U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2250 Mail: Stop SSOP, Washington, DC 20402–0001

28–101 PDF 2006

WEAPONS OF MASS DESTRUCTION:

STOPPING THE FUNDING—THE OFAC ROLE

HEARING

BEFORE THE

SUBCOMMITTEE ON 

OVERSIGHT AND INVESTIGATIONS

OF THE

COMMITTEE ON FINANCIAL SERVICES

U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

SECOND SESSION

FEBRUARY 16, 2006

Printed for the use of the Committee on Financial Services

Serial No. 109–73

(

(II)

HOUSE COMMITTEE ON FINANCIAL SERVICES 

MICHAEL G. OXLEY, Ohio, Chairman

JAMES A. LEACH, Iowa 

RICHARD H. BAKER, Louisiana 

DEBORAH PRYCE, Ohio 

SPENCER BACHUS, Alabama 

MICHAEL N. CASTLE, Delaware 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

ROBERT W. NEY, Ohio 

SUE W. KELLY, New York, Vice Chair 

RON PAUL, Texas 

PAUL E. GILLMOR, Ohio 

JIM RYUN, Kansas 

STEVEN C. LATOURETTE, Ohio 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, JR., North Carolina 

JUDY BIGGERT, Illinois 

CHRISTOPHER SHAYS, Connecticut 

VITO FOSSELLA, New York 

GARY G. MILLER, California 

PATRICK J. TIBERI, Ohio 

MARK R. KENNEDY, Minnesota 

TOM FEENEY, Florida 

JEB HENSARLING, Texas 

SCOTT GARRETT, New Jersey 

GINNY BROWN-WAITE, Florida 

J. GRESHAM BARRETT, South Carolina 

KATHERINE HARRIS, Florida 

RICK RENZI, Arizona 

JIM GERLACH, Pennsylvania 

STEVAN PEARCE, New Mexico 

RANDY NEUGEBAUER, Texas 

TOM PRICE, Georgia 

MICHAEL G. FITZPATRICK, Pennsylvania 

GEOFF DAVIS, Kentucky 

PATRICK T. MCHENRY, North Carolina 

CAMPBELL, JOHN, California 

BARNEY FRANK, Massachusetts 

PAUL E. KANJORSKI, Pennsylvania 

MAXINE WATERS, California 

CAROLYN B. MALONEY, New York 

LUIS V. GUTIERREZ, Illinois 

NYDIA M. VELA ́ ZQUEZ, New York 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

DARLENE HOOLEY, Oregon 

JULIA CARSON, Indiana 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

BARBARA LEE, California 

DENNIS MOORE, Kansas 

MICHAEL E. CAPUANO, Massachusetts 

HAROLD E. FORD, JR., Tennessee 

RUBE ́ N HINOJOSA, Texas 

JOSEPH CROWLEY, New York 

WM. LACY CLAY, Missouri 

STEVE ISRAEL, New York 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

JIM MATHESON, Utah 

STEPHEN F. LYNCH, Massachusetts 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

ARTUR DAVIS, Alabama 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

MELISSA L. BEAN, Illinois 

DEBBIE WASSERMAN SCHULTZ, Florida 

GWEN MOORE, Wisconsin, 

BERNARD SANDERS, Vermont

Robert U. Foster, III, Staff Director 

(III)

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

SUE W. KELLY, New York, Chair

RON PAUL, Texas, Vice Chairman 

EDWARD R. ROYCE, California 

STEVEN C. LATOURETTE, Ohio 

MARK R. KENNEDY, Minnesota 

SCOTT GARRETT, New Jersey 

J. GRESHAM BARRETT, South Carolina 

TOM PRICE, Georgia 

MICHAEL G. FITZPATRICK, Pennsylvania 

GEOFF DAVIS, Kentucky 

PATRICK T. MCHENRY, North Carolina 

MICHAEL G. OXLEY, Ohio 

LUIS V. GUTIERREZ, Illinois 

DENNIS MOORE, Kansas 

CAROLYN B. MALONEY, New York 

STEPHEN F. LYNCH, Massachusetts 

ARTUR DAVIS, Alabama 

EMANUEL CLEAVER, Missouri 

DAVID SCOTT, Georgia 

DEBBIE WASSERMAN SCHULTZ, Florida 

GWEN MOORE, Wisconsin 

BARNEY FRANK, Massachusetts 

(V)

C O N T E N T S 

Page 

Hearing held on: 

February 16, 2006 ............................................................................................ 1

Appendix: 

February 16, 2006 ............................................................................................ 23

WITNESSES 

THURSDAY, FEBRUARY 16, 2006

Werner, Robert W., Director, Office of Foreign Assets Control, U.S. Department of the Treasury ........................................................................................... 6

APPENDIX 

Prepared statements: 

Oxley, Hon. Michael G. .................................................................................... 24

Kelly, Hon. Sue ................................................................................................. 27

Werner, Robert W. ............................................................................................ 28

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Lee, Hon. Barbara: 

Written responses to questions submitted to Robert Werner ....................... 42

(1)

WEAPONS OF MASS DESTRUCTION: 

STOPPING THE FUNDING—THE OFAC ROLE 

Thursday, February 16, 2006

U.S. HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON OVERSIGHT

AND INVESTIGATIONS, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The committee met, pursuant to notice, at 10:06 a.m., in room 

2128, Rayburn House Office Building, Hon. Sue W. Kelly [chairwoman of the subcommittee] presiding. 

Present: Representatives Frank, Kelly, Kennedy, Price, Davis, 

Gutierrez, Cleaver, and Scott 

Chairwoman KELLY. This meeting of the Oversight and Investigations Subcommittee will come to order. Today’s hearing is on 

the role of the Treasury Department’s Office of Foreign Assets Control (OFAC) in fighting the proliferation of weapons of mass destruction. 

The spread of WMD, particularly nuclear weapons, poses the 

greatest threat to the security of the United States and the peace 

of the world. We know, then, that countries such as Iran must be 

dealt with. We have all heard the hateful and ominous rhetoric 

from the president of Iran, and we should all recognize the grave 

threat posed by their possession of weapons of mass destruction. 

If Iran is successful, other nations will likely follow its example, 

and Iran itself could become a base for proliferations of WMD to 

enemies of the United States, including terrorist groups such as 

Hezbollah and Hamas. Acquisition of WMD, particularly nuclear 

weapons, is an activity that states cannot easily undertake without 

assistance from nations that already possess this technology. Even 

the United States’ own Manhattan Project, the first successful nuclear project weapons program, required the technical skills not 

only of our own country, but of industry from the British empire, 

and the best minds of Germany, who were forced to flee because 

of Nazi persecution. 

Recognizing the key role foreign industry plays in WMD proliferation, President Bush signed Executive Order 13382, blocking 

property of weapons of mass destruction proliferators and their 

supporters. Under this order, 18 companies have been designated 

as supporters of proliferation, including 6 companies in Iran, 11 in 

North Korea and 1 in Syria. This order strikes at proliferation by 

stopping these companies from having any access to the U.S. financial system. 

2

This Executive Order is a powerful weapon to be used against 

WMD proliferators. It can only work to the extent that financial institutions and other government agencies cooperate with it. Unfortunately, there have been reports that one of the largest financial 

institutions in the world, ABN AMRO, had a deliberate policy of 

not reporting transactions with Iran to OFAC. There is a possibility that these transactions going back to 1997 may have allowed 

Iranian companies now listed under E.O. 13382 to access the U.S. 

economy. 

