or under 

the control of a U.S. person outside of the United States. OFAC “targets” an 

individual, group, or entity by placing its name on the Specially Designated 

Nationals (SDN) list.4

 According to OFAC officials, OFAC works with the 

Departments of Justice and State, other components within Treasury, and 

intelligence and law enforcement agencies to develop adequate evidence to 

place individuals or entities on the SDN list. Officials at these agencies 

stated that this targeting process can be completed in weeks or months, 

depending on several factors, such as the availability of accurate 

information and the corroboration of intelligence collected from multiple 

sources. 

The Department of Justice’s Civil Division advises OFAC on the legal 

sufficiency of the evidence to comply with IEEPA requirements and would 

also defend the United States against any potential lawsuits that result from 

a targeting decision. OFAC then places targeted names on its SDN list. 

OFAC posts updated information on its public Web site and in the Federal 

Register, and provides electronic notification services to financial 

institutions. In addition, third party vendors provide subscription services 

that track OFAC developments, and the Federal Reserve notifies U.S. 

financial institutions of updates to the SDN list through Fedwire, an 

electronic system that allows it to contact approximately 9,500 financial 

institutions. 

OFAC also provides specific guidance to financial institutions, which are 

required to comply with orders to freeze assets. In addition, OFAC officials 

stated that, when appropriate, they contact some banks and firms 

individually. According to OFAC officials, the office sends OFAC personnel 

4

In addition to its country sanctions, OFAC publishes a list of individuals and companies 

owned or controlled by, or acting on behalf of, targeted countries. It also lists individuals, 

groups, and entities, such as terrorists and narcotics traffickers designated under programs 

that are not country specific. Collectively, such individuals and entities are called “Specially 

Designated Nationals and Blocked Persons” or “SDNs.” Their assets are blocked, and U.S. 

persons are generally prohibited from dealing with them. 
Page 9 GAO-04-1006 Foreign Regimes’ Assets

to the physical locations in the United States of known commercial, real, or 

tangible properties of the target to serve blocking notices to secure 

property. In some cases, these personnel shut down branches and 

subsidiary firms controlled by the target.

In 2003, the Departments of Defense and Homeland Security, as well as 

intelligence and law enforcement agencies, became more involved in 

tracking foreign assets. For example, in the case of Iraq, the Department of 

Defense has been on the ground assisting efforts to locate assets of the 

former Iraqi regime. Department of Homeland Security, Federal Bureau of 

Investigation (FBI), Internal Revenue Service criminal investigators, and 

intelligence agency representatives have worked in Iraq to identify leads to 

the former regime’s hidden assets. See appendix IV for more information 

about U.S. efforts to recover Iraqi assets.

The Department of State coordinates with the United Nations to place 

names of targets identified through the U.S. targeting process on the 

appropriate U.N designation list.5

 Internationally, OFAC develops and 

corroborates evidence collected by other countries on targets they have 

identified and proposed to the United Nations for inclusion on a 

designation list. State works diplomatically with other U.N. members to 

obtain the international consensus needed to place all targets for which 

OFAC has sufficient corroborating evidence on the U.N. lists. For example, 

as of June 2004, U.N. members had achieved consensus on over 500 names 

of individuals and entities associated with the Taliban, al Qaeda, and the 

former Iraqi regime, and had placed them on U.N. designation lists. U.S. 

government officials have also participated in international forums, such as 

Interlaken and Stockholm, to discuss more effective ways of targeting 

economic sanctions.6

5

In addition to the SDN list used by the United States, the United Nations also maintains lists 

of individuals and entities whose assets should be frozen. These lists are maintained 

pursuant to U.N. Security Council resolutions. 

6

The Swiss government hosted a number of expert seminars attended by representatives 

from national governments, central banks, and the U.N. Secretariat, among others, on the 

targeting of United Nations financial sanctions in 1998 and 1999. These seminars became 

known as the “Interlaken Process.” The German government sponsored the Bonn-Berlin 

process, which took place over 2000-2001, on the design and implementation of arms 

embargoes and travel and aviation bans. The Swedish government and a Swedish university 

initiated the “Stockholm Process” in November 2001. It reported on its work to the U.N. 

Security Council in February 2003. 
Page 10 GAO-04-1006 Foreign Regimes’ Assets

Identifying the Location of 

Assets Requires Domestic 

and International 

Cooperation

Financial assets of targets can be spread throughout the international 

financial system, and identifying their location requires the cooperation of 

U.S. and foreign financial institutions. U.S. government agencies involved 

in recovering assets work domestically and with foreign government 

counterparts and financial institutions to identify and locate the assets of 

targeted foreign regimes. 

U.S. intelligence and law enforcement agencies are involved in the 

identification process by developing leads and working with counterparts 

in other countries. For example, in 2003, the Department of Defense’s 

Defense Intelligence Agency provided some of the research and analysis 

used to identify assets of the former Iraqi regime. However, according to 

OFAC officials, if there is little reason to believe that a regime’s assets will 

be targeted, intelligence and law enforcement agencies are less likely to 

gather the kind of information needed by financial institutions to identify a 

targeted regime’s assets. This situation can pose a challenge to identifying 

assets in the international financial system. According to U.S. officials and 

experts on the subject of asset recovery, identifying assets also requires the 

expertise of lawyers and investigators from various jurisdictions to 

coordinate efforts to unravel what may be complicated financial 

transactions. For example, in November 2003, the Department of 

Homeland Security created the Iraqi Provisional Investigations Task Force, 

which Treasury participated in, to share information obtained from Iraqi 

documents and to coordinate their activities with other U.S. government 

agencies. According to Treasury and State officials, the leads have been 

provided to U.S. embassy officials working diplomatically with foreign 

governments to recover the targeted assets. 

According to U.S. officials, since September 11, 2001, contacts between 

U.S. law enforcement officials and prosecutors and foreign officials have 

increased. FBI legal attachés overseas and foreign police authorities 

regularly share criminal intelligence.7

 Information to further criminal 

investigations and prosecutions is also exchanged between U.S. and 

foreign prosecutors. Such exchanges are facilitated through designated 

“central authorities” under treaties the United States maintains with several 

other countries. The United States sometimes provides sensitive 

information to foreign treaty partners in response to formal requests. 

7

The FBI’s legal attachés work to gain cooperation with international police partners in 

support of the FBI’s domestic mission. Their goal is to link law enforcement resources and 

other officials outside the United States with law enforcement in this country.
Page 11 GAO-04-1006 Foreign Regimes’ Assets

However, this process can be lengthy, according to agency officials. Other 

countries have their own standards of evidence, and may have limitations 

on whether, and how, they can utilize information and evidence obtained 

from the United States. In addition, some countries’ laws require the 

demonstration of a criminal act before allowing any attempts to identify 

assets of selected targets.

The United States Has 

Procedures to Freeze Assets 

of Targeted Regimes 

Located in the United States 

or Under the Control of U.S. 

Persons

The United States has procedures, including domestic legal authorities and 

an implementing agency, to freeze assets of targeted foreign regimes in the 

United States or under the control of U.S. persons. Treasury’s OFAC, under 

an executive order declaring a national economic emergency, issues 

regulations implementing requirements that targeted regimes’ assets be 

frozen and transactions involving individuals, groups, or entities associated 

with these regimes be blocked. While OFAC’s regulations require 

compliance by all U.S. persons, compliance by financial institutions is 

crucial because these institutions often hold the targeted assets as deposits 

or securities or because the institutions could be used to facilitate 

transactions involving the assets. Financial institutions and their 

employees, as do all U.S. persons, face criminal penalties of up to 10 years’ 

imprisonment and, in the absence of statutory authority in addition to 

IEEPA, fines of not more than $50,000 for willful violations and civil 

penalties of up to $11,000 per violation for noncompliance.8

The United States Has 

Transferred Assets Back to 

a Country in Certain Cases

The United States has transferred assets back to the newly constituted 

governments of countries in certain cases, including the former Yugoslavia, 

Afghanistan, and Iraq; however, the circumstances varied in each case.

In the case of the former Yugoslavia, according to OFAC, $237.6 million in 

funds belonging to the Central Bank of the Socialist Federal Republic of 

Yugoslavia that had been frozen were transferred to the central banks of 

the successor states prior to sanctions being lifted. The transfers occurred 

primarily in April and May 2003. 

8

These penalties apply to violations of regulations, licenses, and orders issued pursuant to 

IEEPA. 50 U.S.C. §1705. Under the Iraq Sanctions Acts, penalties for violations of the Iraqi 

Sanctions Regulations are significantly higher (up to 12 years in prison and $1 million in 

criminal penalties and up to $275,000 for civil penalties).
Page 12 GAO-04-1006 Foreign Regimes’ Assets

In the case of Afghanistan, funds of the Taliban regime initially frozen in 

1999 were transferred to an existing central bank account at the Federal 

Reserve Bank of New York.9

 OFAC unblocked the account, and the Afghan 

government had the funds transferred to an account in another country. 

According to OFAC, $217 million was unfrozen and released to the Afghan 

Interim Authority in January 2002.

In the case of Iraq, under a March 20, 2003, executive order, the United 

States vested funds previously blocked in the accounts of the government 

of Iraq and certain Iraqi entities. The Treasury then directed the transfer of 

the funds to a U.S. Treasury account held at the Federal Reserve Bank of 

New York. U.S. Treasury officials issued instructions to the Federal Reserve 

Bank of New York to transfer the funds in cash installments to the Coalition 

Provisional Authority (CPA) in Iraq.10 Between May and December 2003, 

$1.7 billion was transferred to the CPA and $208 million to the 

Development Fund for Iraq (DFI).11

U.S. Government 

Agencies and Financial 

Institutions Face a 

Number of Challenges 

in Recovering Foreign 

Regimes’ Assets

U.S. government agencies and financial institutions involved in recovering 

foreign regimes’ assets face a number of challenges. First, law enforcement 

and intelligence agencies do not always have accurate and complete 

information, such as the spelling of names, addresses, and dates of birth, to 

provide to OFAC for distribution to U.S. financial institutions and other 

countries’ to assist in their efforts to locate assets of targeted foreign 

regimes. Second, the local laws of some foreign governments where 

branches of U.S. financial institutions are located sometimes complicate 

efforts to freeze or transfer financial assets. Third, OFAC’s ability to 

monitor financial institutions’ compliance with its regulations is limited 

because it does not have supervisory authority over financial institutions 

9

The funds were transferred to the Federal Reserve Bank of New York due to the Federal 

Reserve System’s role as the fiscal agent for the United States Treasury and other 

government agencies.

10The CPA, established in May 2003, was the U.N.-recognized coalition authority led by the 

United States and the United Kingdom that was responsible for the temporary governance 

of Iraq. The CPA transferred power to a sovereign Iraqi interim government on June 28, 

2004.

11On May 22, 2003, U.N. Security Council Resolution 1483 recognized the establishment of 

the DFI to provide a repository for Iraqi funds to support the reconstruction of Iraq. DFI 

funds consist of oil proceeds, U.N. Oil for Food program surplus funds, and returned Iraqi 

government and regime financial assets.
Page 13 GAO-04-1006 Foreign Regimes’ Assets

and relies on financial regulators to monitor financial institutions’ OFAC 

compliance programs. 

