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

30–535 PDF 2006

COUNTER–TERRORISM FINANCING

FOREIGN TRAINING AND ASSISTANCE:

PROGRESS SINCE 9/11

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

APRIL 6, 2006

Printed for the use of the Committee on Financial Services

Serial No. 109–84

(

(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: 

April 6, 2006 ..................................................................................................... 1

Appendix: 

April 6, 2006 ..................................................................................................... 43

WITNESSES 

THURSDAY, APRIL 6, 2006

Feierstein, Gerald M., Deputy Coordinator for Programs and Plans, Office 

of the Coordinator for Counter Terrorism, U.S. Department of State ............. 21

McDonald, William Larry, Deputy Assistant Secretary, Technical Assistance 

Policy, U.S. Department of the Treasury ........................................................... 18

Sabin, Barry M., Deputy Assistant Attorney General, U.S. Department of 

Justice ................................................................................................................... 23

Walker, Hon. David M., Comptroller General of the United States ................... 5

APPENDIX 

Prepared statements: 

Oxley, Hon. Michael G. .................................................................................... 44

Kelly, Hon. Sue ................................................................................................. 45

Grassley, Hon. Charles .................................................................................... 47

Royce, Hon. Ed .................................................................................................. 50

Feierstein, Gerald M. ....................................................................................... 51

McDonald, William Larry ................................................................................ 60

Sabin, Barry M. ................................................................................................ 67

Walker, Hon. David M. .................................................................................... 84

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Written responses to questions submitted by Hon. Barney Frank, Hon. 

Carolyn B. Maloney, and Hon. Luis V. Gutierrez ...................................... 114

(1)

COUNTER–TERRORISM FINANCING 

FOREIGN TRAINING AND ASSISTANCE: 

PROGRESS SINCE 9/11

Thursday, April 6, 2006

U.S. HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON OVERSIGHT

AND INVESTIGATIONS, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The subcommittee met, pursuant to notice, at 10:00 a.m., in room 

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

Present: Representatives Kelly, Garrett, Gutierrez, Lynch, Scott, 

Cleaver, Wasserman-Schultz, and Moore of Wisconsin. 

Chairwoman KELLY. This hearing of the Subcommittee on Oversight and Investigations will come to order. 

Without objection, all members’ opening statements will be made 

part of the record. 

The subcommittee will hear the testimony of two panels this 

morning. Mr. Walker, I know you are familiar with our light system so I am not going to bother to explain it. Without objection, 

you know your written statement will be made part of the record 

and you know that you will be recognized for approximately 5 minutes for your testimony. And with that, I am going to talk for a 

minute about what the subject of this hearing is—counter-terrorism financing foreign training and assistance, the progress that 

we have made since 9/11. 

This committee has been working very hard to improve efforts to 

stop terror financing, both within the United States and overseas. 

There have been many successes, but we know that terror networks will always adapt to our successes in tracking their financial 

activities. As the terrorists continue to adapt, the cooperation of 

other nations becomes even more essential. Recent examples remind us of the continuing need to secure better assistance from 

other nations in fighting terror financing. Just last week, The New 

York Post reported that a bank in New York had moved more than 

$1 billion to terrorist havens in the so-called tri-border area of 

Brazil, Argentina, and Paraguay. The Holland-based ABN AMRO 

was recently fined $80 million for facilitating illegal trades with 

Iran and Libya. And, as we speak, the Nation of Jordan, an important strategic ally of ours, still lacks appropriate financial defenses, 

despite reports that their financial system is being used to finance 

the insurgency, and despite the Arab Bank scandal, which revealed 

2

glaring weaknesses in the Jordanian-controlled bank. Our efforts to 

compel better cooperation in securing the international financial 

system rely on a strong and unified approach from the Federal 

agencies which share the responsibility on this issue. Unfortunately, we find that this cooperation is often lacking. 

This committee has seen it firsthand. For example, the State Department testified before the International Relations Committee in 

2004 that Saudi Arabia had established a Financial Intelligence 

Unit. Later that same year, Treasury Department officials testified 

before this committee on more than one occasion that the Saudis 

had not yet established an FIU. I went to Riyadh last year and 

found out that the Treasury Department was correct. While the 

Saudis have made substantial progress in the last year towards establishing an FIU, the point remains that Treasury and State were 

not on the same page regarding an important anti-terror financing 

tool in a critically important country. 

The question is, what does this say about the broader efforts? 

The GAO has presented us with another troubling example with a 

detailed report requested by Senators Grassley, Collins, and Durbin, on interagency cooperation in assisting other countries in 

counter-terror cooperation. This report concluded that better cooperation was needed between State, Treasury, and other agencies 

in developing priorities delivering aid and assessing results. In particular, the GAO report found that State and Treasury disagreed 

about who the lead agency is in technical assistance to foreign 

countries. The U.S. Government does not yet have a system of 

measuring the effectiveness of aid delivered. The Treasury Department lacked the ability to provide an accurate account of terrorist 

funds frozen. Unfortunately, these conclusions are not as surprising 

as they should be. And we have to do more now to unify the Government’s efforts. 

I have sponsored legislation with Mrs. Maloney that would provide an objective assessment measure on technical assistance. The 

Treasury-led certification regime on money laundering and terrorism financing in H.R. 3505 would allow each nation to be graded 

on how well it is doing. The fat of process is no longer an adequate 

measure or else State and Treasury would only be working with 

two countries and not a dozen. This legislation passed the House 

by a vote of 415 to 2, and it is now under consideration in the Senate. Without some public measure of effectiveness, America’s businesses, investors, and taxpayers will never know if our efforts are 

adequate or not. A fragmented approach sends the wrong message 

to other nations whose cooperation we are seeking. 

What I am hopeful to hear today are answers from these agencies that will help us heal the fractures that I feel are undermining 

the fight against terror financing. 

Thank you very much for being here, and I turn now to Mr. 

Gutierrez. 

Mr. GUTIERREZ. Good morning, a special good morning to you, 

Chairwoman Kelly. I want to thank you very much for calling this 

hearing. At the February 15th hearing, a number of us asked 

OFAC director Warner about the GAO report, and I am pleased 

that we will have an entire hearing devoted to the subject today. 

I am particularly pleased to welcome the Honorable David M. 

3

Walker, Comptroller General of the GAO. Ms. Kelly and I have 

been keeping your staff busy with other GAO reports, and I must 

commend them on their excellent work. I am also pleased that we 

are joined by representatives of State, Treasury, and Justice here 

today. 

The GAO report indicated a number of problems in the overall 

efforts to combat terrorist financing, many of which were directly 

linked to turf battles between Treasury and State. Therefore, I am 

very interested in learning what steps have been taken in the face 

of that report to improve the working relationship between the 

agencies and how the roles, responsibilities, and procedures are defined when the agencies work together on designations and blocking assets. I am also very interested to learn why the agencies have 

ignored most of the GAO’s fine recommendations regarding the development of a strategic plan and a Memorandum of Understanding between the agencies. 

Finally, there was a point mentioned in the GAO report, which 

several of my colleagues noted back in February. The GAO recommended that Treasury provide more complete information on the 

nature and extent of asset blocking in its Annual Terrorists’ Assets 

Report to Congress. I was shocked to see that Treasury’s reply to 

this recommendation was that the Agency objected, and instead 

wanted the GAO to recommend discontinuing these reports. As a 

Member of Congress, particularly a member of this Oversight Subcommittee, I want this information. I understand that we should 

receive the next one this month. I think we need an accurate way 

to measure your effectiveness. If these snapshots do not provide us 

with that ability, please helps us figure out how to assess your performance and include additional information to place the numbers 

in context. 