Evasion of sanctions regimes by financial institutions endangers 

the United States and our allies and must be treated in a way that 

reflects the severity of the crimes that are facilitated. A recent article in The Wall Street Journal reported that more than seven 

major financial institutions were withdrawing from trade with Iran 

because of increased regulatory monitoring. Several of them are 

under investigation, according to filings with the SEC, for possible 

violations of OFAC regulations while they did business with Iran. 

This country should never tolerate businesses making money 

from hostile regimes that are working to develop weapons of mass 

destruction. We must make sure the system that we have in place 

for addressing that is not easily circumvented. OFAC has an important responsibility in protecting our national security, and I look 

forward to receiving the testimony of Director Werner and working 

with him to strengthen his agency. 

I turn now to Mr. Gutierrez. 

Mr. GUTIERREZ. Thank you, Chairwoman Kelly, for calling this 

hearing, the first oversight hearing of 2006. We’ve worked together 

on many issues and presided over many hearings, particularly on 

today’s subject; combatting the financing of terrorist activities. 

I want to welcome Director Werner here this morning. The last 

time I recall receiving testimony from OFAC was in June of 2004. 

At that time, Mr. Werner’s predecessor indicated just how much 

OFAC had grown—from 10 employees to 144—administering 27 

economic sanctions programs. 

I see from the first page of your testimony that you currently 

have 125 employees handling 30 programs. I know that not everything can be evaluated in terms of numbers, but at the appropriate 

time I will ask you, Director, if that means that you have 20 vacancies currently at OFAC since the last time, which was June of 

2004, you had 134 employees, and if you’re working to fill those positions, and whether that work that the people were doing was 

vital. 

Recently, the front page of USA Today had a story called, ‘‘Fewer 

Terror Assets Frozen. Lack of Urgency Feared in the Front.’’ I 

would ask unanimous consent to place this article in the hearing 

record. 

Chairwoman KELLY. So moved. 

Mr. GUTIERREZ. Again, while I don’t believe that the numbers 

tell the complete story, and certainly immediately after 9/11, there 

was a lot of low-hanging fruit which artificially inflated the number 

of assets frozen at the time, I’m concerned about some issues raised 

in that article as well as in the report by the GAO last October. 

The GAO report indicated a number of problems in the overall 

efforts to combat terrorist financing, many of which were directly 

3

linked to turf battles between Treasury and State. While some of 

those issues are beyond the scope of OFAC’s activities, and are better addressed by others at Treasury, many of your activities require OFAC, as in your opening statement again, to work very 

closely with the State Department. 

Therefore, I’m interested in learning what steps OFAC has taken 

in the face of that report to improve its working relationship with 

State and how the roles, responsibilities, and procedures are defined when agencies working together on designations and blocking. 

Finally, there is a point mentioned both in the USA Today article 

and the GAO report which falls squarely within your purview. The 

GAO recommended that Treasury provide more complete information on the nature and extent of asset blocking in its annual terrorist assets report to Congress. That’s us. 

I was shocked to see that Treasury’s reply to the recommendation was that the agency objected and instead wanted the GAO to 

recommend discontinuing these reports. When I read the GAO report, it said this is what we recommended, this is what they responded, and I guess they wrote everything in the report. That’s 

what I read. As a Member of Congress, particularly a member of 

the Oversight Subcommittee, I want the reports. I understand we 

should receive the next one in April. 

As I said earlier, I’m not hung up on numbers, but I think we 

need a way to measure effectiveness. If these snapshots do not provide us with that ability, please help us figure out how to assess 

your performance and include additional information to place the 

numbers in context. I think that’s what the GAO report—we said 

we needed more numbers to place it in context. 

Thank you very much, and I look forward to the Director’s testimony. 

Chairwoman KELLY. Mr. Price, have you an opening statement? 

Mr. PRICE. Thank you, Madam Chairwoman. I also want to join 

my colleague in thanking you for calling this hearing and welcoming the Director. I look forward to your testimony. I would also 

be interested in your assessment of whether or not Congress is getting the kind of information that it needs. There’s some indication, 

as Mr. Gutierrez said, that we’re not, and I would appreciate your 

comments about that. 

I also am interested in whether or not you are able to interact 

with any other nations who have similar concerns in terms of 

WMD and assisting in limiting the amount of resources that are 

going to folks who are interested in developing that, and I haven’t 

seen that in your report. I look forward to your testimony and welcome you. 

Chairwoman KELLY. Thank you. And we’re joined by the ranking 

member of the Full Committee, Barney Frank. 

Mr. FRANK. Thank you, Madam Chairwoman, for this. And I appreciate the way you and the ranking member have worked together to make the Oversight Subcommittee an effective part of our 

work. 

Mr. Werner, I’m troubled by something that is not your responsibility personally. You may be a victim of it, but you’re here as a 

representative of the Treasury Department. And I read the GAO 

4

report. I should say that I don’t usually get to come to this subcommittee’s hearings. I think the chairman and ranking member 

work very well together. They do an excellent job on oversight. And 

with the responsibilities of ranking member of the Full Committee, 

with all of the subcommittees, it’s hard to get to them all. 

But I was so appalled when I read the GAO report on terrorist 

financing that came out in October, that I had to come here. What 

the GAO says is that there is a major turf battle going on between 

Treasury and State. Shame on us. This is an extraordinarily important issue, terrorist financing, and we have a State-Treasury dispute, according to the GAO. State says it’s the lead agency. Treasury says, no you’re not. Justice says they don’t agree with either. 

And the fact that a dispute of this sort goes on and isn’t resolved 

is appalling to me. 

So one question I have is, why hasn’t this been brought to the 

National Security Council, which I assume would be the appropriate place to mediate a serious interdepartmental dispute, and 

have it resolved? The report, from pages 16 to the end, talks about 

serious disagreements and says that this hurts our efforts. 

Let me read in the report just the headings. ‘‘State and Treasury 

officials also disagree on procedures and practices for the delivery 

of counterterrorism financing, training and technical assistance.’’ 

‘‘State and Treasury officials disagree on the use of OTA funding 

and contractors.’’ ‘‘State, Justice and Treasury officials disagree on 

whether it is appropriate for U.S. contractors to provide assistance 

in the legislative drafting efforts.’’ ‘‘Treasury and State officials disagree on the use of confidentiality agreements between contractors 

and the foreign officials they advise.’’ ‘‘State and Treasury officials 

disagree with the procedures for conducting assessments of countries’ needs for training and technical assistance.’’ 

This is appalling. And I really would hope you will tell us, do 

these disagreements persist? This is a report issued in October. Do 

these disagreements persist? What efforts have been made? You 

know, have any of these six or seven disagreements now, have we 

come to agreement? Maybe you can bring the U.S. Trade Representative in and he can negotiate a treaty here. He doesn’t seem 

to be doing too well in Dubai. He may have some extra time. 

Have these been resolved? If not, what’s going on to resolve 

them? Has this gone to the White House? Has it gone to the National Security Council? I would think this is what you have a National Security Council for. And apparently, you know, I should say 

there may be some Congressional problem here. This reports cites 

some statutes that aren’t explicit about some of these things. But 

that’s what you have a White House coordination body for. And 

this kind of three-way disagreement is a serious problem. 