Target Information Needed 

to Locate and Freeze 

Financial Assets Is Not 

Always Readily Available 

Law enforcement and intelligence agencies do not always have accurate 

and complete information, such as the spelling of names, addresses, and 

dates of birth, to provide to OFAC for distribution to U.S. financial 

institutions and other countries’ to assist in their efforts to locate assets of 

targeted foreign regimes. The large number of names—more than 3,500—

on the OFAC SDN list compounds this problem. For example, in the case of 

Iraq, U.S. officials stated that information provided by OFAC for many of 

the targeted individuals lacked accurate or complete identifiers such as 

dates of birth. In addition, Treasury and Defense Department officials 

stated that intelligence agencies sometimes had to declassify key account 

identifying information before providing it to financial institutions. U.S. 

officials said this process could take months.

According to OFAC officials, financial institutions may also lack complete 

identifying information on their clients, such as dates of birth, which makes 

it more difficult for them to quickly determine if a name on the OFAC list 

matches an account at their institution. Before passage of the USA 

PATRIOT Act, U.S. financial institutions were not required to collect as 

much identifying information about their clients as they are now. 

Regulations issued under section 326 of the act now require financial 

institutions to collect certain identifying information about new clients 

seeking to open an account, such as name, address, and date of birth.12

OFAC officials stated that during the past 15 years, and particularly since 

September 11, 2001, the banking industry has developed a heightened 

awareness of the need to comply with OFAC regulations. A representative 

of the securities industry stated that since September 11, 2001, the 

securities industry has also developed a heightened awareness of the need 

to comply with OFAC regulations. According to representatives of U.S. 

financial institutions we interviewed, they have undertaken an expensive 

and rigorous due diligence program, which can include installing 

1231 C.F.R. §103.121-§103.123 (2003). Under the customer identification program rules (the 

“CIP Rules”), which became effective on June 9, 2003, a financial institution is not required 

to collect the identification verification information mandated by the CIP Rules with respect 

to persons with accounts existing prior to the effective date of the CIP Rules, provided that 

the financial institution has a “reasonable belief” that it knows the true identity of those 

persons.
Page 14 GAO-04-1006 Foreign Regimes’ Assets

monitoring software and training employees to detect names of targeted 

individuals and entities.

To comply with OFAC’s regulations, including orders to freeze assets and 

block transactions, the larger financial institutions whose representatives 

we interviewed used filtering and interdiction software. Representatives of 

these institutions stated that a large number of transactions initially 

blocked by their software are “false positives.” This means that the 

software has blocked transactions of entities with names similar to those 

on the SDN list that should not be blocked because the entities are not 

those on the SDN list. The representatives we interviewed stated that 

OFAC’s SDN list contains names with multiple spellings and, in some cases, 

does not include identifying information such as an address or date of 

birth. This situation requires the financial institution to conduct additional 

research to determine if the transactions involving those entities should be 

blocked. The verification process takes time, however, and may lead to 

delays in processing legitimate transactions. OFAC recognizes that a lack 

of identifying information is a challenge for financial institutions and has 

worked to increase the amount of identifying information it provides to 

financial institutions. 

An official from a trade group representing independent community banks 

stated that because its members are smaller banks with fewer customers, 

they generally use a manual process to comply with OFAC’s regulations. 

Members manually compare updates to the SDN list with lists of accounts 

maintained by the banks and transactions occurring at the banks over a 

specified period. Officials at the trade group noted that managers of most 

independent community banks are familiar with their customers and are 

thus likely to detect suspicious or unusual transactions without the use of 

filtering and interdiction software. However, because OFAC is continuously 

updating its SDN list, it can be difficult and time consuming to manually 

screen transactions against the list. Financial institution officials stated 

that an institution’s decision whether to use software or a manual process 

to comply with OFAC regulations is a business decision that the institution 

must make based on its perceived risk of holding accounts or processing 

transactions of those on the SDN list. 

Representatives of financial institutions also noted that the OFAC SDN list 

does not contain the name of every individual or entity subject to OFAC 

regulations. For example, the U.S. sanctions program against Iran requires 

bank transactions relating to goods or services of Iranian origin or 

transactions controlled by the government of Iran to be rejected. It is 
Page 15 GAO-04-1006 Foreign Regimes’ Assets

difficult for financial institutions to determine if an entity is owned or 

controlled by the government of Iran. Some commercial software vendors 

employ staff to research data available from the State Department, Central 

Intelligence Agency, and other public sources. These staff update their 

database with the names of entities known to be owned or controlled by 

affected governments, or the names of government officials in countries 

where the sanctions program covers government officials. 

Domestic Laws of Foreign 

Countries Sometimes 

Prohibit Freezing and 

Transferring Assets Located 

in U.S. Financial Institutions 

Overseas

The laws of some foreign countries where branches of U.S. financial 

institutions are located prohibit freezing of targeted assets under U.S. 

unilateral sanctions. In the case of multilateral sanctions, they may also 

prohibit the transfer of assets to a new government of a targeted regime. 

According to OFAC officials, in the case of U.S. unilateral sanctions, U.S. 

laws may conflict with the laws of the host country and thereby complicate 

the recovery process. U.S. branches of financial institutions might be 

exposed to legal action by the account holders for blocking financial 

transactions overseas. For example, a U.S. bank in the United Kingdom was 

ordered by a British court to release a Libyan bank’s assets blocked under 

U.S. unilateral sanctions in 1986. The United States subsequently 

authorized the release of the assets. According to an OFAC official, the 

process for recovering assets subject to multilateral sanctions is usually 

easier because these sanctions require international compliance. 

OFAC’s jurisdiction extends to all U.S. persons, which includes U.S. 

citizens and permanent resident aliens, companies located in the United 

States, overseas branches of U.S. companies, and, in some instances, 

overseas subsidiaries of U.S. companies. If these U.S. persons are located 

in a foreign country, they are also subject to the local laws and regulations 

of that country. In some instances, foreign laws conflict with OFAC 

regulations. According to OFAC, in these instances and depending on the 

circumstances, (1) the United States works diplomatically to encourage the 

foreign governments to allow U.S. financial institutions to comply with 

OFAC regulations to freeze and, in some cases, transfer the assets; or (2) 

OFAC issues a license authorizing the financial institution to comply with 

local law.
Page 16 GAO-04-1006 Foreign Regimes’ Assets

OFAC’s Ability to Monitor 

Financial Institutions’ 

Compliance with Its 

Regulations Is Limited

OFAC’s ability to monitor financial institutions’ compliance with its 

regulations, including orders to freeze assets and block transactions, is 

limited because, although financial institutions are required to comply with 

OFAC regulations, OFAC does not have supervisory authority over them. 

Thus, OFAC relies on financial institution regulators to monitor financial 

institutions’ OFAC compliance programs through their examinations.13

OFAC identifies transactions of U.S. persons that involve violations of its 

regulations primarily through mandatory reports it receives from financial 

institutions on transactions that have been blocked. In a few cases, OFAC 

also learns about a financial institution’s own violations through “selfdisclosure” by the financial institution. 

OFAC Identifies Violations of Its 

Regulations Primarily through 

Reports It Receives from 

Financial Institutions 

According to OFAC officials, the primary way OFAC learns about violations 

of its regulations is through their review of mandatory reports filed by 

financial institutions. When a transaction processed through an institution 

is determined to be a “true hit” against the SDN list, it must, according to 

law, be blocked. The institution is required to file a report of this blocking 

with OFAC within 10 business days. These mandatory reports include such 

information as payment instructions for a funds transfer. According to 

OFAC officials, OFAC staff review these mandatory reports and, in every 

case where there has been an indication that a U.S. party may have acted 

inappropriately (such as where one bank that processes a transaction for 

another fails to block a funds transfer), OFAC responded by issuing an 

administrative subpoena for additional details, referring the institution for 

penalty action, issuing a cease and desist order, or sending a warning letter. 

According to OFAC, in every instance where a U.S. bank has acted 

inappropriately, OFAC has sent information regarding the transaction to 

the appropriate financial regulator. In a limited number of instances, OFAC 

learns about violations of its regulations through “self-disclosure” by 

financial institutions. Both OFAC and the financial institution 

representatives we interviewed stated that these self-disclosures often 

involve inadvertent violations of OFAC regulations, such as when a 

financial institution mistakenly processes a wire transfer it should have 

blocked. These improper transactions also come to light when a second 

13Bank regulators currently examining U.S. banks for their compliance with OFAC 

regulations include the Office of the Comptroller of the Currency, Office of Thrift 

Supervision, Federal Reserve Board, Federal Deposit Insurance Corporation, and National 

Credit Union Administration. Securities regulators currently examining U.S. securities firms 

for their compliance with OFAC regulations include the Securities and Exchange 

Commission, New York Stock Exchange, and National Association of Securities Dealers. 
Page 17 GAO-04-1006 Foreign Regimes’ Assets

institution involved in the wire transfer subsequent to the first institution 

through which the wire transfer was sent blocks the transfer and notifies 

OFAC in accordance with OFAC regulations, thus putting OFAC on notice 

of the first institution’s failure to block. 

The financial regulatory officials we interviewed stated that, as a matter of 

safety and soundness or compliance, they regularly examine financial 

institutions subject to their supervision to evaluate the sufficiency of the 

institution’s policies, procedures, and systems to ensure compliance with 

OFAC regulations. When deficiencies in such policies, procedures, and 

systems are observed, the financial regulators take the appropriate 

supervisory action. Financial regulators stated they are unlikely to detect 

specific violations of OFAC regulations during their examinations unless 

such violations are apparent from transaction testing (i.e., testing 

individual transactions for compliance with foreign sanctions). If OFAC 

violations are identified during an examination, the regulators said that 

they direct the institution to contact OFAC immediately, and in situations 

involving enforcement actions, the regulators contact OFAC and share 

pertinent information. 

Treasury Has Not Acted on an 

Inspector General 

Recommendation to Seek 

Legislative Authority to Increase 

OFAC’s Access to Bank 

Regulators’ Examinations

In April 2002, Treasury’s Office of Inspector General (OIG) reported that 

OFAC’s ability to monitor financial institution compliance with its 

regulations is hampered because the varied legislation under which OFAC 

operates does not provide it with the authority to proactively monitor 

financial institution compliance with foreign sanctions.14 In its report, OIG 

made two recommendations to Treasury related to OFAC’s monitoring of 

financial institution compliance. OIG recommended that Treasury inform 

Congress that (1) OFAC lacks sufficient authority to ensure financial 

institution compliance with foreign sanctions and (2) OFAC’s ability to 

ensure financial institution compliance with sanctions would be enhanced 

by ensuring that bank regulators share information from their 

examinations with OFAC. OIG stated that the second recommendation 

could be accomplished by amending the Right to Financial Privacy Act to 

include OFAC in the definition of “bank regulator” for the purpose of

14U.S. Department of the Treasury, Office of Inspector General, Foreign Assets Control: 

OFAC’s Ability to Monitor Financial Institution Compliance Is Limited Due to 

Legislative Impairments (Washington, D.C.; Apr. 26, 2002).
Page 18 GAO-04-1006 Foreign Regimes’ Assets

allowing bank regulators to share information with OFAC.15 In response, 

OFAC officials agreed that its current legislative authority could be 

improved in terms of the information shared by bank regulators but stated 

that, despite statutory limitations, OFAC and the financial regulators have 

created an adequate compliance system. 