I want to thank you very much, and I look forward to your testimony, Mr. Walker. 

Chairwoman KELLY. Thank you. Mr. Lynch. 

Mr. LYNCH. Thank you, Madam Chairwoman. I want to thank 

you, as well as the ranking member, for your great work on this. 

I also want to thank the members of the panels that we have today 

for helping Congress in this important work. This is probably one 

of the most important hearings that our subcommittee could be focusing on right now. There has been, I think, considerable progress 

made up to this point, but having spent—I just returned from my 

fourth trip to Iraq and also visiting Afghanistan, having been in 

Amman, Jordan and Ramallah on the West Bank, there is a lot of 

work that remains to be done. I want to just acknowledge the work 

that has been done thus far. 

One of the interesting conversations I had with a couple of our 

generals in east Fallujah about a month ago, I asked our generals 

and a couple of the colonels there, I said, ‘‘How much of the foreignbased insurgency is attributable to foreign fighters, how much of 

the insurgency is attributable to foreign activity, foreign financed, 

foreign equipped, foreign fighters?’’ And they estimated that it was 

probably about 30 percent; 25 to 30 percent is foreign-sponsored of 

the insurgency in Iraq. And I said, ‘‘How much of this would go 

away if we were able to cut off the financing? How much of this 

insurgency would stop if we were able to scale down the insurgency 

4

and the United States were able to eventually withdraw?’’ And 

their estimation was that all of it, or nearly all of it, would go 

away. 

So sometimes we think about the work on anti-terrorist financing 

as being a latent threat, that people are out there plotting against 

us and that they may, at some point, take action. I just want to 

report for this committee’s benefit that the threat is active and the 

threat is ongoing, and that the work that we do here on this committee and that is being done by the Agencies present here today, 

has very real results on the ground in Iraq and Afghanistan and 

elsewhere in the world. 

I do want to say that along with some of the successes we have 

had there are some frustrations. And I have read the GAO report, 

and I know that it hallmarks certain areas. But one is the seemingly—well, it seems like turf battles between various agencies involved, and that is discouraging because of the work we need to do, 

and also some resistance by foreign governments in Amman, in 

Syria, and some of the lack of counter-terrorist measures in places 

like Ramallah, where the financing situation there is basically 

without any reliable controls. 

I guess what I would want to say is that we are looking for ways 

to help as Members of Congress, and this is not a Democrat versus 

Republican thing, this is for the benefit of our troops and of our 

Nation, as well as our international partners, against terrorism. 

And this is sort of where the rubber meets the road. And so we 

need to know from all of the witnesses today what we can do to 

help you do your job and where would Congress’ best efforts lie in 

terms of producing the greatest benefit in this war on terrorism 

and on terrorism financing. I look forward to the responses of both 

our panels, and again I want to thank Madam Chairwoman and 

Ranking Member Gutierrez for their great work on this. 

I yield back. 

Chairwoman KELLY. Thank you, Mr. Lynch. Mr. Scott? 

Mr. SCOTT. Thank you very much, Madam Chairwoman. And, 

again, I want to just thank you, as the chairwoman of our subcommittee, and Ranking Member Gutierrez, for convening another 

hearing. This is an extraordinarily important hearing. And as we 

look out at this country, each generation has had to rise to the occasion to meet its great challenges. In the revolutionary period, 

there was a Revolutionary War, and the Civil War, and they all 

rose to their occasions, all the way down through World War I and 

II, the Depression, each generation faced theirs. Well, this war on 

terror is this generation’s moment of challenge to maintain the 

greatness of this country and the civility of the world. With that, 

however, it is very, very disheartening, and quite frankly, very 

scary to read about the turf battles among the various Departments and Agencies involved with the Terrorist Financing Working 

Group, TFWG. President Bush’s Administration is constantly defending itself from charges of an inability to coordinate efforts and 

respond to unique challenges, whether they be intelligence failures 

before and after September 11th, or Katrina preparation and response, and most recently we caught another glimpse of the Administration’s coordination shortcomings, the shocking events surrounding the Dubai ports deal. 

5

The United Arab Emirates’ connection to terrorist financing 

seems to have been ignored in the approval of the sale of P&O and 

the WF Ports world deal. Members of Congress, ourselves, and 

even the President of the United States himself, did not find out 

about the deal until it appeared on every front page of every newspaper in this country and was the leading story in every newscast 

on television and radio in this country. 

The GAO report offers specific examples of childish squabbles 

among the members of the body whose job it is to identify countries 

vulnerable to terrorist financing. The GAO report offers us both a 

potential partial explanation as to why this deal was allowed to go 

through, but it also is very important to treat this report as yet another opportunity for us to improve upon the Bush Administration’s, and the entire Federal Government’s, prosecution of the war 

against fundamental terrorism. We have so much work to do. This 

is a new ball game for us. We must rise to this occasion. The future 

of our country, future generations, are depending upon us. 

So I look forward to this hearing. I look forward to the recommendations of the GAO for fixing some of the TFWG’s problems 

and how the Departments of State, Treasury, and Justice plan to 

address them. I am very hopeful that our witness will impress 

upon their bosses, Secretary Rice, Secretary Snow, Attorney General Gonzales, that this committee’s desire is to see that the 

TFAG’s coordination is improved. This Nation’s future is very much 

in your hands, and certainly in our hands as Congress, and the Nation is very much tuned into this. They are watching. They are 

looking. Quite frankly, they are hoping. And they are praying that 

we get it right. 

Thank you, Madam Chairwoman. 

Chairwoman KELLY. Thank you, Mr. Scott. Mr. Walker, we welcome you. We have our first panel here, the Honorable David M. 

Walker. He is the Comptroller General of the GAO. David Walker 

became the seventh Comptroller General of the United States and 

began his 15 year term when he took his oath of office on November 9, 1998. As Comptroller General, Mr. Walker is the Nation’s 

chief accountability officer and head of the U.S. Government Accountability Office. That is a Legislative Branch Agency that was 

founded in 1921. The mission of the GAO is to help improve the 

performance and assure the accountability of the Federal Government for the benefit of the American people. 

And, as you have heard here this morning from the statements, 

Mr. Walker, that is the purpose of this hearing. We are concerned 

that we do, as Mr. Scott, my colleague said, that we do get this 

right. We appreciate that you are able to find time to be here this 

morning, and we look forward to your testimony. 

I have already described the function of the lights. You know 

how they work. And please proceed. 

STATEMENT OF THE HONORABLE DAVID M. WALKER, COMPTROLLER GENERAL OF THE UNITED STATES, GOVERNMENT 

ACCOUNTABILITY OFFICE 

Mr. WALKER. Madam Chairwoman and members of the subcommittee, it is a pleasure to be before you. I am glad I was able 

to work out the time to come, I think this is a very important topic. 

6

I would like to address some of our recent work dealing with 

counter-terrorism financing efforts, primarily based upon the GAO 

report that was issued in October of 2005. I would also like to recognize for the record your work, Madam Chairwoman, and the 

work of this subcommittee in providing leadership in this area, 

which is very much appreciated and very important. 

As you have said on many occasions, Madam Chairwoman, disrupting terrorist financing can raise terrorists’ cost and risks of 

gathering and moving assets and is necessary to impede their ability to carry out significant operations. 