Now, I also think it does not do, frankly, to ignore problems. You 

make one reference here to the State Department and how you 

work with the State Department in your statement, and that’s a 

good thing, but frankly, when you read this GAO report, you have 

to question the kind of bland notion of things about how you work 

together. And as I say, these are not simply jurisdictional issues 

with no substance. These are substantive issues. 

And so I will be asking you, do these disagreements listed in the 

GAO report persist? If so, what efforts are being made to resolve 

5

them? Is there some interagency procedure that is set up to deal 

with them? The persistence of disputes. I mean, I’ve got to say, this 

is so dysfunctional. I listened to what GAO reports, and what 

Treasury and State think, and I think I’m seeing one of these kinds 

of major disagreements like between, you know, I don’t know, between the head of FEMA and the head of Homeland Security. I 

mean, we’re talking about apparently a serious disagreement about 

how to function, and on something that is so important, terrorist 

financing. 

For the Treasury and State Departments to be in prolonged disagreement and for the White House not to have resolved it is a serious problem. Some problems you can’t fix in the world. But I 

would think these kinds of disagreements over who’s in charge and 

what procedures to follow between two American governmental departments ought to be solvable if the Administration simply had its 

attention called to it. 

Thank you, Madam Chairwoman. 

Chairwoman KELLY. I thank you. And, Mr. Frank, I would be delighted if you are still here that you ask questions, but if you are 

not here, if you want to submit those in writing, we will accept 

them and put them in the record. 

Mr. FRANK. Thank you, Madam Chairwoman. I’m going to try 

and stay. 

Chairwoman KELLY. Thank you. I also would like unanimous 

consent to put a statement from Chairman Oxley in the record. So 

moved. 

And we’ll turn now to Mr. Davis. 

Mr. DAVIS. Thank you, Madam Chairwoman. I think in the age 

of the global economy where countries, economies, corporations, 

people, and groups around the world become increasingly interconnected, many of our traditional governmental mechanisms that 

we’ve used for regulation and oversight are not as effective as they 

once were. 

And as we look at this problem, the seriousness of it, I see tremendous opportunities for the Treasury and State Departments to 

come into a new type of hybrid relationship dealing with these 

issues at the root. 

And particularly as somebody who’s watched the emergence of 

Iranian nuclear capability very, very closely, one of the ironies that 

I have found in that and other purveyors of weapons of mass destruction, that some of the very countries that are trying to prevent 

or deter Iran’s emergency in the nuclear world actually had corporations and businesses who had a tremendous vested interest in 

selling components or supporting elements, technologies, providing 

services, infrastructure and construction, that contributed to this 

problem in the long run. So in a sense, it facilitated creation of it 

and now we’re trying to solve that problem. 

And I think one of the things that we would hope to hear about, 

and to help you with in any way from our perspective, is bringing 

to account these entities in countries with whom we do a tremendous amount of business, have a tremendous amount of trade, to 

prevent and deter them at the root from continuing these relationships in the long run. 

And with that, I yield back. 

6

Chairwoman KELLY. Thank you, Mr. Davis. Our witness today is 

Robert Werner, Director of the Office of Foreign Assets Control, 

U.S. Department of the Treasury. Director Werner has led OFAC 

since October of 2004. Prior to then, he served as chief of staff of 

FINCEN. He has also served in the U.S. Attorney’s Office, the Connecticut Attorney General’s Office, and has clerked for two U.S. Supreme Court justices. He is a graduate of New York University 

School of Law, Columbia University, and Amherst College. 

We welcome you here this morning and look forward to your testimony. You may proceed, Mr. Werner. I assume that you understand our light system for the timing. I will extend to you as much 

courtesy as I can, depending on how long you go. But because this 

is a busy place, I tend to try to keep people within the 5-minute 

rules. The green light means there’s 5 minutes. The yellow light 

means there’s 1 minute, and please sum up, and the red light obviously means that we’re out of time. 

Please—we’re very interested in this topic, so please proceed. 

Thank you. 

STATEMENT OF ROBERT W. WERNER, DIRECTOR, OFFICE OF 

FOREIGN ASSETS CONTROL, U.S. DEPARTMENT OF THE 

TREASURY 

Mr. WERNER. Thank you very much. Chairwoman Kelly, Ranking 

Member Gutierrez, and distinguished members of the subcommittee. Thank you for this opportunity to discuss the Administration’s efforts to combat the financial underpinnings of the proliferation of weapons of mass destruction. 

I also thank you for your long-standing leadership and support 

in fostering an ongoing dialogue on this and other issues concerning national security that affect all Americans. 

OFAC is dedicated to carrying out the complex mission of administering and enforcing U.S. economic and trade sanctions based on 

U.S. foreign policy and national security goals. We currently have 

approximately 30 such programs, including residual enforcement 

actions related to programs that have been lifted. These programs 

target rogue nations as well as particular groups, entities, and individuals. 

I also note, Madam Chairwoman, that all of the programs we administer require that we work closely with a broad range of government agencies and private sector industries. We are presently making efforts to expand and improve our communication with our diverse constituencies, ranging from the financial and service sectors 

to manufacturing and agricultural industries. In turn, the cooperation we receive from U.S. businesses in complying with sanctions 

is generally exceptional. 

I would now like to turn to the primary reason we are gathered 

here today. In the aftermath of the September 11, 2001, attacks, 

the horrifying prospect of WMD falling into the hands of terrorist 

or rogue regimes has become all the more real to us. Recent events 

involving the nuclear programs of North Korea and Iran demonstrate the challenge we face. 

Prior to the President issuing the new WMD order, the U.S. Government had imposed a variety of other sanctions with respect to 

proliferation of WMD. For example, Executive Order 12938 authorVerDate 0ct 09 2002 15:10 Oct 20, 2006 Jkt 028101 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 F:\DOCS\28101.TXT HFIN PsN: TERRIE
7

izes the Secretary of State to impose procurement assistance and 

import bans against foreign entities and individuals determined to 

have contributed materially to the proliferation efforts. 

In examining the existing arsenal of financial sanctions tools to 

combat proliferation, however, the President and others, such as 

the members of the Silverman-Robb WMD Commission, believe 

that more could be done. On June 29, 2005, as you noted, the 

President took an additional step by issuing Executive Order 

13382. This order adds powerful tools, a transaction prohibition 

and an asset freeze, to the array of options available to combat 

WMD trafficking. The strong new blocking provisions imposed by 

the President apply to property and interests in property of entities 

and individuals designated under the order. 

By prohibiting U.S. persons from engaging in transactions with 

entities and individuals targeted by the order, we can effectively 

deny proliferators and their supporters access to the U.S. financial 

and commercial systems, cutting them off from the benefits of our 

economy. 

At the same time the President issued Executive Order 13382, he 

also designated eight entities in North Korea, Iran, and Syria. The 

entities designated by the President based on evidentiary packages 

developed by OFAC investigators in close cooperation with colleagues in various agencies reflect some of our government’s primary proliferation concerns. 

The risks of WMD proliferation associated with North Korea, 

Iran and Syria are of tremendous concern to all of us. By publicly 

designating entities and individuals that engage in proliferation activities and those that support them, we aim to first expose their 

illicit activities. Through public designation, we intend to inform 

third parties who may be unwittingly facilitating proliferation 

through what they believe to be legitimate business activity of their 

association with WMD proliferators. We also mean to isolate these 

proliferators financially and commercially by denying them access 

to our system, and to disrupt and impede the operations of the 

WMD proliferators and their supporters. 