In December 2003, the Chairman and Ranking Minority Member of the 

Senate Finance Committee wrote to the Director of OFAC and asked him to 

explain and clarify OFAC’s position on the second OIG recommendation. 

They noted that OFAC’s Director had previously stated that the 

recommendation is a “good first step.” In his February 2004 response, the 

OFAC Director stated that OFAC has engaged in discussions with Treasury 

about the desirability of adopting this recommendation and that Treasury 

continued to review whether certain changes in the technical definitions of 

the Right to Financial Privacy Act would further enhance OFAC’s ability to 

ensure compliance. However, as of August 2004, Treasury had not acted on 

OIG’s recommendation. 

Mechanisms the United 

States Has Used to 

Recover Iraqi Assets 

Could Be Applicable in 

Future Efforts

The United States has invoked domestic legal authorities and international 

obligations and used coordinating bodies in its recent efforts to recover 

Iraqi assets; some of these mechanisms could be applicable to future 

efforts. Some mechanisms identified by U.S. officials have advanced U.S. 

efforts to recover assets; others have been less successful than initially 

expected. Some mechanisms initially developed to combat money 

laundering and terrorist financing also have applicability to foreign regime 

asset recovery. Other mechanisms were not initially used in U.S. efforts to 

recover Iraqi assets and their use remains limited. 

15The Right to Financial Privacy Act, 12 U.S.C. 3401-3418, with certain exceptions, prohibits 

agencies from transferring to another agency financial records originally obtained in 

compliance with the act that can be identified with the financial records of a particular 

customer. The act contains an exception that allows supervisory agencies, including 

financial institution regulators, to share customer financial records.
Page 19 GAO-04-1006 Foreign Regimes’ Assets

The United States Has Used 

Legal Authorities, 

International Obligations, 

and Coordinating Bodies to 

Recover Iraqi Assets

The United States has invoked domestic legal authorities and international 

obligations and used coordinating bodies in its efforts to recover Iraqi 

assets. Legal authorities and international obligations that the United 

States invoked in pursuit of Iraqi assets include IEEPA and U.N. Security 

Council resolutions respectively. Although there has been some success in 

bringing about the return of Iraqi assets, multilateral implementation of 

U.N. Security Council Resolution 1483 has faced challenges that have 

limited its effectiveness. The working group the United States established 

to coordinate the U.S. effort to recover Iraqi assets might be used as a 

model for future efforts, but the U.S. government has not documented the 

mechanisms used in past efforts that could serve as an evaluative basis and 

guide for future efforts.

IEEPA and USA PATRIOT Act 

Allowed the United States to Vest 

Iraqi Assets

In October 2001, section 106 of the USA PATRIOT Act (P.L. 107-56), 

amended section 203 of IEEPA (50 USC 1702) to authorize the President, 

when the United States is engaged in armed hostilities or has been attacked 

by a foreign country or foreign nationals, to confiscate any property, 

subject to the jurisdiction of the United States, of any foreign person, 

foreign organization, or foreign country that the President determines has 

planned, authorized, aided, or engaged in such hostilities or attacks. Before 

the adoption of section 106, the President could confiscate assets under the 

Trading with the Enemy Act, but only after a formal declaration of war.16 

The President invoked section 203 of IEEPA when he issued a March 20, 

2003, executive order vesting assets of the former Iraqi regime. The 

executive order allowed the United States to vest about $1.9 billion of 

frozen Iraqi assets and transfer them to the appropriate authorities for use 

in Iraq.

May 2003 U.N. Resolution 

Requiring Members to Transfer 

Frozen Assets to Iraq Has Not Yet 

Achieved Its Goals

The United States worked with the U.N. Security Council to pass 

Resolution 1483 on May 23, 2003, to pave the way for the transfer of Iraqi 

assets held in other countries to the DFI. However, for a variety of reasons, 

implementation of the resolution has not yet resulted in the transfer of all 

frozen assets back to Iraq. U.S. officials did not anticipate the extent of 

delays in returning the Iraqi assets to the DFI due to existing claims against 

the assets and the domestic authorities of countries holding the assets. 

State Department officials stated that they used experience from past U.N. 

Security Council resolutions to help develop Resolution 1483. 

16Section 106 also amended IEEPA to protect the confidentiality of classified information 

submitted in court in cases involving national security or terrorism.
Page 20 GAO-04-1006 Foreign Regimes’ Assets

Treasury and State Department officials said that although they anticipated 

some difficulties, they thought Resolution 1483 would facilitate the 

recovery and transfer of frozen assets more quickly than it did because it 

contained a provision they believed would facilitate the transfer of Iraqi 

assets to the DFI. However, other countries’ domestic legal authorities have 

slowed asset transfers in some instances. Treasury and State officials 

stated that they worked to find alternative means of facilitating countries’ 

transfer of assets to the DFI in instances where a lack of legal authorities 

has been a problem. However, as of June 2004, other countries had 

transferred about $847 million of the $3.7 billion in frozen funds worldwide. 

Large amounts of frozen assets had not been transferred from some of the 

countries. 

Paragraph 23 of Resolution 1483 directs member states to freeze and 

transfer funds “without delay” unless the funds are subject to a prior 

judicial, administrative, or arbitral lien or judgment. The paragraph further 

states that unless otherwise addressed, claims made by private individuals 

or nongovernmental entities on transferred funds may be presented to the 

government of Iraq. Paragraph 23 also provides that the funds generally 

enjoy privileges and immunities equivalent to those enjoyed by the United 

Nations. New or unsettled claims were supposed to be made to the 

internationally recognized representative government of Iraq. However, 

U.S. government officials stated that some U.N. members have had 

difficulty implementing Resolution 1483 due to, among other factors, the 

lack of (1) legal authority to implement it in their jurisdiction, (2) an OFAClike government entity to assist in identifying assets, and (3) sophisticated 

financial systems to freeze assets. The existence of business community 

and third party claims has also complicated the process. Finally, according 

to officials at the U.S. Mission to the United Nations, some countries have 

expressed concern over the lack of transparency of the DFI. As a result, 

they have been reluctant to transfer assets to it. Taken together, these 

challenges have decreased the immediate effectiveness of Resolution 1483 

and have hindered the United States and others in the international 

community in implementing the resolution.

U.S. Government Formed 

the Iraqi Assets Working 

Group to Coordinate U.S. 

Efforts to Recover Iraqi 

Assets

Established in March 2003, the Iraqi Assets Working Group has focused on 

coordinating asset recovery efforts for Iraq. Treasury leads the working 

group. Its present members include officials from the Departments of State, 

Justice, Defense, and Homeland Security; law enforcement agencies and 

the intelligence community; and the National Security Council. The former 

CPA was also a member during the time of the CPA’s existence. The 
Page 21 GAO-04-1006 Foreign Regimes’ Assets

working group has brought together expertise from across the government 

to coordinate the U.S. government’s efforts to recover Iraqi assets. 

According to public statements, the working group’s goals are to 

• exploit documents and key financial figures in Iraq to better understand 

fund flows; 

• secure the cooperation of jurisdictions through which Iraqi funds have 

flowed so that working group members can exploit financial records 

and uncover the money trail; 

• secure the cooperation of jurisdictions in which Iraqi assets may reside 

to locate, freeze, and repatriate the assets; 

• engage the financial community in the hunt for Iraqi assets generally, 

and specifically to secure the cooperation of financial institutions 

through which Iraqi funds have flowed or still may reside; 

• develop a system to facilitate the fluid repatriation of funds; and 

• prepare for potential sanctions against uncooperative jurisdictions and 

financial institutions. 

Little Documentation of Past 

U.S. Government Asset Recovery 

Efforts Is Available to Guide 

Future Asset Recovery Efforts

Neither Treasury nor State Department officials we interviewed knew 

whether the U.S. government had used a similar coordinating body for any 

of its previous asset recovery efforts. These agency officials did not have 

any documentation of mechanisms used in past efforts. In addition, one 

State official stated that when he started to work on the effort to recover 

Iraqi assets, he found little documentation of prior efforts to guide him.

According to OFAC officials, once a sanctions program is terminated, they 

no longer maintain historical information on it. When we asked OFAC 

officials for documentation of their past freezing and transferring 

regulations and the results of these efforts, they were unable to respond in 

a timely manner. 

Both Treasury and State officials have stated that they believe the 

collective efforts to recover Iraq’s assets, including efforts undertaken as 

part of the working group, afford the United States an opportunity to 

develop and institutionalize lessons learned for future recovery efforts. 

Treasury officials stated that they have begun to use the working group as a 
Page 22 GAO-04-1006 Foreign Regimes’ Assets

model for new asset recovery efforts and are considering creating an 

umbrella interagency mechanism to oversee future efforts.

Mechanisms Developed to 

Combat Money Laundering 

and Terrorist Financing 

Strengthen Financial 

Systems Worldwide

Some mechanisms that were initially developed to combat money 

laundering and terrorist financing may facilitate foreign regime asset 

recovery by strengthening financial systems worldwide. In one instance, a 

USA PATRIOT Act provision had direct applicability and was used to sever 

a foreign bank’s access to the U.S. financial system. Other USA PATRIOT 

Act provisions have a more indirect effect on asset recovery by 

strengthening U.S. financial institutions’ anti-money laundering systems 

and making it more difficult to hide assets. U.S. officials stated that other 

mechanisms, such as the Financial Action Task Force (FATF)17 and 

technical assistance the U.S. government provides to other countries to 

strengthen their anti-money laundering systems, help strengthen countries’ 

financial systems and thus indirectly facilitate asset recovery.

Some USA PATRIOT Act 

Provisions May Facilitate Asset 

Recovery by Making It More 

Difficult to Hide Assets in the 

U.S. Financial System

Title III of the USA PATRIOT Act contains expanded provisions of U.S. law 

to prevent, detect, and prosecute terrorist financing and international 

money laundering at financial institutions already covered by prior laws 

and extended these requirements to other financial service providers not 

covered under prior laws.18 Treasury officials believe that a number of the 

act’s provisions have a preventive effect that strengthens the anti-money 

laundering safeguards of financial institutions and thus facilitates the 

recovery of foreign regimes’ assets. More generally, to the extent that the 

act’s provisions help strengthen the anti-money laundering systems of U.S. 

financial institutions, increase transparency, enhance customer due 

diligence, and increase reporting of suspicious financial activity, the 

provisions make it more difficult to use the U.S. financial system to hide 

illicit funds. 

In May 2003, the United States used one section of the act to discourage a 

foreign bank from illegally holding Iraqi assets. Section 311 of the act 

authorizes the Treasury Department to designate specific foreign financial 

institutions, jurisdictions, transactions, or accounts to be of “primary 

17FATF is an intergovernmental policy body focused on combating money laundering and 

terrorist financing.