In October of 2005, GAO issued a report on the United States’ 

efforts to counter terrorist financing abroad. We noted that the 

United States plays an active and ongoing role in building international support for measures to combat terrorist financing. For example, the U.S. Government has participated in efforts to develop 

and implement international standards to combat terrorist financing, sometimes leading these efforts. The United States also conducts various intelligence and law enforcement activities designed 

to identify and disrupt the flow of terrorist financing abroad. These 

activities include, among other things, gathering intelligence and 

sharing information with other countries. 

Further, the United States provides training and technical assistance to help countries that are vulnerable to terrorist financing 

activities and to help them establish effective counter-terrorism-financing regimes. 

In addition, the United States has participated in global efforts 

to publicly designate individuals and groups as terrorists and to 

block their access to assets. 

As our October 2005 report showed, much has been accomplished 

by the combined efforts of these agencies. However, our report also 

noted that various challenges exist that could serve to negatively 

impact our effectiveness, as well as Congress’ ability to perform its 

own oversight, appropriations, and other activities. 

I might note, as is contained in my written statement, which you 

have kindly put into the record, that GAO is not only involved in 

doing our traditional oversight, insight, and foresight work in this 

area, but we also are involved as part of the international auditor 

community. We are head of strategic planning for auditors general 

around the world and on the board of directors of the International 

Organization of Supreme Audit Institutions, which is comprised of 

186 countries, and has a task force focusing on what auditors general can do to help in this area. And let me say for the record, including to the agencies that are here, we can help, we are willing 

to help to the extent that they deem it possible and appropriate, 

obviously without compromising our independence. 

Although the U.S. Government provides a range of training and 

technical assistance to countries it deems vulnerable to terrorist financing, it does not have a strategic and integrated plan to coordinate the delivery of this assistance. We found that interagency efforts lack three basic elements that we believe are critical to effective execution of operations within and across agencies. First, there 

needs to be key stakeholder acceptance of the various roles and responsibilities and procedures that will be used. Secondly, there 

needs to be strategic alignment of resources, which are limited to 

7

meet essential needs. And, thirdly, there needs to be a performance 

measurement process in order to assess the effectiveness of activities that are being engaged in. 

In our October 2005 report, we recommended that the Secretaries of State and the Treasury, in consultation with the National 

Security Council and other Government agencies, implement an integrated strategic plan and sign a Memorandum of Agreement or 

Memorandum of Understanding to improve coordination of counterterrorism-financing training and technical assistance. In their 

March 2006 letters to the Congress regarding their responses to 

our recommendations, State and Treasury describe, in general, certain steps that they are taking to improve the interagency process. 

For example, working with one another and with the Terrorist Finance Working Group (TFWG) members, to review and revise related procedures and to try to obtain better acceptance. However, 

the letters do not provide any information regarding steps to systematically assess and align U.S. resources with country needs or 

to measure the results of the training and technical assistance, and 

they did not address our recommendation for the need for a Memorandum of Agreement. 

U.S. agencies have accomplished much in their efforts to combat 

terrorism-financing abroad. Despite the difficulties of interagency 

coordination, TFWG has delivered counter-terrorism-financing 

training and technical assistance to numerous vulnerable countries 

and as designated and blocked significant amounts of terrorist assets. However, without a strategic and integrated plan for coordinating the funding and delivery of training and technical assistance by agencies, the U.S. Government cannot maximize the use of 

its resources in the fight against terrorist financing. Interagency 

disputes over State Department-led TFWG roles and procedures 

have hampered TFWG leadership and, unfortunately in some 

cases, wasted valuable staff time and talent. 

Furthermore, the U.S. Government’s, including TFWG’s, failure 

to integrate all available U.S. and international resources may result in missed opportunities to leverage resources to maximize 

value and mitigate risk. 

Finally, without a functional performance measurement system, 

TFWG lacks the information needed for optimal planning and coordination, and Congress lacks the information that it needs to conduct effective oversight. 

Finally, with regard to the Congress. In view of Congressional interest in U.S. Government efforts to deliver training and technical 

assistance abroad to combat terrorist-financing and the difficulty of 

obtaining a systematic assessment of U.S. resources dedicated to 

this endeavor, as stated in our report, we would respectfully suggest that Congress should consider requiring the Secretary of State 

and the Secretary of the Treasury to submit a meaningful annual 

report to the Congress, showing the status of interagency efforts to 

develop and implement an integrated strategic plan and to ensure 

that a Memorandum of Agreement is entered into to assure the effective activities of TFWG and its related responsibilities. 

Madam Chairwoman, this concludes my opening statement, and 

I would be more than happy to answer any questions that you or 

Ranking Member Gutierrez or any other members may have. 

8

[The prepared statement of Mr. Walker can be found on page 84 

of the appendix.] 

Chairwoman KELLY. Thank you very much, Mr. Walker. We really appreciate your work on this, the work of your Agency, and the 

sincere effort to try to make sure that this becomes a reality sooner 

rather than later in terms of cooperation. 

I would like to ask a couple of questions, we asked you to report 

on the status of interagency efforts and I am very interested in how 

Treasury works as a single Agency, in particular the relationship 

between the international affairs and the TFI stove pipes. Can you 

explain to the committee what coordination, if any, you saw between these two branches of the Treasury? 

Mr. WALKER. Yes, there is detailed information contained in the 

report. 

Chairwoman KELLY. Mr. Walker, do you want to identify this 

gentleman and have him come sit at the table? 

Mr. WALKER. If you wouldn’t mind, Madam Chairwoman, he is 

involved in the details. 

Chairwoman KELLY. No, we would be very happy to have him. 

Mr. WALKER. This is Loren Yager, who is one of our executives 

in the international affairs and trade area. 

Mr. YAGER. Thank you, Madam Chairwoman. We looked at a 

number of the efforts in the specific field of terrorist financing 

training and, as we detail in the report, we found a number of activities that were ongoing, some were very successful and some indicated that there were disagreements between the agencies that 

frankly had not been resolved and these difficulties had persisted 

for some years in the time before the publication of our report. So 

I think it is certainly a mixed picture, as the Comptroller General 

has indicated. There were examples of successful coordination but 

there were other cases where the disagreements persisted for many 

years and, as you indicated, could have had an effect on the effectiveness of U.S. efforts, as well as the ability to take advantage of 

opportunities and needs outside of the United States. 

Chairwoman KELLY. Can you give me any specific information 

about the TFI and the international affairs stove pipes? 

Mr. YAGER. Well, our report, one of the things we tried to focus 

on in the report, and I think is part of our advantage, is the ability 

to look at the agencies who work together, not just within Treasury 

but also between Treasury, State, and Justice. And I think those 

were the areas where we found the most significant disagreements, 

that the procedures that Treasury has in place, when it delivers 

training and technical assistance, differed from those of what State 

likes to do. And so we found that some of those disagreements, certainly there were longstanding efforts to put this training in place, 

but at the same time when brought together through the TFWG, 

we found that they just were unable to resolve those differences, 

and it did affect their ability to deliver the training in vulnerable 

countries. 

Chairwoman KELLY. Thank you very much. Mr. Walker, you 

mentioned the important role that FATF plays in the terrorist financing technical assistance role, but the NCCT list is now down 

to two nations and never was higher than 19 members. Given the 

9

limited nature of the NCCT list, do you see the need for other public benchmark measures of terror financing effectiveness? 