While the public designation of these entities by the President 

which exposes their illegitimate activities to the light of public 

scrutiny is very important, OFAC’s continuing role as part of administering the sanctions program is to look behind these entities. 

For our investigators, the entities named by the President represent a starting point as we seek to unravel the support networks 

that enable these entities to function. 

In addition, the subsequent designation of any entity or individual serves as an additional basis for aggressive investigation by 

OFAC in pursuit of designating additional parties. We refer to 

these as derivative designations, and it is this approach, targeting 

the broader support networks, that has over time proved to be a 

determining factor behind successful designations. With decades of 

experience in administering and enforcing dozens of economic sanctions programs, one lesson is clear to OFAC: True success is based 

not on isolated designation actions, that is, actions undertaken only 

once with no follow-up. Quite to the contrary, our greatest areas of 

success have been based on sustained aggressive action over time 

8

that evolves and adapts to match the ever-changing methods of our 

adversaries. 

As we apply the designation criteria of the order to strike our adversaries again and again, we disrupt their attempts to disguise 

their illicit activities in the stream of illicit commerce. In the context of the new order, this means we target not only the missile 

or bomb maker, but also the procurement funds, the brokers and 

middlemen, the logistical apparatus used to move dangerous weapons to market, and the financiers that provide the financial mechanisms that facilitate proliferation activities. And we’ve tried to visually display that on the slide above, because that’s very, very important and key to how we approach our designations. 

I should also emphasize that interagency coordination is clearly 

a critical part of the designation process, because we have to ensure that our public designation of entities and individuals comprising a network do not jeopardize the ongoing operations of our 

colleagues in law enforcement, with the intelligence community, 

and are consistent with our government’s foreign policy and national security objectives and interests. 

Finally, I also think it is important to highlight that this new 

sanctions program underscores the President’s commitment to 

work with our international partners to foster cooperative efforts 

against WMD proliferation, including those undertaken through 

the Proliferation Security Initiative. 

In addition, we hope that this program can provide a model for 

other nations to draw upon as they develop their own laws to stem 

the flow of financial and other support for proliferation activities as 

called for in the United Nations Security Council Resolution 1540 

and the Gleneagles statement of the G–8. In that regard, a number 

of agencies, including Treasury and State, have been engaging in 

active outreach across the world. 

Once again, I thank you for the opportunity to discuss OFAC’s 

role in this important program, and I would be pleased to answer 

any questions you have. 

[The prepared statement of Mr. Werner can be found on page 28 

of the appendix.] 

Chairwoman KELLY. Thank you so much, Director Werner. 

You’re doing very important work. And also thank you so much for 

the slides that you have shown us. 

I’ve got a couple of questions. First is a question about whether 

or not the United States is concerned that ABN AMRO was laundering WMD money for Iran through Dubai. Are you concerned? 

Mr. WERNER. I’m very concerned by the kind of activity that the 

ABN AMRO case demonstrated may have been going on. We know 

what was going on with ABN AMRO, and that activity is a real 

threat to OFAC programs, which is why we were so pleased to be 

able to join with the Federal Reserve in taking very, very significant action against that bank for what, as you said, Madam Chairwoman, was really a very intentional, systemic program to strip information out of transactions and thereby deny U.S. persons the 

ability to understand what sort of transactions were flowing 

through the United States. 

Interestingly enough, what we saw in that case was some of the 

transactions that they’re shipping information out of the United 

9

States were, with respect to the underlying transactions, not illegal. They were U-turn transactions, which are permitted by the 

Iran program. But other transactions we do see landed in the 

United States. They were not U-turned and clearly violative of our 

programs. And more importantly, the practice of stripping that information, while U-turns may be okay in Iran, they’re not okay in 

other programs. And that very practice was really, really troubling 

to us. 

We were pleased to be able to make a very strong statement with 

the ABN AMRO action, and we intend to continue to look at other 

situations that may involve other international banks involved in 

that kind of conduct, because as you know, it’s WMD, it’s terrorism, 

it’s narcotics trafficking. It’s everything that our programs are 

aimed at that can really be circumvented by that kind of systemic 

program. 

Chairwoman KELLY. Americans now know that Dubai was a financial center for Al Qaeda prior to the attacks of 9/11. Would 

Americans be wrong to think that now Iran may be running some 

of its WMD acquisition program through the banks in Dubai? 

Mr. WERNER. Dubai is an area, because it is such a growing transit point for trade, that is of tremendous concern to us, and it’s an 

area that we will continue to try and work on with the UAE and 

with other industries that we regulate, to make sure that we can 

understand what sort of activities are going through the ports 

there and what are the vulnerabilities that we face. 

Chairwoman KELLY. Has Treasury ever raised the concerns 

about WMD proliferation and the massive Iran sanctions busting 

with Dubai? 

Mr. WERNER. We have; in fact, my Deputy Director just got back 

from a trip to the UAE with an interagency team where the issue 

of proliferation and developing joint ways of addressing that was 

raised. 

Chairwoman KELLY. Were these issues raised when Treasury as 

the head of the Committee on Foreign Investments in the United 

States reviewed and recently approved a Dubai company, Dubai 

Ports World, taking control of six major U.S. ports, including the 

ports of New York and New Jersey? 

Mr. WERNER. Madam Chairwoman, I know that’s an issue of concern to you. It’s both outside of my responsibilities at OFAC and 

outside of my knowledge base. I’m unable to address that. 

Chairwoman KELLY. Mr. Werner, would you be able to get me an 

answer for that, please? 

Mr. WERNER. I will take your question back to Treasury. 

Chairwoman KELLY. What would you say to suggestions that 

Dubai should be a candidate for designation as a jurisdiction of primary money laundering concern? 

Mr. WERNER. Again, that’s outside of the specific OFAC role. It’s 

a significant policy issue. I think that while there’s no question 

that we have to pay a lot of attention to the kinds of activity that 

may be flowing through the ports in Dubai, and my experience has 

been that our outreach to the UAE is well received by them, and 

that they’re anxious to engage in a dialogue with us. 

And so again, others would decide whether to designate them as 

a primary money laundering concern. But what I can say is I agree 

10

with you that it’s an area that we have to pay attention to. On the 

other hand, my own feeling is that they’re striving to work with 

OFAC on our issues. 

Chairwoman KELLY. Of course they’re going to appear to strive, 

simply because they want to buy six major ports. But I would hope 

that you can come back to me with an answer on that question I 

asked about the ports. But I also understand that perhaps a bit of 

cynicism on our part from Treasury in dealing with these people 

might be beneficial. 

I am very concerned about Dubai and their role in what we know 

was funding and passing the money through from Al Qaida prior 

to 9/11. 

I want to ask you another question. Last year, a man was indicted in Connecticut for allegedly selling prohibited equipment to 

a branch of the Iranian government which is involved in producing 

ballistic cruise missiles. The indictment alleged that he hid the 

deal using an Iranian bank with a branch in the UAE. 

The indictment quoted a fax this individual sent to this Iranian 

weapons agency, and I’m going to read a quote from that fax. The 

quote is, ‘‘All transactions between our firms can be handled 

through Bank Saderat, Dubai, main branch, by directly depositing 

the funds to our account to avoid tracing of foreign agencies.’’ 