18The International Money Laundering and Financial Anti-Terrorism Act of 2001, Title III, 

USA PATRIOT Act, Pub. L. No. 107-56.
Page 23 GAO-04-1006 Foreign Regimes’ Assets

money laundering concern.” Under this section, Treasury may require 

domestic financial institutions with links to jurisdictions or institutions of 

“primary money laundering concern” to take specific measures, such as 

increased record keeping. This section also allows the United States to 

restrict or prohibit access to the U.S. market. According to Treasury 

officials, financial institutions may stop dealing with other financial 

institutions located in a jurisdiction of “primary money laundering 

concern” to avoid the increased record-keeping requirements established 

by Section 311. 

In May 2004, under Section 311, Treasury issued a notice of proposed rule 

making to impose “special measures” against a Syrian bank as a “financial 

institution of primary money laundering concern.” These special measures 

will include severing correspondent accounts with the bank.19 Treasury 

based this action, in part, on its belief that the institution had been used by 

terrorists and to launder proceeds from the illicit sale of Iraqi oil.

Treasury officials stated that other USA PATRIOT Act provisions could 

facilitate asset recovery efforts in the future. For example, Treasury 

officials stated that Section 312 regulations, when finalized, will increase 

the due diligence that financial institutions are required to exercise with 

regard to certain accounts of foreign financial institutions or wealthy 

foreign individuals. According to a Treasury official, one collateral benefit 

of this provision has been the creation of databases to identify “politically 

exposed persons” and their associates.20

FATF and Technical Assistance 

to Help Countries Combat 

Money Laundering and Terrorist 

Financing Indirectly Facilitate 

Asset Recovery

State and Treasury officials noted that FATF has played a part in foreign 

regime asset recovery through its role of identifying international best 

practices and issuing standards. State Department officials said that the 

United States’ involvement in FATF has strengthened the ability of 

countries to implement asset freezes. Treasury officials agreed with State 

on the indirect role FATF plays and stated that some of the best practices 

adopted by FATF could have relevance to asset recovery efforts by 

enhancing other countries’ abilities to recover assets. Treasury officials 

19A correspondent account is an account established by a financial institution for a foreign 

bank to receive deposits and make payments or other disbursements on behalf of the 

foreign bank, or to handle other financial transactions related to the foreign bank.

20The term “politically exposed persons” applies to persons who perform important public 

functions for a state. These persons can include heads of state, government and cabinet 

ministers, senior judges, and members of ruling royal families, among others.
Page 24 GAO-04-1006 Foreign Regimes’ Assets

also stated that Treasury has tried to encourage other countries through 

FATF to search for hidden Iraqi assets. 

The United States has worked with FATF to adopt and implement measures 

designed to counter criminals’ use of the financial system.21 In 1990, FATF 

produced a paper, “Forty Recommendations,” intended to assist countries 

in their anti-money laundering efforts. These recommendations, which 

have been revised twice, were intended for universal application. FATF 

expects them to be accepted and implemented by governments wanting 

recognition in the international community as jurisdictions that combat 

money laundering. Following the terrorist attacks of September 11, 2001, 

FATF issued new international standards to combat terrorist financing—

the “Eight Special Recommendations.” The objective of these measures, 

when implemented by countries worldwide, is to deny terrorists and their 

supporters access to the international financial system by encouraging 

financial institutions to implement record keeping and other safeguards.

The FATF recommendations on both money laundering and terrorist 

financing are designed to assist countries in making their financial systems 

more transparent and less vulnerable to misuse. FATF encourages 

nonmembers to implement both the FATF Forty Recommendations on antimoney laundering and the Eight Special Recommendations on anti-terrorist 

financing.

Treasury officials stated that, in their view, FATF, in and of itself, was not a 

mechanism for recovering foreign regimes’ assets. The Treasury 

representative to FATF stated that FATF is more of a process by which 

countries cooperate with each other than an organization with extensive 

personnel to recover assets. It has a small secretariat and relies on 

members to do the majority of its work. Treasury’s representative to FATF 

commented that the United States is also looking into ways for FATF to 

maintain a database of information on members’ laws relating to 

anti-money laundering and bank secrecy. The representative was not aware 

of an effort to collect information on laws related to foreign regime asset 

recovery but stated that this is a task FATF might be able to do. However, 

he cautioned that FATF still had the limitations cited above.

21FATF was established in 1989 as a policy-making body that works to generate the political 

will to bring about national legislative and regulatory reforms in the areas of anti-money 

laundering and anti-terrorist financing. Its current mandate extends through the end of 2004, 

but its work will continue if the member governments agree that this is necessary.
Page 25 GAO-04-1006 Foreign Regimes’ Assets

In addition to its participation in FATF, the U.S. government has provided 

technical assistance to governments to improve their capacity to combat 

money laundering and terrorist financing. State officials stated that 

technical assistance of this type could help countries recover assets of 

foreign regimes within their borders because it helps them develop the 

necessary legal authorities and investigative abilities to locate hidden 

assets. 

Use of Other Mechanisms 

for Asset Recovery Has 

Been Limited 

The United States’ use of some other mechanisms to recover foreign 

regimes’ assets has been limited. For example, Treasury officials stated that 

the Egmont Group provides a valuable channel for exchanging information 

with other countries.22 However, the Egmont Group was not fully 

integrated in the search for Iraqi assets. Also, although not involved in Iraq, 

private sector firms have played a role in past asset recovery efforts and 

could potentially be used in future efforts.

Treasury Did Not Initially Use 

the Egmont Group to Obtain 

Information 

Treasury officials stated that the Egmont Group provides a valuable 

channel through which countries, through their financial intelligence units 

(FIUs), can exchange financial investigative information. FIUs are 

specialized governmental agencies that countries have created as they 

develop systems to combat money laundering.23 The U.S. government did 

not initially use the Egmont Group in its efforts to recover Iraqi assets 

because, according to Treasury officials, Treasury and State decided to 

work diplomatically through high-level financial ministry contacts. 

Treasury officials stated that this method of exchanging information 

worked well.24 In the Iraq case, Treasury officials stated they already knew 

where many of the hidden Iraqi assets were located. They noted that 

Egmont is primarily intended for use in facilitating the exchange of 

information in ongoing U.S. and foreign criminal investigations. The 

officials noted that, with Iraq, there was no such investigation. In March 

22The Egmont Group began in 1995 when a number of financial intelligence units (FIUs) 

established an informal group to cooperate on the exchange of law enforcement 

information. As of June 23, 2004, the Egmont Group had 94 members. The group is named 

for the location of the first meeting—the Egmont-Arenberg Palace in Brussels, Belgium.

23Treasury’s Financial Crimes Enforcement Network is the FIU for the United States.

24The Treasury and State Departments are working with foreign governments to encourage 

them to transfer frozen Iraqi funds to the Development Fund for Iraq. According to State 

Department officials, since March 2003, State has sent more than 400 cables to other 

countries requesting that they transfer the Iraqi funds.
Page 26 GAO-04-1006 Foreign Regimes’ Assets

2004 congressional testimony, a Treasury official stated that the Egmont 

Group had been used more recently to exchange information related to the 

financial activities of the former Iraqi regime and to communicate specific 

Iraqi asset law enforcement-related inquiries to other countries.25

U.S. Agencies Have Not Involved 

Private Sector Firms in Foreign 

Regime Asset Recovery Efforts

Private sector firms have played roles in some instances of foreign regime 

asset recovery through civil lawsuits, investigative efforts, or both; 

however, they have not played a role in recovering Iraq’s assets. In cases 

where corrupt leaders have stolen from their countries, private sector firms 

have been hired to locate those assets and file suit to have the assets 

returned to their country of origin. Officials from firms involved in some of 

these efforts stated that they have developed considerable expertise that 

has allowed them to effectively recover assets. According to 

representatives of private law firms, civil litigation may be the most 

effective mechanism for recovering the stolen assets of corrupt 

government officials because such proceedings are public, serving to 

shame the individuals involved in stealing or concealing the assets. 

Representatives of private sector firms cautioned that efforts of this sort 

face challenges that can limit the involvement of private sector firms in 

recovering assets. For example, locating assets and suing for their return is 

expensive. Countries differ significantly in the laws that apply to 

recovering a regime’s assets, and pursuing assets in these countries would 

require expertise in the laws of each country. In many cases, the new 

government sues to recover assets. For example, in 1999, the government 

of Nigeria—after the 1998 death of General Sani Abacha, the former 

President—sought the return of assets stolen from the country during the 

Abacha regime. Nigeria had to hire those with the expertise to pursue the 

assets in the foreign countries in which they were invested. The legal 

requirements of other countries had to be met before the assets could be 

returned to Nigeria. Some countries required the posthumous criminal 

conviction of Abacha in Nigeria before funds that he had invested overseas 

could be returned. The case was resolved when the government of Nigeria 

negotiated a settlement with members of Abacha’s family in which it agreed 

not to prosecute the family in exchange for some of the stolen funds.

25U.S. Department of the Treasury, testimony of Juan C. Zarate, Deputy Assistant Secretary, 

Executive Office for Terrorist Financing and Financial Crimes, U.S. Department of the 

Treasury before the House Financial Services Subcommittee on Oversight and 

Investigations, March 18, 2004.
Page 27 GAO-04-1006 Foreign Regimes’ Assets

Cases that have involved private sector efforts include the following: 

• In 1985, Congress retained a private firm to investigate reports that 

Philippines President Ferdinand Marcos and his wife had secretly 

amassed millions of dollars in private wealth. The investigation 

confirmed that the Marcoses held assets located in the United States 

and overseas that were worth almost a billion dollars.

• In 1986, the Haitian government hired a private firm to locate hundreds 

of millions of dollars appropriated by former dictator Jean-Claude “Baby 

Doc” Duvalier. The investigations led to the seizure of bank accounts in 

New York, London, Luxembourg, Paris, and Geneva.

• After the 1988 terrorist attack on Pan Am flight 103 over Lockerbie, 

Scotland, plaintiffs sued the government of Libya on behalf of the 

victims.26 This resulted in a negotiated settlement in 2003.

• In 1990, the Kuwaiti government hired a private firm to investigate the 

financial network used by Saddam Hussein to hide assets in the West. 

The firm was able to link Hussein to millions of dollars in assets held in 

others peoples’ names in the United States and Europe, exposing some 

of his front companies and agents.

In the more recent case of Iraq, however, assets in the United States were 

vested and U.N. Security Council Resolution 1483 sought to protect assets 

in other countries from the types of claims that would result from civil 

suits. Private firm representatives stated that these actions removed the 

incentive for parties to pursue litigation. Treasury officials stated that U.S. 

government investigators were better positioned than the private sector to 

pursue Iraqi assets because they had access to classified information and 

the expertise to interpret what they found. They also stated, however, that 

private investigators might be useful in helping analyze large volumes of 

documents and other records.