Mr. WALKER. As you mentioned before, Madam Chairwoman, I 

think FATF is focused on this issue and they have done some good 

work. At the same point in time, with their list now being reduced 

down to two, there is little question that I think we believe, and 

I am sure you will find that the other witnesses will state on the 

second panel, that the United States is concerned with well more 

than two countries. Therefore we should not just be focused on the 

list that FATF has. 

Chairwoman KELLY. Thank you. I want to go to one more question about the lead agency role of the TFWG. It is not really spelled 

out in legislation. My question is whether or not you think we need 

legislation to clarify the roles and what other legislation you think 

might be necessary besides the annual report on the proposed 

MOA? 

Mr. WALKER. We think it may be appropriate that there be legislation with regard to the annual report; legislation that would also 

require some type of clarity and a Memorandum of Agreement or 

Understanding between these parties, as I mentioned before. One 

would hope that you would not have to enact legislation to make 

that happen. But in the absence of the discretionary action by the 

Executive Branch, should the Congress so desire, that may be necessary. 

I think it is important to think about what leadership means. 

You need to have a lead to try to help facilitate the development 

of a strategic and integrated plan that can be used for entities 

within Departments, as well as between Departments. That is critically important. But beyond that, and beyond overseeing and being 

aware of what all is going on, leadership in this regard may be 

more facilitation rather than control. This is one of the issues that 

has to be addressed as well. So you need to have a lead for development of a plan, for overseeing the execution of that plan, and you 

need to have a lead who is facilitating things getting done rather 

than controlling what is getting done. Sometimes people don’t understand the difference between those functions. 

Chairwoman KELLY. Well, I would hope that we might be able 

to work this out without legislation, but if legislation is needed, I 

am certainly sure that Mr. Gutierrez and I, as well as others on 

this subcommittee, and on the full Financial Services Committee, 

will be taking a look at that. And I very much appreciate the testimony that you have given. We turn now to Mr. Gutierrez. 

Mr. GUTIERREZ. Thank you. Comptroller Walker, in your testimony you explained that the State Department’s Office of the Coordinator for Counter-Terrorism is ‘‘charged with directing, managing, and coordinating all U.S. agency efforts to develop and provide counter-terrorism financing programs, including, but not limited to, those in priority countries.’’ However, the Treasury Department responded to questions from Ranking Member Frank that 

Treasury believes that the State Department has the lead role only 

in coordinating these efforts, not in managing or directing, but coordinating. Can you explain the discrepancy? 

Mr. WALKER. Ranking Member Gutierrez, that is directly the 

point that I am making. Without there being any clarification of 

10

what leadership means, it means different things to different people based on what they would like it to mean. My view is what 

needs to be clarified is that you need to have a lead for developing 

that strategic and integrated plan. You need to have a lead who 

has overall responsibility for monitoring what is going on, for collecting that information, and for providing the periodic reporting to 

the Congress. At the same point in time, that lead is not necessarily someone who has to direct others. They need to try to provide reasonable assurance that people are meeting their part of the 

deal on the Memorandum of Agreement or Memorandum of Understanding. I would, however, respectfully suggest that in this area 

you want that lead to be a facilitator. We have a number of players 

on the field here. They all have significant capabilities. They all 

can make a difference and are making a difference, and I think 

part of the problem may be merely when you say ‘‘direct,’’ that 

means that we are going to do it slower, and time is essential in 

this type of business. I do not know if we need somebody to direct; 

we need somebody to coordinate and facilitate. 

Mr. GUTIERREZ. Forgive the redundancy of the question—I think, 

Madam Chairwoman, that this is where a lot of our efforts might 

have to be focused in terms of our conversations and dialogue with 

the different agencies in terms of those verbs—directing, managing, 

and coordinating, just who is in charge of what and what that really means and what the implications of those things are because 

then we get people coming, as the State Department did come and 

say, we do not direct, we do not manage, we coordinate. And then 

sometimes I think to myself, well, if you coordinate, maybe you do 

manage. Maybe we should flesh out some of those directives so that 

everybody knows exactly what is expected of them and that you 

could have better coordination, to be redundant once again with the 

word. 

Comptroller Walker, the GAO made almost 2,000 recommendations last year. I know that most of your recommendations are 

taken very seriously and many agencies act quickly upon your suggestions. In your experience, where would you rank this audit in 

terms of compliance with your recommendations? 

Mr. WALKER. First, one of our key performance measures in our 

Annual Performance and Accountability Report to the Congress 

and the American people is what percentage of our recommendations that we made 4 years ago have been adopted. And we monitor 

them in the interim. But we figure if people do not do it within 4 

years, they are probably not going to do it. Last year, 85 percent 

of the recommendations that we made 4 years ago had been adopted within that 4-year period, some quicker than others. That is an 

all time record. 

I would say based upon the letter responses that we have seen, 

they are partially adopting our recommendations but not fully 

adopting our recommendations. As I mentioned before, we do not 

see anything about a Memorandum of Agreement or Memorandum 

of Understanding. We have not seen an express commitment that 

there will be a strategic and integrated plan, and I am not sure if 

they are going to be able to reach agreement on what the role of 

the lead person or agency is or not. You can ask them. Therefore, 

I would say a partial adoption but not full adoption. In addition, 

11

a couple of our specific recommendations were not directly addressed and responded to. 

Mr. GUTIERREZ. Okay, thank you very much, Comptroller. I was 

going to ask those two questions, Madam Chairwoman, because I 

think they both go to the heart of what I know is your priority, and 

my priority, and the priority of the members of this subcommittee, 

in terms of helping to coordinate the efforts and giving the agencies 

everything they need, but at the same time helping. 

Thank you very much, Comptroller Walker, for your answers and 

to our staff for all the wonderful work they have done. Thank you. 

Mr. WALKER. Thank you. We have a great staff. 

Chairwoman KELLY. Yes, you do. Mr. Lynch? 

Mr. LYNCH. Thank you, Madam Chairwoman. Mr. Walker, in the 

GAO report that we have, in one of the sections that is particularly 

disturbing it says that, ‘‘In May of 2005, the State Department denied a Treasury official entry into a priority country to help set up 

an FIU, a Financial Intelligence Unit, at the Central Bank’s minister’s request. State officials told us because the country had been 

designated as a priority country after Treasury began preliminary 

work there, State wanted to conduct a TFWG assessment before allowing Treasury to continue its work. At the U.S. Embassy’s request, State delayed the assessment and Treasury’s work proceeded but the Treasury official’s entry into the country was delayed several months.’’ 

That gives me a reason for grave concern about the cooperation 

and what is going on with these turf wars. What the heck is going 

on here if the State Department is not allowing Treasury to go into 

a certain country, and where we all know, Madam Chairwoman, 

that these FIU’s are extremely important to have them established. 

Until we have them up and running and there is some cooperation 

within these governments, these fallen governments, they are 

tough enough to get anyway. It just frustrates me greatly that even 

though we had an agreement from the host agreement, the priority 

country, to set up an FIU, the State Department is blocking Treasury from going in and setting it up? I guess I have higher expectations of both Treasury and State in this matter. I am going to ask 

these folks when they come up what is going on here but I would 

like to have your impression as well? 