Is the Bank Sadarat an entity of specific concern? And if not, 

why not? 

Mr. WERNER. Well, Bank Sadarat, which is an Iranian-controlled 

bank, is actually under our current Iranian sanctions program. No 

U.S. person is permitted to deal directly with that bank. So, yes, 

Bank Sadarat is an entity of concern under our existing sanctions 

programs. 

Again, Madam Chairwoman, you’re raising an excellent point. 

The whole issue, though, of front companies and the possible use 

of UAE incorporated companies by Iranian entities or citizens is an 

issue of concern for us. It’s a challenge in all of our programs, from 

the narcotics trafficking program to the terrorist program to WMD, 

which is that as people strive to use the formal financial commercial system, they’ve developed very creative ways of creating entities that appear innocent but aren’t. And that is one of the areas 

in which we’ve attempted to target our resources. It’s very labor intensive. The more transparency we can get in our system—as well 

as in the systems of other countries—the more that will facilitate 

our ability to trace people as they create these front companies. 

Chairwoman KELLY. Well, clearly, this gentleman felt that all he 

had to do was be at Bank Sadarat in a Dubai branch, which raises 

the concern of how carefully OFAC is looking at branches, international branches of banks. 

I’m interested in knowing whether or not Bank Sadarat used 

money for other groups like Hezbollah and Hamas. Should the 

British be concerned about the fact that Bank Sadarat has a very 

large office in London? 

Mr. WERNER. I think as the Director of an entity that spends a 

lot of time administering the Iran sanctions program, I’m concerned about any Iranian bank and the branch of any Iranian 

bank. I would suggest that other countries should be as well. 

11

We know that one of the things we need to do is engage in very 

robust international outreach, and OFAC does some of this, but 

other parts of Treasury and State are also engaged in this, because 

we’re only as good as our weakest link. And the fact of the matter 

is, without really gaining international consensus on these issues, 

it’s very, very difficult to completely disrupt the flow of finances. 

And so, these are issues of concern. 

Chairwoman KELLY. I would hope that they would be addressed. 

The Wall Street Journal reported last year that the United States 

suspects the Bank of China of laundering North Korean money. I’d 

like to know whether you feel this is true; has that issue ever been 

raised with the Chinese; and has the bank become another candidate for Treasury Department designation like Banco Delta Asia 

was? 

Mr. WERNER. Madam Chairwoman, I apologize. I can’t comment 

on any specific examples that may or may not be under investigation, but what I can tell you is that we are constantly as a general 

matter looking at major financial centers and major banks to see 

if there’s facilitation in any of the areas that we administer our 

programs, whether it’s WMD, terrorism, narcotics trafficking, or 

even our country programs. 

And I think in that respect, the ABN AMRO action is a good example of that, where the result of that action is a major bank that 

is completely reforming the way that it operates internationally, including beginning to use the OFAC list to screen all currency 

transactions, not just U.S. dollar transactions. Therefore, I’m in 

complete agreement with you that OFAC, with the resources it has, 

needs to stay vigilant and keep track of all these institutions and 

take aggressive action wherever we find systemic violations. 

Chairwoman KELLY. Since you brought up ABN AMRO, I have 

one last question about that. A Wall Street Journal article indicated that the chairman of ABN AMRO, Chairman Grunick, ordered the destruction of an internal review of the bank’s dealings 

with Iran and Libya. He apparently rescinded this order, but he 

had ordered it. Has OFAC seen the document? And if so, can you 

characterize it for us? 

Mr. WERNER. I have not seen that document. 

Chairwoman KELLY. Is that something—you are aware of the 

document? 

Mr. WERNER. I would need to go back and review what parts of 

the record that OFAC has that are open source versus not open 

source. 

Chairwoman KELLY. Perhaps, Mr. Werner, you could get an answer for me on that one also? 

Mr. WERNER. I will be happy to do that. 

Mr. WERNER. Thank you very much. I turn now to Mr. Gutierrez. 

Mr. GUTIERREZ. Hi. I’d ask unanimous consent, Madam Chairwoman, to yield my time and turn to the ranking member of the 

Full Committee, Congressman Barney Frank. Thank you. 

Mr. FRANK. I thank the ranking member. I appreciate it. Let me 

say, Mr. Werner, none of this may be your fault, and some of it 

may not be your responsibility, but it is so important, I’m going to 

ask you to comment, and if you can’t give me the answer, then you 

can go back and get it. 

12

You do mention in here that you work with State, although I 

must say a little more optimistically than I would have thought 

after reading this. First point of disagreement. There were six separate disagreements. I’m going to ask you about each one, the status of it. 

In the report that came out in October—maybe things got cleared 

up: 

Treasury does not accept State’s position that State needs all 

U.S. counterterrorism financing, training, and technical assistance. 

Disagreements continue between some Treasury and State officials 

concerning the Terrorist Financing Working Group. According to 

State, State leads the U.S. effort to provide counterterrorism financing, training, and technical assistance to all countries the U.S. 

Government deems vulnerable. According to Treasury, State’s role 

is limited to coordinating other U.S. agencies’ provisions of 

counterterrorism financing, and there are numerous other efforts 

outside of State’s program. 

Does that disagreement persist? 

Mr. WERNER. Congressmen, none of the issues on technical assistance do fall within OFAC’s purview. Those involve other components of Treasury. What I can tell you is, because I’m very proud 

of it, is that our cooperation with not just the State Department 

but the Commerce Department and other agencies that we have to 

deal very closely with on our programs, is excellent. 

We work closely with the State Department not only in designations that our investigators are working on, but also in very significant— 

Mr. FRANK. Does that mean, then, that the Secretary of the 

Treasury or whomever is in charge of this overall, could learn from 

you how to play well with the others and maybe give that instruction to your colleagues? 

Mr. WERNER. I don’t believe that Treasury agreed—or State 

agreed that the disconnect that was in the GAO report accurately 

reflects the state of play between Treasury and State. 

Mr. FRANK. Well, you think these disagreements are wrong. Is 

there a disagreement between—does Treasury accept the fact that 

State is the leader of all counterterrorism financing, training, and 

technical assistance or does State no longer believe that? 

Mr. WERNER. Congressman, I think I’d have to bring your questions back to the people at Treasury. 

Mr. FRANK. All right. Well, then, I agree with that, but if you 

don’t want to answer, or if you’re not able to answer, that’s okay. 

But then you shouldn’t answer. I mean, if you can’t answer, okay. 

But then don’t—I’m troubled if you tell me you can’t answer but 

then there’s no real problem, because that’s an answer. And then 

I will have to try and probe that. 

Now, let me ask you this. Yes, this talks about OTA that it’s not 

true, but it says State, Justice, and Treasury disagree on whether 

it is appropriate for U.S. contractors to provide assistance in the 

legislative drafting efforts on anti-money laundering and 

counterterrorism financing. 

Does that involve you at all, drafting of anti-money laundering 

and other legislative proposals? 

13

Mr. WERNER. Congressman, I’m going to take your advice and 

tell you that I can’t answer. 

Mr. FRANK. Are you not involved in the legislative drafting of 

money laundering? 

Mr. WERNER. I am not involved in that, and OFAC does not provide that sort of technical assistance. 