Conclusion The U.S. government, led by the Treasury and State Departments, has 

achieved important successes in its current effort to recover assets of the 

former Iraqi regime. However, the challenges it has faced in this and other 

26The party pursuing asset recovery can also be private citizens that have suffered injury 

from the actions of a regime.
Page 28 GAO-04-1006 Foreign Regimes’ Assets

asset recovery efforts have complicated the process and could be 

addressed in a number of ways. For example, improvement of the adequacy 

of account identifying information supplied by intelligence and law 

enforcement agencies could enable U.S. financial institutions to more 

accurately freeze assets in response to OFAC freeze orders in the future. 

Informing intelligence and law enforcement investigators of the kinds of 

information needed at the earliest possible stage and faster declassification 

of intelligence information could expedite the process.

The ability of OFAC, as the U.S. agency charged with administering and 

enforcing economic sanctions against targeted foreign regimes and other 

designated groups and individuals, to ensure financial institution 

compliance with its sanctions could be enhanced if financial regulators 

shared information from their examinations with OFAC. This information 

could assist OFAC in enforcing its regulations by alerting it to financial 

institutions at a higher risk of not complying with its regulations. Treasury 

has not acted on a recommendation made by its Office of Inspector General 

over 2 years ago to seek legislative authority that would facilitate OFAC’s 

access to information from bank regulators’ examinations.

Recent efforts to quickly recover assets of the former Iraqi regime have not 

been as successful as initially expected, in part, because of existing claims 

against the assets and because other countries’ domestic legal authorities 

have impeded their ability to freeze and transfer assets of foreign regimes 

under various conditions, such as U.N. resolutions. U.S. officials have 

worked with some foreign governments to make the required legislative 

changes and have worked to devise alternative mechanisms for the assets 

to be transferred. Our efforts to obtain information on coordinating or 

other mechanisms used in past asset recovery efforts were unsuccessful, in 

part, because we found little documentation of these past cases. U.S. 

officials stated that they have learned a great deal in the Iraq case and that 

the mechanisms used in this effort could apply to future cases. 

Documenting the government’s lessons learned from the Iraq case would 

provide a critical road map to ensure that the United States implements a 

thorough and well-considered asset recovery effort in the future.
Page 29 GAO-04-1006 Foreign Regimes’ Assets

Recommendations for 

Executive Action

To improve the U.S. government’s readiness to move forward quickly in 

future asset recovery efforts, we are making three recommendations:

• The Departments of the Treasury and State should work with U.S. 

intelligence and law enforcement agencies to improve the accuracy and 

completeness of account identifying information needed by financial 

institutions to identify and freeze assets of foreign regimes.

• The Department of the Treasury should seek legislative authority, if 

necessary, to enhance OFAC’s ability to ensure financial institution 

compliance with sanctions by allowing financial regulators to share 

complete information from their examinations with OFAC.

• The Departments of the Treasury and State should develop and 

document a compilation of lessons learned from the current effort to 

recover Iraq’s assets that could assist in appropriately institutionalizing 

and leveraging all mechanisms available for future efforts.

Agency Comments and 

Our Evaluation

We received written comments on this report from the Departments of 

State and the Treasury. These comments and GAO’s evaluation of them are 

reprinted in appendixes VI (State) and VII (Treasury). The Departments of 

Defense, Homeland Security, Justice, State, and the Treasury, the Securities 

and Exchange Commission, Office of the Comptroller of the Currency, and 

the Federal Reserve Board also provided technical comments that GAO 

discussed with relevant officials and included in the text of the report, 

where appropriate.

State agreed with our recommendations regarding the need to improve the 

accuracy and completeness of account identifying information and 

document lessons learned from the current effort to recover Iraq’s assets. 

State stated that it would continue to work with foreign governments, 

Treasury, and U.S. intelligence and law enforcement agencies to improve 

target identifiers. State also stated that it would be desirable to work with 

the Department of the Treasury as well with their Missions to the United 

Nations and Iraq to develop and document lessons learned that might serve 

as a guide to future efforts. Although Treasury did not comment directly on 

either of these recommendations, it stated that it will continue to strive, to 

the extent applicable and permitted by law, to overcome the challenges of 

repatriating assets presented by diverse international legal constraints. 
Page 30 GAO-04-1006 Foreign Regimes’ Assets

With regard to whether it should seek a legislative change to allow financial 

regulators to share information from their examinations with OFAC, 

Treasury maintained that this issue has not affected the U.S. government’s 

ability to recover regime assets but that further information sharing 

between OFAC and the regulators would be helpful. Treasury stated that it 

had discussed this issue with federal regulators and, based on these 

meetings, it is uncertain whether legislative changes are necessary to 

enhance information sharing between OFAC and the financial regulators. 

Treasury further stated that it expects that comprehensive arrangements 

will be in place shortly to enhance information sharing between OFAC and 

the financial regulators. We agree that further information sharing between 

OFAC and the financial regulators would be helpful, and we encourage 

Treasury to seek whatever legislative solutions are necessary to overcome 

any obstacles to further information sharing. We modified our 

recommendation to reflect Treasury’s efforts and reaffirm the importance 

of ensuring that information sharing is enhanced. 

Unless you publicly announce its contents earlier, we plan no further 

distribution until 30 days after the date of this report. At that time, we will 

send copies of this report to the Secretaries of Defense, Homeland Security, 

State, and the Treasury; the Attorney General; the Chairmen of the Federal 

Reserve Board and the Securities and Exchange Commission; the 

Comptroller of the Currency; and interested congressional committees. We 

will also make copies available to others on request. In addition, this report 

will be available at no cost on GAO’s Web site at http://www.gao.gov.
Page 31 GAO-04-1006 Foreign Regimes’ Assets

If you or your staffs have any questions about this report, please contact 

Joseph Christoff at (202) 512-8979 or Davi M. D’Agostino at (202) 512-8678. 

GAO contacts and key contributors to this report are listed in appendix 

VIII.

Joseph A. Christoff, Director

International Affairs and Trade

Davi M. D’Agostino, Director

Financial Markets and Community Investment
Page 32 GAO-04-1006 Foreign Regimes’ Assets

Appendix I

Objectives, Scope, and Methodology ApApenednxidexiIs

The objectives of our report were to (1) describe the approach the U.S. 

government uses to recover foreign regimes’ financial assets, (2) examine 

the challenges the United States faces in recovering foreign regimes’ assets, 

and (3) examine the mechanisms the United States has used to recover 

Iraqi assets and their applicability to future efforts.

To address all of these objectives, we interviewed key U.S. government 

officials from multiple U.S. government agencies. The agencies included

• the Department of the Treasury (Executive Office for Terrorist 

Financing and Financial Crimes; Office of Foreign Assets Control; 

Financial Crimes Enforcement Network; and Internal Revenue ServiceCriminal Investigation); 

• the Department of State (Bureau of Economic and Business Affairs; 

Bureau of International Organization Affairs; Bureau for International 

Narcotics and Law Enforcement Affairs; and United States Mission to 

the United Nations); 

• the Department of Justice (Criminal Division’s Asset Forfeiture and 

Money Laundering Section, Counterterrorism Section, and Office of 

International Affairs; Civil Division; and Federal Bureau of Investigation 

Terrorist Financing Operations Section and Legal Attaché Program); 

• the Department of Homeland Security (Bureau of Immigration and 

Customs Enforcement); and 

• the Department of Defense (Office of the Under Secretary of Defense 

for Policy and Defense Intelligence Agency).

To address our first objective of describing the approach the U.S. 

government uses to recover foreign regimes’ assets and our second 

objective of examining the challenges the United States faces in recovering 

these assets, we reviewed documents from the U.S. government, the United 

Nations, and a nonprofit research organization, including testimonies, 

reports, and relevant laws. We also interviewed representatives of several 

large U.S. financial institutions responsible for complying with Treasury’s 

Office of Foreign Assets Control’s (OFAC) regulations to freeze assets and 

block transactions, two trade associations representing segments of the 

U.S. financial services industry, two financial regulatory agencies, and two 

self-regulatory organizations. 
Appendix I

Objectives, Scope, and Methodology

Page 33 GAO-04-1006 Foreign Regimes’ Assets

To address our third objective of examining the mechanisms U.S. officials 

identified for use in recovering Iraqi assets and their applicability to future 

efforts, we defined mechanisms to include legal authorities and 

coordinating bodies that Treasury Department officials said have been or 

could be used for asset recovery. Relevant legal authorities we reviewed 

included the International Emergency Economic Powers Act (IEEPA), 

sections in Titles I and III of the USA PATRIOT Act,1

 and United Nations 

Security Council Resolutions 1267, 1373, 1483, 1518, and 1546. Our 

discussion of foreign laws and regulations is based on interviews and other 

secondary sources. Furthermore, we reviewed documents describing the 

mission and operations of coordinating bodies that could be used to 

recover foreign regimes’ assets, such as the mission statements of the 

Egmont Group and Financial Action Task Force. 

To identify and describe the role of the Iraqi Assets Working Group, we 

interviewed officials from the Department of the Treasury and relied on 

public statements describing this group’s goals and activities. To identify 

and describe U.S. efforts to provide technical assistance to other countries, 

we interviewed officials from the Department of State and reviewed the 

United States’ report to the U.N. Security Council committee established to 

oversee implementation of Resolution 1267. Finally, to determine the role 

and use of private firms in efforts to recover assets, we interviewed 

representatives of law firms and a consulting firm that have been involved 

in past cases of asset recovery. We discussed with these representatives not 

only their involvement in past cases, but also the extent to which they have 

been or thought they could be used in the current case involving Iraq. 

To help describe the activities of the Iraqi assets working group, a key 

coordinating body used to recover the assets of the former Iraqi regime, we 

requested the minutes of the working group’s meetings. Treasury officials 

noted that the working group’s minutes were classified and also related to 

matters that remained sensitive. As a result, they did not provide us with 

these minutes. Due to the sensitivity of the matters in this particular 

situation and the nature and timing of our engagement, we relied on public 

statements and interviews with Treasury officials describing the group’s 

goals and agency officials’ general descriptions of the working group’s 

minutes to meet our reporting objectives.

1

Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept 

and Obstruct Terrorism Act of 2001 (USA PATRIOT Act), Pub. L. No. 107-56, 115 stat. 272 

(2001).
Appendix I

Objectives, Scope, and Methodology

Page 34 GAO-04-1006 Foreign Regimes’ Assets

We conducted our work in Washington, D.C., and New York City from May 

2003 to August 2004 in accordance with generally accepted government 

auditing standards.
Page 35 GAO-04-1006 Foreign Regimes’ Assets

Appendix II

Targeted Foreign Regimes Since 1979 ApendxiI

The United States, acting unilaterally, through the United Nations (U.N.), or 

both, has sought to freeze the assets of targeted foreign regimes to achieve 

a range of foreign policy and national security goals. The table below 

identifies the foreign regimes against which asset freezing sanctions were 

first imposed in 1979 or later (even if those sanctions were subsequently 

lifted), the time frame in which the asset freeze was or is in effect, the body 

(United States, United Nations, or both) that imposed the freeze, U.S. 

executive orders used to implement the freeze, stated reasons for the 

freeze, and amount of assets frozen by the United States as of June 2004.1

 

Table 1: Targeted Foreign Regimes Since 1979

1

This table does not include the regimes of North Korea and Cuba, even though the United 

States still has active asset freezes against them. Those freezes were authorized in 1950 and 

1963, respectively, under the Trading with the Enemy Act, while the freezes against the 

regimes listed in this table have been authorized under the International Emergency 

Economic Powers Act.