Mr. WALKER. We did provide at least one example of where, because of the lack of understanding between the agencies regarding 

their respective roles and responsibilities and what it meant to be 

the lead, there was at least one occasion where assistance was not 

provided in a timely manner. Now, I am sure there are many other 

occasions where they did not have a problem, but there have been 

some where there has been a problem. I think it comes back to 

what we said before, what does it mean to be the lead? What is 

the understanding as to the different roles and responsibilities of 

these organizations? What are the agreed upon rules of procedure 

that they are going to operate under and as long as they operate 

under those procedures, you FYI somebody as to what you are 

doing. You do not get approval for what you are doing. After you 

have the strategic and integrated plan, after you have the Memorandum of Understanding or Agreement with those rules of engagement or rules of procedure, then how can you facilitate, not 

12

control, how can you facilitate people being able to get things done 

quicker? So it goes back to our recommendations, and I would respectfully suggest, Mr. Lynch, that you may want to ask the directly responsible parties about this matter and how pervasive this 

may or may not be. 

Mr. LYNCH. Thank you. Madam Chairwoman, I expect that type 

of difficulty and that type of resistance in dealing with a foreign 

country but it is unacceptable when it is our side. It is the U.S. 

Government, just different Departments of our Government having 

that type of difficulty. It really compounds the problem greatly. 

Mr. WALKER. Candidly, as we all know, when you have a large 

organization, and the U.S. Government is a very large and complex 

organization, that has a number of different Departments and 

agencies and layers and players, this is not the only area in which 

we have had difficulty in coordinating. At the same time, when you 

are dealing with safety and security, which is the most fundamental, in Maslow’s hierarchy of needs, it is the foundation that is 

the most important thing that everybody is concerned with, we 

need to find a way to be able to combat bureaucracy and get things 

done quicker. 

Mr. LYNCH. Mr. Walker, in the last segment of your report, you 

talked about the lack of a measurement tool with regard to performance. And you mentioned that back in July of 2005, that the 

database and the software that had been recommended had not 

been implemented at that point. Has it since been adopted? 

Mr. WALKER. Mr. Yager tells me that it has been promised but 

not delivered based upon the latest information that we have. 

Mr. LYNCH. Okay, I think the Justice Department had a database that they recommended for measuring progress. Can I ask you 

is it functional or are we still talking? 

Mr. WALKER. If you do not mind, Mr. Yager can. 

Mr. LYNCH. Yes, I am fine with that. I am sorry, sir, what is your 

name again? 

Mr. YAGER. My name is Loren Yager. I am a Director in GAO’s 

International Affairs and Trade Group. 

Mr. LYNCH. Okay, thanks for coming, thanks for your help. 

Mr. YAGER. Thanks for your question. The issue that we raised, 

really there were two parts to your question, the first had to do 

with the performance indicators of OFAC and we did take a look 

to see whether those were in place and we asked numerous times 

before this hearing to try to find additional information regarding 

the status of that plan and their development of additional indicators. We have not received any indication that they do have a detailed plan worked out which would provide the kind of oversight 

that the Comptroller General has mentioned, the kind of indicators 

that demonstrate progress, and, frankly, to help resolve some of the 

disputes that may have been going on. 

Mr. LYNCH. Okay, and last question, have they given you sort of 

a score card, State and Treasury, TFWG, or a country-by-country 

analysis of where we are in terms of our progress in either getting 

an FIU up and running or getting cooperation from the host government? 

Mr. WALKER. We do not have that. It is something they may 

have but we do not. 

13

Mr. LYNCH. Okay. 

Chairwoman KELLY. Thank you, Mr. Lynch. 

Mr. LYNCH. Thank you, Madam Chairwoman. I yield back. 

Chairwoman KELLY. Mr. Scott. 

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

Walker, again thanks for appearing before the committee. As I 

mentioned earlier in my opening remarks, there is just so much at 

stake here. Every time an American gets on an airplane, goes into 

a mass meeting, or even comes out of his home now, there is a certain amount of fear. We have to show the American people that 

they are safe, and we are not doing that. And it is just ironic that 

the major reason is that apparently folks in the State Department 

think it is about them or folks in the Justice Department think it 

is about them. I want to ask you, first of all, about the report. In 

your testimony, your key recommendation, as I understand it, is 

that Congress require State and Treasury to submit an annual report to Congress showing how these Agencies have developed and 

implemented a strategic plan and a Memorandum of Agreement or 

Understanding. Take me through each of the Agencies and tell me 

why they are fighting you on this. Go ahead on that first point. 

Mr. WALKER. First, I do not know if they are fighting us. The 

issue is, is it for the Executive Branch, and as you know, we are 

in the Legislative Branch. The Executive Branch needs to have a 

strategic and integrated plan to clarify what leadership means, 

who is responsible for what. One that has some metrics to be able 

to assess how you are doing and to be able to use that information 

as a basis for the annual report to the Congress. Information that 

we would be able to also take a look at and provide information for 

your benefit. So I think the key is you might ask them why they 

did not specifically address our recommendation on having a strategic and integrated plan, on executing a Memorandum of Agreement or Memorandum of Understanding, and other issues that 

were not directly addressed in their letter. I do not want to respond 

for them. They are in a better position to say why they did not respond. 

Mr. SCOTT. Well, we will get to them but right now we only have 

you, so I have to ask you these questions because it is apparent 

that the problem is a lack of coordination or a lack of cooperation 

in terms of your recommendations with Justice and with the Treasury Department. Now, just according to your report, much of the 

dispute seems to be coming from the Departments of State and 

Treasury. Can I get a yes or no from you on that? 

Mr. WALKER. That is correct. State is designated as the lead. 

There is a difference of opinion between State and Treasury as to 

what that means. And some of the challenges that we have seen, 

including the one that Mr. Lynch mentioned, had to do with a difference of opinion between State and Treasury. 

Mr. SCOTT. Over turf, would you say that is the dispute? 

Mr. WALKER. Over what the State Department’s role and responsibilities are as being lead in this area, as to whether or not they 

are supposed to coordinate and facilitate or whether or not they are 

supposed to control and direct. 

Mr. SCOTT. Okay, very good. Now, how would you categorize the 

Justice Department’s participation? 

14

Mr. WALKER. I would ask Mr. Yager to comment on that. 

Mr. SCOTT. Yes. 

Mr. YAGER. We directed our recommendation to the State Department and to the Department of the Treasury primarily because 

those are the two Agencies that have funding to perform the training and technical assistance. Justice does perform some training 

and technical assistance abroad, but they do that through the 

funds that are provided by one of those two other agencies. So in 

our recommendation we included this, and we directed it primarily 

at State and Treasury because they have the funding. We certainly 

believe that other agencies, like Justice in addition with the support of the NSC, should be involved in developing that plan. But 

because those were the two agencies with funding, we thought it 

was appropriate to direct our recommendation to them. 

Mr. SCOTT. Okay, now, let me ask you this about the interagency 

Terrorist Financing Working Group, just give me a brief explanation of that group, what it is composed of and what its mission 

is as you understand it? 

Mr. WALKER. First, we have a board that we can put up that 

shows you the composition of that group. And, Mr. Yager, if you 

could explain that board. 

[Chart] 

Mr. YAGER. This is a group, as you can see from the board, that 

contains a large number of members from within the key agencies. 

Given the importance of tracking and trying to combat and prevent 

financing from going to terrorists, the TFWG was created in order 

to bring all the groups together that have some role. The State Department chairs that TFWG through two of its sub-units. Of 

course, there are members of that group from Justice, from Treasury, as well as other Departments around. This is the attempt by 

the U.S. Government to get the right people into the room to talk 

about how progress can be made, not just on training but on a variety of other issues related to terrorist financing. 