Mr. FRANK. Okay. Well, I would then ask, Madam Chairwoman, 

perhaps we could write to the Secretary, and to the Secretary of 

State. There are from pages 14 through 18, 6 separate disagreements listed, and I would ask that we ask both State and Treasury 

about that and maybe ask people to come and have a hearing, and 

maybe we could even approach, because we ought to set a good example about turf, our colleagues, our counterparts at the International Relations Committee, and maybe we could have a joint 

hearing with both State and Treasury, and it might be I think a 

useful thing for us to be able to help resolve this. 

Chairwoman KELLY. I think that sounds like a good idea. Actually, this committee’s staff has been working with OFAC staff to 

see if we could have a hearing on the broader aspects of this, possibly in March. 

Mr. FRANK. I appreciate that, and I yield back. 

Chairwoman KELLY. Thank you. Mr. Price. 

Mr. PRICE. Thank you, Madam Chairwoman, very much. Mr. 

Werner, I won’t give you any instructions about how to answer, for 

fear that you might not answer. 

I appreciate your testimony. I am struggling a bit, though, because I think there’s a disconnect between your report and certainly the GAO report, and I’m struggling as to whether or not to 

probe the process that you’re going through or whether or not to 

ask questions about specific incidents. 

But I do want to point to the GAO report for a couple of the conclusions that they reach. One is that OFAC reports on the nature 

and extent of terrorists’ U.S. assets don’t provide Congress with the 

ability to assess your achievements. Do you agree or disagree with 

that statement? 

Mr. WERNER. That is an OFAC issue, and I would agree with 

that statement, and we were working on new metrics during the 

time that the report was being formulated. 

In addition, the TAR Report, which was historically never intended to be a performance-based report, was looked at as well and 

we saw that the way it was formatted was not as informative as 

it could be. So that’s why the submission of that report is delayed, 

because we are working on reformatting that information so that 

it also will be more useful. 

Mr. PRICE. Your testimony to us would lead me to believe or 

would lead one to believe that we’re doing very well, that we’re 

tracking what we need to track, and that we’re having a positive 

effect. But I’m not certain that I can sit here with all confidence 

and say that, yes, in fact that’s what’s occurring. Are you able to 

give me any greater confidence or give us greater information 

which would give us that confidence? 

Mr. WERNER. I would note that the 9/11 Commission gave terrorist financing an A-minus, so hopefully that was some indication 

that we were on the right track. But beyond that, it’s easier to 

14

measure things with numbers, and so people tried to grab things 

that had quantitative aspects, and freezing assets was one of them. 

And again, right after 9/11, there was a lot of low-hanging fruit, 

and there were a lot of assets that were frozen. 

But, frankly, that’s just not a good measure of the overall success 

of a program, because the assets we freeze are only one component 

of what we do. What we’re really trying to do is disrupt the network. And, frankly, whether they have assets within the United 

States or not, a designation that disrupts their ability to transact 

business in the international economy is disruptive and effective. 

And we have indications that is the case. We see other countries 

beginning to work with us on our various programs and joining us 

in freezing assets. 

We see them excluding business from their jurisdictions. We also 

begin to see banks voluntarily pulling their business out of Iran or 

other jurisdictions. Even when they’re outside of our jurisdiction 

now, they’re telling us they’re going to use the OFAC list to screen 

transactions, even transactions that are not in U.S. dollars. 

Those are all indications to me that our programs are being effective, not only in terms of asset freezing and not only in terms of 

disruption and exclusion from the U.S. economy, but in creating 

awareness and exposing and isolating terrorists and drug traffickers and proliferators internationally. 

And so, while some of these things are anecdotal, and we have 

to collect information over time, I do believe that we’re seeing positive results. We can always do better. We can always do more. 

We’re allocating the limited resources we have as best we can. But 

I would say that I can assure you that our programs have a positive effect, and they’re meeting objectives that we set in terms of 

disruption and isolation and exposure. 

Mr. PRICE. Thank you. I appreciate that. The subcommittee here 

has found the task of tracing the assets of foreign leaders, and has 

been somewhat stymied with bank secrecy laws. And so the relative lack of transparency that exists in many other nations, how 

can you ever know whether front companies anywhere are working 

with terrorist financing? 

Mr. WERNER. Congressman, you’ve hit on an excellent issue, a 

very difficult issue. In some countries, for example, in Colombia, 

our narcotics trafficking program is very effective because we’ve 

been able to work with the Colombian government on their corporate laws and their transparency. And as they’ve become more 

transparent, working together, our two countries have become 

much more effective in tracking front companies and networks. 

In other places where there isn’t that kind of transparency, it’s 

very difficult. And I would add, in the WMD program, it’s particularly difficult because we’re dealing not just with private entities. 

In many cases, we’re dealing with governmental entities, and their 

ability to impact the official records that would lead you to be able 

to trace corporate entities makes it even more challenging. So this 

is a very, very significant challenge for us. 

As we administer these programs, we’re going to hopefully learn 

how to get around that or work within it, but it’s going to require 

a lot of international outreach. It’s why we do need to work closely 

with the State Department. It’s why OFAC needs to rely very heavVerDate 0ct 09 2002 15:10 Oct 20, 2006 Jkt 028101 PO 00000 Frm 00020 Fmt 6633 Sfmt 6633 F:\DOCS\28101.TXT HFIN PsN: TERRIE
15

ily on other elements of TFI as they do outreach through FATF and 

through the G–8 and other international bodies; it’s critical in 

order for us to be effective in the way we administer these programs. 

Mr. PRICE. My time has expired, but I do want to commend you 

for what you’re doing. And I know that you know that your work 

is incredibly vital to each and every American citizen, and I appreciate what you’re doing and ask you to view us please as partners 

and allow us to assist you if there’s anything that we can do to help 

you accomplish your efforts. 

Mr. WERNER. I appreciate that. Thank you, sir. 

Chairwoman KELLY. Mr. Gutierrez. 

Mr. GUTIERREZ. Let me ask you a question about the GAO report. Maybe you can answer this question. I hope you can. Why did 

Treasury ask the GAO to recommend the discontinuation of your 

annual terrorist assets report to Congress? Do you feel it should be 

discontinued? And why or why not? I understand the next one will 

be ready in April. 

Mr. WERNER. I’m a little bit confused by that question, because 

I was not aware that we had asked for the elimination of that report. I know that there’s another report that Treasury was responsible for being involved in that I think Treasury did maybe seek 

to have eliminated. 

Mr. GUTIERREZ. Okay. And given the lack of time and the confusion between what I understood the GAO report to say and what 

you’re testifying the GAO report might have said, could you report 

back to us on just what it was Treasury asked the GAO you should 

discontinue? There’s no disagreement that there was a discontinuation of something. 

Mr. WERNER. I’ll have to get back to you on that. I don’t want 

to misstate something. And I’m not really sure. 

Mr. GUTIERREZ. Just get back to us and tell us what annual report it was that the GAO report actually was correct or incorrect 

about when Treasury asked that it be discontinued. 

Mr. WERNER. Sure. 

Mr. GUTIERREZ. Okay. The decline in OFAC’s staff from 144 in 

June to 125 today. I see your testimony provides for 10 additional 

employees to implement Executive Order 13382, and 15 additional 

positions. 

Will this simply bring up your numbers to 2004 numbers? Or are 

there vacancies present? And how are you doing more work with 

fewer employees? Is that okay? Or you just need to hire people? 

What’s going on? 