Foreign regime Time frame

Body imposing 

asset freeze

U.S. executive 

orders used to 

implement freeze

Stated reasons for 

freeze

Amount of assets 

frozen by the 

United Statesa

Afghanistan

(Taliban)

1999-presentb Both the United 

States (see executive 

orders) and the 

United Nations in 

Resolutions 1267, 

1333, 1373, 1390, 

and 1455

Executive Orders 

13129 and 13224

To prevent access to the 

assets by the Taliban, a 

group not officially 

recognized as the formal 

government of 

Afghanistan by the U.S. 

or U.N. and to pressure 

the Taliban to extradite 

Osama bin Laden 

$217 millionc

Angola

(UNITA) 

1993-2003 Both the United 

States (see executive 

orders) and the 

United Nations in 

Resolutions 1173 and 

1176

Executive Orders 

12865 and 13098

To preserve the unity, 

sovereignty, and 

territorial integrity of 

Angola and promote 

international peace and 

stability in the region 

No amounts 

reported

Haiti 1991-1994 Both the United 

States (see executive 

orders) and United 

Nations in 

Resolutions 841 and 

917d

Executive Orders 

12775, 12853, 

12917, and 12920

To return democracy to 

Haiti and democratically 

elected President JeanBertrand Aristide to his 

office

$121 million at the 

time of releasee
Appendix II

Targeted Foreign Regimes Since 1979

Page 36 GAO-04-1006 Foreign Regimes’ Assets

Iraq 1990-present Both the United 

States (see executive 

orders) and the 

United Nations in 

Resolutions 661, 

1483, and 1546

Executive Orders 

12722, 12724, and 

13315

To end Iraq’s invasion of 

Kuwait and restore 

sovereignty, 

independence, and 

territorial integrity to 

Kuwait; disarm Iraq of 

weapons of mass 

destruction; and assist in 

the reconstruction of Iraq

$2.1 billionf

Libya 1986-present Both the United 

States (see executive 

orders) and the 

United Nations in 

Resolution 883g

Executive Order 

12543

To end Libya’s support 

for international 

terrorism 

$1.25 billionh

The former Yugoslavia 1992-1996; 1998-

2003i

Both the United 

States (see executive 

orders) and the 

United Nations in 

Resolution 942j

Executive Orders 

12808, 12846, 

13088, 13121

To preserve the territorial 

integrity of all states of 

the former Yugoslavia; 

reaffirm the need for a 

lasting peace settlement 

by all Bosnian parties; 

promote international 

peace and security; 

provide stability in the 

region; and maintain 

progress in Bosnia and 

Herzegovina in 

implementing the Dayton 

peace agreement

$237.6 millionk

Burma 2003-present United Statesl Executive Order 

13310

To take additional steps 

with regard to the 

Burmese government’s 

repression of the 

democratic opposition 

Data not availablem

Zimbabwe 2003-present United Statesn Executive Order 

13288

To respond to certain 

members of the 

Zimbabwean 

government 

undermining democracy, 

the rule of law, and 

political and economic 

stability in the region 

$800,000

(Continued From Previous Page)

Foreign regime Time frame

Body imposing 

asset freeze

U.S. executive 

orders used to 

implement freeze

Stated reasons for 

freeze

Amount of assets 

frozen by the 

United Statesa
Appendix II

Targeted Foreign Regimes Since 1979

Page 37 GAO-04-1006 Foreign Regimes’ Assets

Source: United Nations, U.S. Treasury Department Office of Foreign Assets Control, and Institute for International Economics.

a

Treasury’s Office of Foreign Assets Control maintains data on the amount of assets frozen in all 

blocking programs. These amounts are included in the Treasury’s annual Terrorist Assets Report if a 

regime is determined by the Secretary of State to be a state sponsor of terrorism. 

b

Sanctions against the government of Afghanistan have been lifted. However, a freeze of the assets 

associated with the Taliban, Osama bin Laden, and al Qaeda remain in effect. 

c

These assets were unfrozen and released to the Afghan Interim Authority in January 2002. 

d

The United States began asset freezing sanctions against Haiti unilaterally in 1991 and the U.N. 

followed with multilateral sanctions in 1993.

e

Over $55 million was released during the period of sanctions at the request of the recognized 

government of Haiti, and with the certification of the Department of State, for expenditures related to 

the operations of the Haitian government in the United States and worldwide.

f

$1.93 billion was vested under Executive Orders 13290 and 13315. Approximately $120 million was 

paid out in claims and another $40 million remains blocked. 

g

The United States began asset freezing sanctions against Libya unilaterally in 1986 and the U.N. 

followed with multilateral sanctions in 1993. Currently, only limited U.S. sanctions remain in effect 

against Libya. 

Iran 1979-1981; 1995-

present

United States Executive Orders 

12170, 12959, and 

13059

1979-1981: to force 

Iran’s release of 

American hostages and 

settle expropriation 

claims. 

1995-present: to end 

Iran’s support for 

international terrorism 

and pursuit of weapons 

of mass destruction

$23.3 milliono

Panama 1988-1989 United States Executive Order 

12635

To remove General 

Manuel Noriega from 

power

$296.8 millionp

Sudan 1997-present United States Executive Order 

13067

To end Sudan’s support 

for international 

terrorism, its efforts to 

destabilize neighboring 

governments, and the 

prevalence of human 

rights violations 

$28.4 millionq

Syria 2004-present United States Executive Order 

13338

To end Syria’s support of 

terrorism, continued 

occupation of Lebanon, 

pursuit of weapons of 

mass destruction and 

missile programs, and 

subversion of United 

States and international 

efforts to stabilize and 

reconstruct Iraq

$0r

(Continued From Previous Page)

Foreign regime Time frame

Body imposing 

asset freeze

U.S. executive 

orders used to 

implement freeze

Stated reasons for 

freeze

Amount of assets 

frozen by the 

United Statesa
Appendix II

Targeted Foreign Regimes Since 1979

Page 38 GAO-04-1006 Foreign Regimes’ Assets

h

Of this amount, $5.4 million is blocked in U.S. banks’ foreign branches. 

i

Certain diplomatic and consular assets and assets of the National Bank of Yugoslavia remain blocked.

j

The United States began asset freezing sanctions against the former Yugoslavia unilaterally in 1992, 

and the U.N. followed with multilateral sanctions in 1994 that were lifted in 1996. The United States’ 

asset freezing sanctions were lifted in 1996. However, the United States imposed another round of 

unilateral sanctions from 1998 to 2003. 

k

This amount represents assets of the National Bank of Yugoslavia returned to the successor states of 

the former Socialist Federal Republic of Yugoslavia. In addition, amounts representing blocked wire 

transfers were released by General License, and the New York State Banking Department was 

licensed to take possession of assets of Beogradska Banka, New York Agency and Jugobanka, New 

York Agency as part of bankruptcy proceedings against the two institutions. 

l

The European Union imposed multilateral asset freezing sanctions against Burma in 2000, prior to the 

United States’ asset freezing action in 2003. 

mThe sanctions became effective in July 2003, just after the cut off date for U.S. holders of property to 

report blocked property. The most recent report was due June 30, 2004. 

n

The European Union imposed multilateral asset freezing sanctions against Zimbabwe in 2002, prior to 

the United States’ asset freezing action in 2003.

o

This figure represents the amount—mostly diplomatic and consular property—remaining blocked from 

the 1979-1981 sanctions. During the period of the 1979-1981 sanctions, over $12 billion in Iranian 

property was blocked. 

p

The assets were unfrozen and released to the legitimate government of Panama in 1989. 

q

Of this amount, $100,000 is blocked in U.S. banks’ foreign branches. 

r

No Syrian individuals or entities had been formally targeted by the United States for an asset freeze as 

of June 2004. Therefore, no Syrian assets have yet been frozen. 
Page 39 GAO-04-1006 Foreign Regimes’ Assets

Appendix III

Key U.S. Legal Authorities Used to Recover 

Foreign Regimes’ Assets ApendxiI

Source: GAO.

International Emergency Economic Powers Act (IEEPA)

Provides broad authority to the President to declare a national emergency to deal with an unusual and extraordinary threat, which has its 

source in whole or in part outside the United States, to the national security, foreign policy, or economy of the United States (50 U.S.C. §§ 

1701-06). The act gives the President substantial authority over foreign trade, including authority over property in which a foreign country 

or national thereof has any interest with respect to any property, subject to the jurisdiction of the United States (50 U.S.C. § 1702). In 

October 2001, section 106 of the USA PATRIOT Act (P.L. 107-56), amended section 203 of IEEPA (50 U.S.C. § 1702) to authorize the 

President to confiscate any property subject to the jurisdiction of the United States of a foreign person, organization or country that the 

President has determined to have planned or engaged in armed hostilities against the United States and vest all “right, title, and interest” 

in a designated agency or individual.

Trading with the Enemy Act of 1917 (TWEA)

Provides the President with authority under certain circumstances to confiscate and vest foreign assets subject to the jurisdiction of the 

United States, but only after a congressional declaration of war (50 U.S.C. App. §§1-44).

United Nations Participation Act (UNPA)

Authorizes the President to apply economic sanctions, including freezing of assets, called for by United Nations Security Council 

Resolution (22 U.S.C. § 287c).

National Emergencies Act (NEA)

Imposes procedural limitations on Presidential declarations of national emergency under which foreign assets have been blocked or 

frozen. A national emergency declared under the act automatically terminates on the anniversary of the declaration of the emergency 

unless the President publishes in the federal register and transmits a notice to Congress stating that the emergency continues in effect 

(50 U.S.C. §§ 1601-51).
Page 40 GAO-04-1006 Foreign Regimes’ Assets

Appendix IV

Efforts to Recover Iraqi Assets ApendxiIV

After Iraq invaded Kuwait in 1990, the United Nations imposed sanctions 

against the Iraqi regime; however, in 1996, the United Nations and Iraq 

agreed on the Oil for Food Program, thereby enabling Iraq to pay for 

humanitarian items. We estimated that between 1997 and 2002, Saddam 

Hussein’s regime accumulated at least $10.1 billion in surcharges on oil 

sales and illicit charges from suppliers exporting goods to Iraq through the 

Oil for Food program. In its recent efforts to recover assets of the former 

Iraqi regime worldwide, the U.S. government has engaged the services of a 

variety of U.S. agencies and recently developed domestic and international 

tools to recover these and other hidden assets. U.S. recovery efforts have 

had varying results.