Chairwoman KELLY. Excuse me, but I would like to just simply 

point out that there is a copy of that chart in your packet in front 

of you. So if you cannot see the board, at least you can get it in 

paper in your hand and get it up close so you can read it. 

Mr. SCOTT. Thank you. 

Mr. WALKER. It is also in our testimony. If I can, Mr. Scott, let 

me come back at your first question. With regard to our recommendations for an integrated and strategic plan, with regard to 

our recommendations to clarify roles and responsibilities through a 

MOA and rules of procedure, and with regard to having metrics to 

measure how you are doing, I would say that is Management 101. 

If you want to maximize value and mitigate risks, by the way in 

this area there will never be zero risk, we will never be 100 percent 

safe, that is impossible. But what we need to do is target the resources and authorities that we have, which comes back to the 

thrust of our recommendation. Frankly, it applies in virtually every 

area of Government, it is even more critical when you are dealing 

with safety and security. 

Mr. SCOTT. Thank you very much. 

Chairwoman KELLY. Thank you, Mr. Scott. Mr. Cleaver. 

15

Mr. CLEAVER. Thank you, Madam Chairwoman. At the last meeting, Ranking Member Barney Frank had asked for some information that was promised to the committee. Has that been forwarded? 

Mr. WALKER. I was not here, so I will ask Mr. Yager. 

Mr. YAGER. We did take a look at the hearing record and the discussion; we did not get a copy of the answers that might have been 

provided by the Agencies. So our most recent information that we 

worked off for the statement were the responses to our recommendations that were provided. We call them the 60-day letters. 

They were provided to the Chair of the appropriations committees, 

as well as the oversight committees. And that is the most recent 

information that we are working off of. 

Mr. WALKER. Stated differently, as you know, statutorily the 

Agencies are required by law to respond within 60 days whether, 

and to what extent, they are going to adopt our recommendations. 

If Mr. Frank has additional information that has been provided by 

the Departments and Agencies, we have not been provided that. 

But if he does provide that to us, we would be happy to take a look 

at it. 

Mr. CLEAVER. All right, I will pass that along to him. I did not 

know if he had been here, I came in late. But my number one question and concern is, as you know, we just raised the debt ceiling—

well, not ‘‘we,’’ I voted against it, but we are headed toward $9 trillion. We are borrowing money as if we can actually get out of debt 

by borrowing. And we do not seem to understand what you do not 

owe will not hurt you. But where we are now is we are borrowing 

a lot of money from a lot of different places. Some money we are 

borrowing—the top three, Japan, China, and the UK, that is 40 

percent of our debt, which is owned by foreign republics. Twothirds of that is with China and Japan. But we also owe OPEC almost $20 billion. Is it possible that we are inadvertently financing 

terrorists because of the debt we are wallowing in and continuing 

to go to foreign countries to pay for the operation of the U.S. Government? 

Mr. WALKER. I do not think that we are inadvertently funding 

terrorists. I will say this, this country has three major financial 

deficits. We have a budget deficit. Last year, $760 billion on an accrual basis, a 35 percent negative bottom line, the worst in the history of the United States. 

Mr. CLEAVER. $435 in this budget coming up, but go ahead. 

Mr. WALKER. Well, that is on a cash basis. On an accrual basis, 

it is much worse than on a cash basis. Secondly, we have a balance 

of payments deficit, which includes a trade deficit. And now the 

percentage of our debt held by the public—that is held by foreign 

players is up to about 50 percent. Over 90 percent of the new debt 

that we have issued within the last several years has been purchased by foreign players, which means that we are increasingly 

turning over part of our mortgage to foreign players who may or 

may not share the same economic, foreign policy, and national security interests as the United States. And one of the reasons we 

have done that is because of our third deficit, we have a savings 

deficit. The United States is great at spending and poor at saving. 

Last year for the first time since 1933, the depth of the Depression, 

Americans spent more money than they earned. We had a negative 

16

personal savings rate and the U.S. Government did too. So we are 

on an imprudent and unsustainable fiscal path. I would respectfully suggest the biggest threat to the future of the United States 

is our fiscal irresponsibility. 

Mr. CLEAVER. That is exactly where I am going. Americans, if 

they understood this, would tremble at what we are laying out for 

our children and our grandchildren. And Asian markets are holding enough U.S. Treasury notes or U.S. assets, they could buy a 

controlling interest in almost every company being traded on Wall 

Street. And we cannot fight terrorism and ignore the debt and the 

fact—Asians have a 20 percent savings rate, ours is zero, negative 

zero. I think this is chilling. 

Mr. WALKER. The last thing that I would say on this is it is pretty simple, the more of our debt that is held by foreign players, the 

less leverage we have on those foreign players, and the more leverage they have on us. It is that simple. 

Chairwoman KELLY. Mr. Walker, just because the issue of the 

debt was brought up, do you have the percent of U.S. debt with regard to the GDP, the U.S. GDP? Isn’t that around 32-, 35 percent? 

Mr. WALKER. That is only for debt held by the public. If you add 

up debt held by the trust funds, which are Social Security and 

Medicare, which we have already spent that money in other Government operating expenses, you can roughly double the percentage of GDP. And so it depends upon whether you are just talking 

about debt held by the public or total debt. If you take the $8.1 trillion, we were at about $8.1 trillion, the economy is what, $11 trillion to $12 trillion, the total debt is about $8.1 trillion. And Congress just authorized taking it up to about $9 trillion. By the way, 

I would respectfully suggest that we need to raise the debt limit 

because otherwise we will default. We have to get serious about the 

deficit and we have not yet. 

Chairwoman KELLY. Just out of curiosity, how does that compare, how does the U.S. figure with GDP compare to a country like 

Japan? 

Mr. WALKER. Japan has higher debt than we do. I would be 

happy to provide for the record information on this from the latest 

report that was issued by the Organization of Economic Cooperation and Development, which were 30 major industrialized nations, 

including the United States and Japan. I will provide information 

for the record as to where debt as a percentage of GDP stands. 

Chairwoman KELLY. I think we are a little off target here. It is 

just that it was brought up and it is an interesting way that the 

figures seem to move around. It is hard to grab hold of them. The 

last I heard the Japanese debt was 170 percent of their GDP. So 

I think that it is very difficult to figure out where all these things 

land. So any information you can give us, we would be very grateful for. Mrs. Wasserman-Schultz. 

Mrs. WASSERMAN-SCHULTZ. Thank you, Madam Chairwoman. In 

the background information that I have looked at, State does not 

apparently agree with your recommendation to develop and implement an integrated strategic plan. They say that a series of NSC 

documents and State’s Office of the Coordinator for Counter Terrorism’s Bureau Performance Plan served that purpose. Could you describe for us how the documents that State describes and their own 

17

internal office differ from what GAO recommended and how what 

they are suggesting would work falls short of this goal? 

Mr. WALKER. That plan does not clearly and unambiguously lay 

out the relevant roles and responsibilities. That plan does not have 

key metrics in order to be able to assess performance. Those are 

two of the major elements that are not addressed in that plan. 

Mrs. WASSERMAN-SCHULTZ. Thank you. And in page 9 of your 

testimony, you mention that senior Treasury officials strongly disagree with State’s degree of control over TFWG decisions and that 

State creates obstacles rather than coordinating efforts. And that 

is a serious disagreement. How can we more clearly define State’s 

role? 

Mr. WALKER. My view is that if they cannot handle it themselves, then the Congress can end up legislating in this area, and 

you should be prepared to do that if the Executive Branch cannot 

deal with it within a reasonable period of time. I am hopeful that 

they can and I am hopeful that they will. But the Legislative 

Branch has quite a bit of power under our Constitution. 