Mr. WERNER. What happened there is that a component of 

OFAC, the Foreign Terrorist Division, was transferred into the new 

Office of Intelligence and Analysis that was established in 2004, 

and there was a transfer of about 23 analysts. 

The reason that was done is that they were all working on the 

terrorist targeting programs, which were very, very heavy intel-related programs. And it was believed, and I think it’s proven to be 

true over the last year, that moving those analysts into the Office 

of Intelligence and Analysis headed by an Assistant Secretary that 

was an intel professional, would enhance their ability to do their 

work. And I think we’ve seen that. 

16

I remain a customer, because the designations are still done 

under my authority, and we still administer and enforce the programs. But that was why OFAC went from the 144, went down. 

This year actually we’ve got an additional 10 FTE’s that have been 

allocated. Next year, under the President’s budget, we’re requesting 

an additional 25 positions or 15 FTE’s. But those are really— 

Mr. GUTIERREZ. So you sent people over to another division, and 

you still get the information, but they’re working under another 

system? 

Mr. WERNER. That’s correct. 

Mr. GUTIERREZ. That clears up the mystery. I just wanted to 

make sure if you needed any help or what was going on, maybe if 

people weren’t getting hired. 

I want to ask you a question. Do you agree with former Under 

Secretary Guru’s comments in USA Today? Specifically, he said, a 

lack of urgency is hurting efforts to block terrorist financing. Is 

OFAC a priority within Treasury? Is your work a priority for this 

Administration? What about the former Under Secretary’s comments, that a lack of urgency is hurting the blocking of terrorist 

funding? 

Mr. WERNER. I don’t agree with those comments. I don’t understand what they’re based on. 

Mr. GUTIERREZ. Did you read the article? 

Mr. WERNER. I did. 

Mr. GUTIERREZ. Okay. 

Mr. WERNER. I know when I see our investigators working all 

hours of the day and night, the motivation and enthusiasm in 

which not only Treasury approaches the work we do, but in the 

interagency, I see no lack of urgency. This is complicated work. 

Terrorist financing in particular is very, very difficult, because as 

you all know, you’re taking good money and turning it into bad. 

The amount of money you need to involve yourself in terrorism is 

small compared to other areas. For example, in WMD, you’re usually dealing in large volumes of money. It is very difficult to detect 

and track. There are a lot of other sensitivities, operational, law 

enforcement, and others, that impact the way designations go forward. 

And I see no lack of urgency at all. In fact, to me it’s impressive 

that people day after day, month after month, year after year, have 

been able to sustain the sort of effort that they’re currently engaging in. 

Mr. GUTIERREZ. Let me ask you one last question then, Director. 

The GAO noted that turf battles with State have hurt your ability 

to coordinate efforts within our own government. Do you agree or 

disagree with that statement? 

Mr. WERNER. I can only speak to my experience as the Director 

of OFAC. 

Mr. GUTIERREZ. Speak to your experience as best you can. 

Mr. WERNER. My experience is that interagency cooperation on 

the programs we administer is excellent. I meet monthly with my 

counterpart from EB. Our staffs are interacting constantly. State 

is involved in foreign policy guidance on the licenses we issue. We 

participate in numerous interagency working groups involving the 

State Department. I have daily contact with someone from the 

17

State Department on at least one of our programs. And I actually 

am very impressed that it’s as good as it is, because bureaucracies 

often don’t interact well. We seem to have a system where we understand each other’s roles and responsibilities, and we coordinate 

very well. 

Mr. GUTIERREZ. Thank you, Mr. Director. 

Chairwoman KELLY. Thank you very much. Mr. Cleaver. 

Mr. CLEAVER. Thank you, Madam Chairwoman. Mr. Werner, 

thank you for being here. On a scale of one to ten, ten being the 

highest, where are we in terms of detecting and interrupting the 

flow of funds to terrorist organizations? 

Mr. WERNER. It’s a hard question to answer, because even 

though you’ve given me a one to ten scale, it’s not clear what it’s 

relative to. 

Mr. CLEAVER. One to five. 

Mr. WERNER. Rather than give you a number, I’d rather give you 

a narrative, because I think we’re still learning. It’s a very, very 

complicated, difficult area. What I can tell you is I believe that we 

continue to improve. The effort is high. 

We’re seeing success in areas—what we’re beginning to see is 

that there are overlaps in some of our programs. WMD and terrorism are a good example of two programs that can complement 

each other. And my sense is as we gain increasing international cooperation and sophistication so that other countries pass laws that 

support our efforts and they gain expertise in how to implement 

programs like ours, that we’re having increasing success. 

At the end of the day, we’re only as strong as the weakest link. 

I know you’ve all heard that many times, but it’s true. So that to 

really be successful from an economic terrorist financing perspective, we do need international consensus cooperation and implementation. 

Mr. CLEAVER. Let me ask the question another way, and you 

may have hit on it at the end of your comments. Are there any 

gaps in OFAC that Congress can close? If you were sitting here, 

are there things that you would want to do to strengthen your job, 

and to further reduce the opportunities for terrorists to have their 

operations funded? 

Mr. WERNER. Well, one of the things—yes. The answer is yes. 

And I think what I would do is point to the President’s 2007 budget 

request where he seeks 25 additional positions for OFAC, which 

considering we’re an organization of approximately 125 people, is 

a very significant request. And a large piece of that is intended to 

permit us to have additional resources necessary to do the kind of 

follow-up on primary designations that is so essential. 

As I testified, what’s critical to the effective implementation of 

any economic sanctions program, is that you don’t just designate 

the bomb builder or the bomb thrower or the drug manufacturer, 

but also the network that it supports. And as the terrorist organization morphs and changes its name or shifts its funding to a sister 

entity, we need to be able to have the resources to track that, stay 

on top of it, and redesignate or add supplemental designations. And 

to do that, we really need additional resources. 

18

Mr. CLEAVER. So the answer is yes, and—do you have—one final 

question, Madam Chairwoman. The cost of the new personnel or 

additional personnel, do you remember offhand what that was? 

Mr. WERNER. It comes out to 15 FTE’s. Well, our total request 

for WMD and terrorism was, I think, about 13 FTE’s in actual 

funding, because it will take us a while to hire and bring on board. 

I don’t recall the exact dollar amount that it comes to, but we can 

get that to you. 

Mr. CLEAVER. Is it detectable in the budget? 

Mr. WERNER. Yes. Yes. It’s broken out in the budget. 

Mr. CLEAVER. Okay. Thank you. 

Chairwoman KELLY. Thank you, Mr. Cleaver. Mr. Werner, the 

President of the United States has drawn attention to the super 

bills used by North Korea to fund its illegal activities. This is not 

well understood, and I wonder if you could explain to the committee how counterfeiting, especially in North Korea, facilitates the 

acquisition of WMD technology. 

Mr. WERNER. Again, you’re stepping beyond my personal expertise, and we can follow up with experts to get you a more complete 

briefing in response. But the obvious answer is that as they counterfeit U.S. dollars, because they’re very sophisticated at it, it gives 

them capital to make acquisitions. 

Chairwoman KELLY. Thank you. If you would follow up, I think 

that would be helpful, because then it will give all the committee 

members an idea of how this works. And I’m not sure there’s a 

great deal of knowledge on that. 

I also want to point out that when you showed your first slide, 

you actually have two others. 

Mr. WERNER. Yes. 