Estimated Revenue 

Obtained Illegally by the 

Former Iraqi Regime 

Exceeds $10 Billion

In August 1990, Iraq invaded Kuwait, and the United States froze Iraqi 

assets. Shortly after, the United Nations also imposed sanctions against the 

regime. Security Council Resolution 661, approved in 1990, prohibited all 

nations from buying Iraqi oil and selling Iraq any commodities except food 

or medicines. The resolution also required member states to block the 

transfer of Iraqi assets from their countries. The United States amended its 

sanctions consistent with the resolutions. Other nations similarly froze 

Iraqi government assets in their countries. 

In December 1996, the United Nations and Iraq agreed on the Oil for Food 

Program, which allowed Iraq to sell a set amount of oil to pay for food, 

medicine, and infrastructure repairs. Iraq’s oil revenue was placed in a 

U.N.-controlled escrow account. From 1997 through 2002, we estimate that 

the former Iraqi regime acquired $10.1 billion in illegal revenues—$5.7 

billion in oil smuggled out of Iraq and $4.4 billion in surcharges on oil sales 

and illicit charges from suppliers exporting goods to Iraq through the Oil 

for Food program.1This estimate is higher than our May 2002 estimate of

1

This estimate is in constant 2003 U.S. dollars. 
Appendix IV

Efforts to Recover Iraqi Assets

Page 41 GAO-04-1006 Foreign Regimes’ Assets

$6.6 billion2 because it includes (1) oil revenue and contract amounts for 

2002, (2) updated letters of credit from prior years, and (3) newer estimates 

of illicit commissions from commodity suppliers.

Oil was smuggled out through several routes, according to U.S. government 

officials and oil industry experts. Oil entered Syria by pipeline, crossed the 

borders of Jordan and Turkey by truck, and was smuggled through the 

Persian Gulf by ship. Jordan maintained trade protocols with Iraq that 

allowed it to purchase heavily discounted oil in exchange for up to $300 

million in Jordanian goods. Syria received up to 200,000 barrels of Iraqi oil a 

day in violation of the sanctions. Oil smuggling also occurred through 

Turkey and Iran.

In addition to revenues from oil smuggling, the Iraqi government levied 

surcharges against oil purchasers and commissions against commodity 

suppliers participating in the Oil for Food program. According to some 

Security Council members, the surcharge was up to 50 cents per barrel of 

oil and the commission was 5 percent to 15 percent of the commodity 

contract.

In our 2002 report, we estimated that the Iraqi regime received a 5 percent 

illicit commission on commodity contracts. However, a September 2003 

Department of Defense review found that at least 48 percent of 759 Oil for 

Food contracts were potentially overpriced by an average of 21 percent.3

Food commodity contracts were the most consistently overpriced, with 

potential overpricing identified in 87 percent of the contracts by an average 

of 22 percent. The review also found that the use of middlemen companies 

potentially increased contract prices by 20 percent or more. Defense 

officials found 5 contracts that included “after-sales service charges” of 

between 10 percent and 20 percent. 

In addition, interviews by U.S. investigators with high-ranking Iraqi regime 

officials, including the former oil and finance ministers, confirmed that the 

former regime received a 10 percent commission from commodity 

suppliers. According to the former oil minister, the regime instituted a fixed 

2

GAO, Weapons of Mass Destruction: U.N. Confronts Significant Challenges in 

Implementing Sanctions Against Iraq, GAO-02-625 (Washington, D.C.: May 23, 2002).

3

The Defense Contract Audit Agency and the Defense Contract Management Agency, Report 

on the Pricing Evaluation of Contracts Awarded under the Iraq Oil for Food Program 

(Washington, D.C.; Sept. 12, 2003).
Appendix IV

Efforts to Recover Iraqi Assets

Page 42 GAO-04-1006 Foreign Regimes’ Assets

10 percent commission in early 2001 to address a prior “compliance” 

problem with junior officials. These junior officials had been reporting 

lower commissions than what they had negotiated with suppliers and 

pocketing the difference.

The United Nations Security 

Council Has Adopted Three 

Recent Resolutions 

The United Nations Security Council has adopted three recent resolutions 

regarding Iraq—1483, 1518, and 1546. The United States and other U.N. 

Security Council members adopted Resolution 1483 to assist in the 

reconstruction of Iraq and the establishment of a new Iraqi government. 

This resolution lifted trade sanctions initially imposed on Iraq in 1990; 

provided for the transfer of the U.N.’s Oil for Food Program to the Coalition 

Provisional Authority (CPA) over a 6-month period; sought to freeze assets 

of the former government of Iraq, Saddam Hussein, other senior officials, 

and their immediate families (the former regime); noted the establishment 

of a Development Fund for Iraq (DFI); and required all U.N. members to 

transfer assets frozen in their countries to the DFI. Unlike recent 

resolutions regarding the Taliban and terrorists worldwide, Resolution 

1483 did not establish a committee to oversee its implementation. On 

November 24, 2003, the United States and other U.N. Security Council 

members adopted Resolution 1518, which established a committee to 

identify individuals and entities whose assets were to be frozen under 

Resolution 1483. On June 8, 2004, the U.N. Security Council adopted 

Resolution 1546, which anticipated the end of the occupation of Iraq, the 

dissolution of the CPA, and endorsed the formation of a sovereign interim 

Iraqi government.

U.S. Efforts to Recover 

Iraq’s Assets Involve Many 

Agencies and Use Recently 

Developed Domestic and 

International Authorities

The United States has tapped the services of several U.S. agencies and used 

recently developed U.S. and international authorities in its efforts to 

recover Iraqi assets worldwide. About 20 entities, including those of the 

Departments of Defense, Homeland Security, Justice, State, and the 

Treasury, intelligence agencies, law enforcement agencies, and the National 

Security Council, are involved in recovering Iraqi assets.

To lead the asset recovery efforts, the United States created an interagency 

coordinating body headed by the Department of the Treasury. This group, 

the Iraqi Assets Working Group, has developed a strategy to identify, freeze, 

seize, and transfer former regime assets to Iraq. The working group’s goals 

include exploiting documents and key financial figures or information on 

fund flows, working with other jurisdictions where funds are located to 

recover assets, working with the financial community, developing a system 
Appendix IV

Efforts to Recover Iraqi Assets

Page 43 GAO-04-1006 Foreign Regimes’ Assets

to facilitate fund repatriation, and prepare for potential sanctions against 

uncooperative jurisdictions and financial institutions. The working group is 

leveraging the expertise of U.S. officials involved in efforts to recover 

assets of terrorists and money launderers.

Provisions in the USA PATRIOT Act amended IEEPA to allow the President 

to confiscate foreign property subject to U.S. jurisdiction in times of 

“ongoing hostilities” or if the United States is attacked. These provisions 

gave the President authority, invoked through an executive order, to 

confiscate the property of the former Iraqi regime and to vest title to these 

assets. In addition, according to the State Department, U.N. Security 

Council Resolution 1483 was an important vehicle for requiring other 

countries to transfer assets to Iraq. On May 22, 2003, the U.N. Security 

Council adopted Resolution 1483, which (1) noted the establishment of the 

DFI, a special account in the name of the Central Bank of Iraq; and (2) 

required member states to freeze and immediately transfer to the DFI all 

assets of the former Iraqi government and of Saddam Hussein, senior 

officials of his regime, and their family members. The resolution also 

included a unique immunity provision to protect the assets from new 

claims.

U.S. Efforts to Recover the 

Former Iraqi Regime’s 

Assets Have Had Varying 

Results

In 2003, the U.S. government quickly vested Iraq’s assets held in the United 

States and transferred them to Iraq. Similarly, the U.S. military seized assets 

recovered in Iraq of the former Iraqi regime. The CPA has used most of the 

vested and seized assets for emergency salary and pension payments to 

Iraqi civil servants, reconstruction projects and other ministry operations. 

U.S. officials noted that some other countries’ efforts to transfer Iraqi funds 

have been slowed by their lack of implementing legislation.

The United States Transferred 

Nearly $1.9 Billion in Vested 

Assets to Iraq

On August 2, 1990, in compliance with a Presidential executive order, 

Treasury’s OFAC issued regulations to financial institutions requiring them 

to freeze Iraqi assets in the United States. More than 30 banks in the United 

States identified and froze accounts with $1.4 billion in Iraqi assets.4 These 

institutions held assets in accounts that accumulated interest.

4

In addition, according to OFAC, more than $480 million was frozen in U.S. financial 

institutions abroad.
Appendix IV

Efforts to Recover Iraqi Assets

Page 44 GAO-04-1006 Foreign Regimes’ Assets

In March 2003, the President invoked authorities, including the enhanced 

authority in IEEPA, as amended by provisions in the USA PATRIOT Act, 

and issued an executive order confiscating Iraqi government assets held by 

U.S. financial institutions and vesting them in the U.S. Treasury. The order 

resulted in the vesting in the Treasury of about $1.9 billion of the former 

regime’s assets in the names of the government of Iraq, the Central Bank of 

Iraq, Rasheed Bank, Rafidain Bank, or the State Organization for Marketing 

Oil. All U.S. financial institutions holding such funds were ordered to 

transfer those funds to the Federal Reserve Bank of New York, and 23 

banks did so by electronically transferring the funds. Between May and 

December 2003, the United States transferred more than $1.7 billion to Iraq 

and $208 million to the DFI. 

With respect to the $1.7 billion transferred to the CPA, according to 

Treasury and Federal Reserve officials, Treasury instructed the Federal 

Reserve Bank of New York to release portions of the funds to the 

Department of Defense (DOD) upon the Office of Management and 

Budget’s approval of the CPA’s spending plans. As of July 2004, the former 

CPA had disbursed about $1.68 billion of the $1.7 billion for emergency 

needs in Iraq, including salaries for Iraqi civil servants and pensions, and 

for ministry operations.

The United States Seized More 

Than $900 Million in Iraq

The CPA informed us in June 2004 that the U.S. military, in coordination 

with U.S. law enforcement agencies, had seized about $927 million of the 

regime’s assets in Iraq. The U.S. military seized about $894 million in Iraqi 

bonds, U.S. dollars, euros, and Iraqi dinars, as well as quantities of gold and 

jewelry. This amount included $750,000 found with Saddam Hussein when 

he was captured. Department of Homeland Security agents seized an 

additional $32 million. The CPA was authorized to use these seized funds 

for humanitarian and reconstruction efforts in Iraq. As of July 2004, the 

former CPA disbursed used about $799 million for reconstruction activities, 

including projects, ministry operations, and liquefied petroleum gas 

purchases. 

Other Countries Have 

Transferred about $847 Million to 

the DFI

To encourage other countries to transfer the funds to Iraq, the Secretary of 

the Treasury requested that the international community identify and 

freeze all assets of the former regime. Additionally, Treasury and State 

officials said they have engaged in diplomatic efforts to encourage 

countries to report and transfer the amounts of Iraqi assets they had frozen. 

For example, since March 2003, State officials told us they have sent more 

than 400 cables to other countries requesting that they transfer funds to the 

DFI.
Appendix IV

Efforts to Recover Iraqi Assets

Page 45 GAO-04-1006 Foreign Regimes’ Assets

According to Treasury, other countries have frozen about $3.7 billion in 

Iraqi assets. About $2 billion was frozen since March 2003. Treasury 

officials reported that, as of June 2004, other countries and the Bank for 

International Settlements had transferred about $847 million to the DFI. 