Mrs. WASSERMAN-SCHULTZ. And, lastly, I guess I am still all 

right on my time, I have also reviewed the dispute over the use of 

contractors between the agencies. Treasury is working to resolve its 

differences with State on the use and role of contractors. The reason for the dispute is really understandable. I can understand that 

using contractors rather than direct employees would compromise 

confidentiality and that it seems to warrant clarity. Can you talk 

about what procedures we should be establishing for needs assessment and other disagreements between the agencies that you outlined and how we can resolve that because it seems like a really 

necessary element to fix? 

Mr. WALKER. I will start, and I will ask Mr. Yager to provide 

some more details. First, it is understandable that reasonable people might disagree on whether and to what extent you should use 

contractors for certain types of functions and activities. I am a substance over form individual. Merely because somebody is a contractor does not, per se, mean that it is a problem. You have to look 

at who is that contractor? What is the nature of the contractor? Is 

it a person who has the requisite security clearances, who is a 

former employee of the Treasury Department or the State Department or the Defense Department or one of the intelligence agencies? That would be substantively different obviously than if it is 

another type of entity or individual who might not meet those criteria. So I think it is something that needs clarity. It is something 

that we ought to try to provide a reasonable degree of consistency 

on, but I would respectfully suggest we need to have certain principles or safeguards that we would operate rather than saying yes 

or no you should or should not ever use contractors. Loren? 

Mr. YAGER. Let me just make one brief addition. I think it also 

suggests why performance measures are so important because it is 

difficult to make these systematic decisions on the basis of anecdotal information about either successes or failures in the efforts 

to combat terrorist financing or provide that training. So we think 

with a solid set of performance indicators, it will be much easier 

for the Agency to work together and say we have had success using 

these types of contractors or others and here is our proof of that 

18

success. We believe this is a type of effort, for example, that might 

go forward. Without those performance measures, it becomes quite 

difficult to make those decisions on a systematic basis. 

Mrs. WASSERMAN-SCHULTZ. Madam Chairwoman, as someone 

who comes from a State that has widespread use of performance 

measures with regular legislative oversight, I can completely agree 

that is an effective means of ensuring that we have a policy that 

is implemented effectively, and it also provides clarity, so I would 

completely agree with you. 

Thank you. I yield back the balance of my time. 

Chairwoman KELLY. Thank you very much. Senator Grassley 

had intended to come and testify before the committee today. His 

schedule, unfortunately, was not able to permit him to be here but 

with unanimous consent, I will insert Senator Grassley’s full statement in the record. 

And, Mr. Walker, we thank you very much for your testimony 

today. And with that, this panel is excused. 

Mr. WALKER. Thank you. 

Chairwoman KELLY. While that panel is leaving, I would appreciate it if the second panel would take their seats. 

We welcome the second panel. And without objection, your full 

statements will be made part of the record. Our first speaker is 

William Larry McDonald, from the U.S. Treasury. He is the Deputy 

Assistant Secretary for Technical Assistance Policy. He oversees 

the program that provides assistance to approximately 70 countries 

in Central and Eastern Europe, the former Soviet Union, the Middle East, Africa, Asia, and Latin America. We appreciate your 

being here today, Larry, and thank you very much for being here. 

Our second panelist is Mr. Gerald—I am going to pronounce it 

wrong—Feierstein, I should guess that ‘‘ei,’’ Feierstein. Mr. 

Feierstein here with the State Department in Washington. He has 

previously served as the Desk Officer for Nepal, Pakistan, and 

Egypt, as Deputy Director in the Office of Arabian Peninsula Affairs, and Director of the Office of Pakistan and Afghanistan and 

Bangladesh Affairs, and the Office of Regional Affairs in the Near 

East Bureau. 

Our third panelist is Mr. Barry Sabin from the Justice Department. He presently serves as the acting Deputy Assistant Attorney 

in the Criminal Division of the Justice Department in Washington, 

D.C. Mr. Sabin started in that position in January of 2006 and is 

responsible for overseeing the Counter Terrorism Section, Fraud 

Section, Criminal Appellate Section, and Capital Crimes Unit. We 

thank you very much, Mr. Sabin. We thank all three of you for 

being here, and we look forward to your testimony. And we will 

begin with you, Mr. McDonald. 

STATEMENT OF WILLIAM LARRY MCDONALD, DEPUTY ASSISTANT SECRETARY, TECHNICAL ASSISTANCE POLICY, U.S. DEPARTMENT OF THE TREASURY 

Mr. MCDONALD. Chairwoman Kelly, Ranking Member Gutierrez, 

and members of the committee, I very much appreciate this opportunity to speak to you today about the GAO’s report on U.S. efforts 

to deliver training and technical assistance abroad to combat terrorist financing. I would also like to express my appreciation for 

19

the leadership, commitment, and support that you bring to combating terrorist financing. 

In my written testimony for the record, I have given a detailed 

description of the Treasury Department’s technical assistance program and Treasury’s role in the interagency process. I have also 

provided a number of examples of Treasury’s technical assistance 

that illustrate our track record in this area over the last several 

years. In my oral remarks, I will focus on the issues that you asked 

me to address in your invitation letter. 

First, I want to confirm at the outset that the Treasury Department does accept the State Department’s lead role in this area. If 

I accomplish nothing else today, I hope to put this one to bed. The 

State Department indeed has a mandate to lead the interagency effort, to prioritize, and de-conflict capacity building programs in the 

area of terrorist financing. Given its broad foreign policy mandate, 

the State Department is well-positioned institutionally to play this 

role. 

And, if I may add, the interagency effort is well served by the 

leadership and the right kind of leadership of my colleague, Mr. 

Feierstein. He brings experience, professionalism, and skill in 

weighing the many factors that have to be considered in reaching 

difficult judgments on issues that do not lend themselves to a simple or straightforward calculation. He is a facilitator, and here I am 

referring back to the remarks by the Comptroller of the GAO; he 

is a facilitator. He is a consensus builder. He is not a control freak. 

And the same goes for my other colleague on the panel, Mr. Sabin. 

Since assuming my position as Deputy Assistant Secretary in December of 2005, I have gotten to know Mr. Feierstein, Mr. Sabin, 

and others involved in the interagency process, and I could not be 

more pleased about our collaboration. 

Regarding the procedures and practices of the interagency group, 

I would like to confirm that Treasury does accept them. These procedures are essential to help ensure an orderly, coordinated process 

in a complex area involving many participants. At the time the 

GAO report was prepared, there were Treasury officials who honestly felt that the procedures and practices would benefit from 

greater flexibility in their application—shock absorbers, if you 

will—to help us get over the occasional bump in the road and improve our effectiveness. I am pleased to tell you that a number of 

structural and operational changes have indeed been made over the 

past several months that have enhanced the effectiveness of the 

interagency group and the interagency process more broadly. 

First, the interagency group is now chaired at a more senior 

level. I have already noted Mr. Feierstein’s role in that regard. Second, the procedures and practices of the interagency group have 

been fine-tuned in a way that allows for greater flexibility. In particular, I welcome the increased openness to conducting so-called 

‘‘table top’’ assessments of a country’s assistance needs here in 

Washington, rather than conducting a full-blown in-country assessment. In certain cases, where sufficient information is available, 

this option provides flexibility that can expedite our work and marshall scarce resources. Third, the reconstitution of the Training and 

Assistance Sub-Group is a welcome enhancement of the interagency process. It brings together agencies providing technical asVerDate 0ct 09 2002 18:31 Nov 14, 2006 Jkt 030535 PO 00000 Frm 00025 Fmt 6633 Sfmt 6633 F:\DOCS\30535.TXT HFIN PsN: TERRIE
20

sistance in all areas related to combating terrorism and serves as 

a useful forum for addressing any differences that cannot be resolved at the staff level. 