Chairwoman KELLY. I’d like to know if you would like to show 

those two slides and discuss them with the committee. 

Mr. WERNER. I’d be delighted to, if that’s okay. 

Chairwoman KELLY. Of course. 

Mr. WERNER. This slide was intended to just demonstrate the 

designation process. At times I think people don’t really understand how incredibly comprehensive it is and how much it does involve an interagency process. 

And so what this slide depicts is that we begin with identifying 

a target. And the identity of a target can flow from a lot of different 

sources. It can flow from open source, from a newspaper article. It 

can come from law enforcement sensitive information. It can flow 

from intelligence. But based on an all-source review, our analysts 

are constantly generating targets. 

Once a target is identified, that begins the evidentiary process in 

which additional information and evidence are collected. An actual 

evidentiary is drafted. It’s important to remember, though, during 

this entire process, we’re constantly coordinating with other agencies and deconflicting, because you can have law enforcement equities, you can have diplomatic concerns. There are other operational 

issues that we need to carefully vet with other agencies so we don’t 

disrupt their processes as well. 

But as it moves through the process, we reach a point where we 

draft an evidentiary, which is essentially an administrative record 

for the designation, which then undergoes a legal review both by 

19

lawyers at the Treasury Department as well as at the Justice Department. We then have a formal interagency coordination. The 

Executive Orders generally require, and the WMD one does, concurrent consultation with other agencies. The WMD Executive 

Order specifies the State Department and the Justice Department 

but also refers to other appropriate agencies. 

And finally, if the deconfliction is resolved and the evidentiary is 

legally sufficient, we’ll actually send it in for a final agency review. 

And that then results in a public announcement, and everybody 

knows about the OFAC list. And we do publish the identifying information of the entity on our list. 

We also, at the same time we designate, blast out notices to 

thousands of financial institutions and to State and local law enforcement components, as appropriate, and to Federal components. 

And we make sure our lists are incorporated into appropriate databases, such as the Visa databases. That’s essentially a very abbreviated version of our designation process. 

And then I think the next slide goes to just trying to depict how 

incredibly broad our authorities are. When we actually designate, 

that results in a block of any interest of a targeted person or entity 

that comes within the jurisdiction of the United States or a U.S. 

person. And that doesn’t just refer to bank accounts and money. It 

also includes houses and cars and, frankly, future interests, such 

as inheritances—all are blocked by our action. 

And as our list-based programs grow, we, in fact, are beginning 

to collect blocked houses and cars and other things, which is interesting, because unlike in a seizure where the Federal agency will 

take title to the property, OFAC does not. We are not the custodian. The assets are merely blocked. And so that can often create 

some interesting and complicated licensing and maintenance issues 

for us. 

Chairwoman KELLY. Thank you. That’s very interesting. And 

we’ve been joined now by Mr. Scott. Mr. Scott, do you have any 

questions? 

Mr. SCOTT. Certainly. Thank you very much, Chairwoman Kelly, 

for your leadership on this important issue. And may I add that I 

feel our committee is making significant progress. Terrorist organizations certainly need money to function. And according to the 9/

11 Commission, our efforts to freeze terrorist assets is in many 

ways the crown jewel of the Federal anti-terrorism campaign, and 

we’re very proud of that. It’s an area in which we are succeeding 

the most, but we certainly can do better. 

And with that in mind, let me ask you this. Recent media reports 

describing a significant decline in the amount of terrorist assets 

frozen since September 11th have cited a lack of cooperation and 

commitment among different Federal agencies, and other countries. 

I think that this really is sort of the stone in our shoe in terms of 

even making further progress. Cooperation between the Federal 

agencies involved in this, and cooperation with other countries. 

Can you describe for me the plans that you have and the plans 

that you have implemented or that you’re working on which would 

reverse this trend of a failure of communications and cooperations 

between agencies and countries? 

20

Mr. WERNER. Certainly. To address the asset freezing issue first, 

I think in many ways a decline in assets frozen under any particular program can actually be evidence of the success of that program, because as you drive people out of the use of the former financial system, you’re naturally going to exclude them from our 

trade and transactions with the United States, and there will be 

less assets available to freeze. 

But also I think it represents the fact that many of the designations we’re doing now are involving networks in concentric circles 

around from the obvious targets that were designated right after 

9/11. And so I don’t look to the amount of assets frozen as really 

determinative of performance. I think we really concentrate on 

whether we have evidence that we’re disrupting networks and disrupting the ability of the networks to do business. 

With respect to cooperation, I think the GAO report was targeted 

at an area that is outside of OFAC’s scope of responsibility, which 

is the technical assistance provided internationally. And I’ll let others in the Treasury and State Department address that particular 

issue. 

But with respect to cooperation within my programs, the cooperation is really excellent. We work hand-in-glove with the State Department not just on the designation components of our programs, 

but also with respect to very difficult licensing decisions and enforcement decisions that we make. And we have interagency groups 

that we participate in, in all of our major programs, where we do 

joint targeting with multiple agencies and we rely, for example, in 

the weapons of mass destruction program, our investigators—this 

is a new program for us. We’re learning the technical aspects of 

that program. 

And we rely very heavily on expertise from other department, 

the Department of State, Department of Commerce, Department of 

Energy, where there are folks who have years and years of knowledge and experience dealing with WMD-related issues. So that 

from that perspective, we couldn’t get our work done without that 

cooperation, and we emphasize it, and it’s a culture that is important for me to instill within my organization. 

Mr. SCOTT. Do you know of any countries that you could sort of 

point to that might not be cooperating with us as much as we’d 

like? Countries that offer more of a challenge than others. 

Mr. WERNER. I think with respect to cooperation, I would defer 

to my colleagues at the State Department and others within Treasury who deal more directly with international liaison. That’s not to 

say that OFAC isn’t involved in international outreach. We are. We 

do a lot of very technical compliance with international banks and 

with other governments on OFAC-related programs. 

There are areas of concern. Obviously, the Gulf is a region where 

there’s a lot trade and financing going on there that we know we 

need to pay attention to. And there are other areas—for example, 

we’re very focused on Iran and North Korea and Syria at this time. 

Those countries not only are a risk when it comes to weapons of 

mass destruction, but they are state sponsors of terrorism. And 

those are some of the areas that we have a lot of concerns about 

and direct a lot of our resources to. 

Mr. SCOTT. Okay. 

21

Chairwoman KELLY. Thank you very much, Mr. Scott. We’ve 

been called for a vote. There are no more questions. Without objection, your written statement, your full written statement, Mr. Werner, will be made part of the record. And the Chair notes that some 

members may have additional questions, and certainly there are 

some you are going to come back with answers for, for this panel. 

There may be some questions submitted in writing. So, without objection, the hearing record will remain open for 30 days for members to submit written questions to this witness and to place their 

responses in the record. 

With that, this hearing is adjourned with great thanks to you, 

Mr. Werner. 

Mr. WERNER. Thank you very much. 

[Whereupon, at 11:12 a.m., the subcommittee was adjourned.] 

(23)

A P P E N D I X

February 16, 2006

24


28101.001
25


28101.002
26


28101.003
27


28101.004
28


28101.005
29


28101.006
30


28101.007
31


28101.008
32


28101.009
33


28101.010
34


28101.011
35


28101.012
36


28101.013
37


28101.014
38


28101.015
39


28101.016
40


28101.017
41


28101.018
42


28101.019
43


28101.020