Treasury officials noted that the remaining assets have not been transferred 

to the DFI because some countries do not have the necessary legislation to 

effect the transfer. Other countries are holding about $955 million pending 

adjudication of claims. U.N. Security Council Resolution 1483 requires the 

immediate transfer of Iraqi funds identified and frozen in these accounts to 

the DFI.

According to U.S. officials, Treasury and State continue to leverage the U.S. 

government’s relations with finance ministries and central banks to 

encourage the transfer of Iraqi assets to the DFI. Treasury and State have 

worked with countries holding Iraqi assets either to assist them in 

developing legislation that would allow them to transfer Iraqi assets they 

hold to the DFI, or to identify other ways they can transfer the assets 

without violating their own laws. For example, in one case, an Iraqi bank 

owning an account holding Iraqi assets located overseas formally requested 

in writing a transfer of the funds to the DFI. The country holding the assets 

was able to comply with the request and transferred the funds without 

having to pass legislation. In another instance, a “mirror” account was set 

up in the DFI and the funds from a country were transferred to that 

account. Therefore, the funds were never technically transferred out of the 

originating account. Some of the remaining frozen Iraqi funds are located in 

financial institutions in Iraq’s neighboring countries or Europe. 

Limited Progress Has Been Made 

in Recovering Hidden Assets of 

the Former Iraqi Regime

Although the United States has made progress in identifying hundreds of 

individuals, entities, and accounts associated with the former Iraqi regime, 

limited progress has been made in recovering the regime’s hidden assets. 

Because the former Iraqi regime used a network of front companies, trusts, 

and cash accounts in the names of the family members of the former 

regime’s leaders and associates, it has been difficult to identify how much 

remains hidden in the international financial system. U.S. government 

officials have cited estimates ranging from $10 billion to $40 billion in illicit 

earnings, although it is not clear what earnings went to whom.

According to U.S. government officials, U.S. government asset recovery 

efforts have focused on exploiting documents in Iraq, interviewing key 

financial figures, and convincing other countries to cooperate in identifying 

and freezing illicit funds that have flowed through or still reside in their 

countries. For example, Department of Homeland Security agents have 
Appendix IV

Efforts to Recover Iraqi Assets

Page 46 GAO-04-1006 Foreign Regimes’ Assets

exploited Central Bank of Iraq records for leads regarding Saddam 

Hussein’s procurement network to further investigations of U.S. entities 

that conducted illegal transactions with Iraq. Internal Revenue Service 

criminal investigators have conducted interviews of former finance 

ministry individuals and exploited financial documents of the regime to 

obtain leads on the location of targeted assets. The Defense Intelligence 

Agency provides some of the research and analysis used to identify assets 

of the former Iraqi regime.

In addition, according to Treasury and State officials, they are coordinating 

efforts to gain the cooperation of other countries. For example, U.S. 

investigators have identified over 2,600 accounts that potentially belonged 

to the former regime in other countries. State officials are working through 

their overseas embassies to get the cooperation of these countries to return 

the funds to the DFI. Anticipating the end of the occupation of Iraq and the 

reassertion of the full sovereignty of Iraq, the United States also supported 

the adoption of U.N. Security Council Resolution 1546 on June 8, 2004, 

which continues the obligations of U.N. member states to freeze and 

transfer certain funds, assets, and economic resources to the DFI in 

accordance with Resolutions 1483 and 1518 adopted in 2003.
Page 47 GAO-04-1006 Foreign Regimes’ Assets

Appendix V

Roles of U.S. Entities in Recovering Iraqi 

Assets ApendxiV

Figure 2: Assets Frozen in the United States

Figure 3: Assets Seized in Iraq

Asset location

United States

Assets

$1.92 billion

frozen and transferred

$1.68 billion

funds disbursed in Iraq

Current status

Department of the Treasury

Executive Office of the President

Coalition Provisional Authority

Entity Agency/office/subdivision Role

Office of Foreign Assets Control

Executive Office for Terrorist

Financing and Financial Crime

Froze assets in 1990 and directed financial institutions to transfer these

assets to Treasury account in 2003.

Leads interagency Iraq Task Force Working Group for Tracking and

Recovery of Iraqi Assets (Iraqi Assets Working Group, IAWG). 

Office of Management and Budget Approves CPA spending requests of vested funds.

Federal Reserve Bank of New York Maintains Treasury's vested account. As directed by the Treasury, released the vested

funds to the Department of Defense and the Coalition Provisional Authority (CPA).

Approved and managed the obligation and expenditure of vested funds.

Source: GAO.

Coalition Provisional Authority Approved and, with DOD, managed the obligation and expenditure of seized funds.

Asset location

Iraq

Assets

$927 million

seized

$799 million

funds disbursed in Iraq

Current status

Department of Defense

Entity Agency/office/subdivision Role

Military identified and seized assets in U.S. dollar, euro, and dinar currency notes;

gold; jewelry; and Iraqi bonds.

Department of Homeland Security Bureau of Immigration

and Customs Enforcement

Secret Service

Assisted the military in the identification and seizure of assets. 

Seized an additional $32 million.

Determined the authenticity of seized assets.

Source: GAO.
Appendix V

Roles of U.S. Entities in Recovering Iraqi 

Assets

Page 48 GAO-04-1006 Foreign Regimes’ Assets

Figure 4: Assets Identified and Frozen in Other Countries

Asset location

Other countries

Assets

$3.7 billion

identified and frozen

$847 million

transferred to the

Development Fund for Iraq

Current status

Department of the Treasury

Entity Agency/office/subdivision Role

Office of Foreign Assets Control Coordinates with State and Justice on potential asset designations.

International Affairs Tracks the status of assets frozen in and transferred from other countries.

Bureau of Economic and Business Affairs,

Bureau of International Organization Affairs,

and overseas embassies

Undertake diplomatic efforts to encourage other governments to

implement U.N. Resolutions 1483, 1518, and 1546. 

Bureau of Intelligence and Research and

Regional Bureaus

Collect and analyze economic and other information on Iraq and its

neighboring countries.

Department of State

U.S. Mission to the United Nations Negotiated consensus on U.N. Resolutions 1483, 1518, and 1546.

Submits potential freezing designations to the United Nations. 

Financial Institutions Identify, freeze, and transfer assets to the Development Fund for Iraq.

Coordinates with State on outreach to foreign government officials, including

finance ministries. 

Executive Office for Terrorist

Financing and Financial Crime

Source: GAO.
Appendix V

Roles of U.S. Entities in Recovering Iraqi 

Assets

Page 49 GAO-04-1006 Foreign Regimes’ Assets

Figure 5: Hidden Iraqi Assets

Bureau of Economic and Business Affairs,

Bureau of International Organization Affairs,

and overseas embassies

Undertake diplomatic efforts to encourage other governments to

follow up on leads and freeze assets.

U.S. Mission to the United Nations Encourages U.N. members to identify, freeze, and transfer assets.

Asset location

Global

Assets

Unknown Unknown

hidden Iraqi assets

Current status

Department of the Treasury

Department of State

Internal Revenue Service

 Criminal Investigation Division

Department of Defense Defense Intelligence Agency

Department of Homeland Security

Entity Agency/office/subdivision Role

Executive Office for Terrorist Financing

and Financial Crime

Reviews documents and interviews individuals connected to Saddam

Hussein's finances, front companies, and account transactions; provides

leads to embassies and to other governments and financial institutions.

Provided research and analysis used to identify assets of the former Iraqi

regime.

Office of the Secretary of Defense and

Under Secretary of Defense for Policy

Worked with the IAWG to facilitate activities in Iraq, including providing 

logistical support to Treasury investigators.

Source: GAO.

Coordinates U.S. efforts to locate additional hidden assets.

Bureau of Immigration and Customs Enforcement Identify and track financial assets related to the Central Bank of Iraq.
Page 50 GAO-04-1006 Foreign Regimes’ Assets

Appendix VI

Comments from the Department of State ApendxiVI
Appendix VI

Comments from the Department of State

Page 51 GAO-04-1006 Foreign Regimes’ Assets
Page 52 GAO-04-1006 Foreign Regimes’ Assets

Appendix VII

Comments from the Department of the 

Treasury ApendxiVI

Note: GAO comments 

supplementing those in the 

report text appear at the end 

of this appendix.

See comment 1.
Appendix VII

Comments from the Department of the 

Treasury

Page 53 GAO-04-1006 Foreign Regimes’ Assets

See comment 2.

Now on p. 33.

See comment 3.
Appendix VII

Comments from the Department of the 

Treasury

Page 54 GAO-04-1006 Foreign Regimes’ Assets
Appendix VII

Comments from the Department of the 

Treasury

Page 55 GAO-04-1006 Foreign Regimes’ Assets

The following are GAO’s comments on the Department of the Treasury’s 

letter dated September 2, 2004.

GAO Comments 1. We incorporated the updated amounts of Iraqi assets (1) transferred by 

other countries to the Development Fund for Iraq, (2) frozen currently 

by other countries, (3) held by other countries pending adjudication of 

claims, and (4) transferred by the United States to the Development 

Fund for Iraq.

2. Treasury took exception to our statement regarding their reluctance to 

share the Iraqi Assets Working Group meeting minutes with us. 

Treasury stated that it did not provide these meeting notes because 

they are classified and related to ongoing matters that remained 

sensitive at the time of the request. We note that GAO has statutory 

access to classified information and is required by law to maintain the 

same level of confidentiality as the agency from which we get the 

information. Due to the sensitivity of the matters in this particular 

situation and the nature and timing of our engagement, we relied on 

public statements and interviews with Treasury officials describing the 

group’s goals and agency officials’ general descriptions of the working 

group’s minutes to meet our reporting objectives.

3. Treasury commented that the issue of whether OFAC should have 

access to the financial regulators’ compliance examinations of financial 

institutions is important and is being discussed within Treasury and 

with the federal banking regulators, but maintained that this issue has 

not affected the U.S. government’s ability to recover regime assets. 

Treasury also commented that it is uncertain that legislative changes 

are necessary to enhance information sharing between OFAC and the 

financial regulators. Treasury said it is pursuing the issue and it expects 

that comprehensive arrangements will be in place shortly to enhance 

information sharing between OFAC and the financial regulators. We 

agree that further information sharing between OFAC and the financial 

regulators would be helpful, and we encourage Treasury to seek 

whatever legislative solutions are necessary to overcome any obstacles 

to further information sharing. 
Page 56 GAO-04-1006 Foreign Regimes’ Assets

Appendix VIII

GAO Contacts and Staff Acknowledgments ApendxiVI

GAO Contacts Joseph A. Christoff, (202) 512-8979

Davi M. D’Agostino, (202) 512-8678

Staff 

Acknowledgments

Thomas Conahan, Lynn Cothern, Philip Farah, Rachel DeMarcus, Ronald 

Ito, Barbara Keller, Sarah Lynch, Zina Merritt, Tetsuo Miyabara, Marc 

Molino, and Mark Speight made key contributions to this report.

(320201)
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