Madam Chairwoman, the GAO report gave considerable attention to the third party contractor issue, and I know that this is a 

matter that interests the committee, so let me say a bit about that. 

First, I would like to clarify that Treasury’s advisors work under 

personal services contracts, not third party contracts, and are individually selected by Treasury management. They become for a time 

Treasury Department hires and are fully integrated members of 

Treasury’s technical assistance family. I believe that Treasury, Justice, State, and other Agencies agree that such contractors can play 

an important complementary role in the area we are discussing 

today. Contractors with the requisite experience and expertise can 

complement the limited number of U.S. Government officials available to address the enormous need for technical assistance, especially when long-term assistance rather than short-term assistance 

is what is needed. The ability to deploy expert long-term personal 

services contractors is one of the special features and strengths of 

Treasury’s program. I do not mean to suggest by this that such 

contractors are a substitute for U.S. Government officials in all 

matters. Contractors cannot and do not provide assistance in certain areas that are appropriately reserved to U.S. Government officials. 

If I may, I would like to make one other observation about the 

issue of contractors. The term ‘‘contractors’’ conjures a number of 

different images, I think our colleague from the GAO alluded to 

this. When I took this job, I learned that personal services contractors make up the backbone of Treasury’s program. And I made it 

my business to meet with them, learn about their backgrounds, 

and get to know them. What I have learned about them has been 

more than reassuring, it has been inspiring. Treasury’s financial 

enforcement advisors consist primarily of retired assistant United 

States attorneys and agents from the FBI, former agents from the 

Criminal Investigation Division of the Internal Revenue Service, 

former regulators and examiners from the Federal Reserve, the 

FDIC and the OCC, former agents of the U.S. Customs Service, the 

Immigration and Naturalization Service, the Financial Crimes Enforcement Network, and the Drug Enforcement Administration. 

In the first days following the tragedy of 9/11, these former officials came forth in droves asking simply, ‘‘How can I help?’’ There 

are certain things they should not, and will not do, but they can 

and do make a valuable and, I would argue, indispensable, contribution. They are a source of intellectual capital and greatly and 

flexibly strengthen our human resource base. I assure you there is 

no finer, more qualified or dedicated group of men and women. And 

their dedication is producing results. The work of these advisors 

has resulted in the removal of eight countries from FATF’s blacklist of non-cooperative countries and territories and the creation of 

Financial Intelligence Units in a number of other countries. 

Finally, Madam Chairwoman, my invitation letter asks that I 

note any recommendations that Treasury may have based on the 

GAO report. My recommendation, and this is a recommendation I 

make to myself as much as anyone else, is to treat the GAO report 

21

as a catalyst for self-scrutiny, to consider what has worked well 

over the past several years and what needs addressing, and to 

make any adjustments in light of that. 

Madam Chairwoman, that process is well underway, and, I think 

my co-panelists would agree, will continue. That concludes my 

statement, and I will be happy to take any questions at the appropriate time. 

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

60 of the appendix.] 

Chairwoman KELLY. Thank you, Mr. McDonald. 

Mr. Feierstein. 

STATEMENT OF GERALD M. FEIERSTEIN, DEPUTY COORDINATOR FOR PROGRAMS AND PLANS, OFFICE OF THE COORDINATOR FOR COUNTER TERRORISM, U.S. DEPARTMENT OF 

STATE 

Mr. FEIERSTEIN. Chairwoman Kelly, Congressman Gutierrez, and 

members of the committee, thank you for the opportunity to speak 

to you today about interagency cooperation on combating counterterrorism financing and providing international training and assistance since the terrorist attack of September 11, 2001. 

That tragedy changed the way the U.S. Government approached 

terrorist financing. We have worked to create and implement programs that enhance the capacity of key partner nations to detect, 

disrupt, and dismantle global terrorist financing networks. Our objective is to deny financial safe havens to terrorist organizations 

and their supporters. Together, we are building sustainable, dynamic, anti-money laundering, and counter-terrorist financing regimes, and implementing effective programs in the legal, financial, 

law enforcement, and judicial fields. Improving the capability of 

our partner nations to combat terrorist financing significantly enhances our own ability to detect and isolate terrorist financiers and 

follow the money, right to where it links global terrorists to their 

support networks. 

In pursuit of this goal, the interagency created the Terror Finance Working Group in October of 2001 to leverage existing antimoney laundering expertise across the U.S. Government and to develop specific CT finance capacity building programs. Co-chaired by 

the State Department’s Office of the Coordinator for Counter Terrorism and the Bureau for International Narcotics and Law Enforcement Affairs, this interagency forum brings together the Departments of Treasury, Justice, and Homeland Security, independent financial regulatory agencies, and the law enforcement 

and intelligence communities. 

This interagency working group has achieved a notable record for 

its efforts. We have provided CT finance and anti-money laundering assistance for over 1,850 foreign counterparts in over 18 priority countries. A number of countries have either adopted new legislation to shut down terrorist financing or are in the process of 

doing so. Our assistance has led to the arrest and conviction of terrorists in Southeast Asia and the Middle East, as well as the conviction and subsequent designation of a terrorist fundraiser in the 

Middle East. Our training has enabled other Middle East partner 

nations’ law enforcement agencies to identify and take action 

22

against several Al Qaeda cell members. Additional specific examples of the record are provided in my written testimony submitted 

for the record. 

Nevertheless, all interagency mechanisms are subject to constant 

review and revision and may be altered at any time. We have 

taken measures following the GAO’s report to strengthen interagency coordination and enhance the development and delivery of 

CT finance foreign assistance programs. Specifically, we have elevated the leadership of the Working Group to the Deputy Assistant 

Secretary level. Another change was the resuscitation of the Training and Assistance Sub-Group, TASG, led by the coordinator for 

Counter Terrorism at the State Department. The Terrorist Finance 

Working Group now reports to this body. Should any issue arise 

that cannot be worked out by the members of the Working Group, 

something that has not occurred since I assumed duties as co-chair 

in January, it is referred to the TASG for resolution. 

Also, in response to the GAO report, we have dedicated resources 

at the Department of Justice Office of Overseas Prosecutorial Development Assistance and Training, OPDAT, to measure the effectiveness of our counter-terrorism financing and anti-money laundering programs. OPDAT measures the basic elements of an effective counter-terrorism financing and anti-money laundering regime 

for each country that has received U.S. foreign assistance in this 

area. 

In addition, we analyze what type of practical impact our training programs have had on the ground. With this system, we hope 

to determine how and where our capacity building programs have 

had the most impact and how we can improve and apply them in 

other countries. 

Members of the Working Group agree on each other’s respective 

roles. We agree that the State Department chairs the Working 

Group and coordinates training and technical assistance abroad for 

priority countries. Given its expertise in the area, we support the 

Justice Department’s lead role in prosecutorial and judicial assistance matters, including drafting anti-money laundering and CT financing legislation. We support the Treasury Department’s lead 

role in providing financial regulatory assistance and Financial Intelligence Unit development and implementation of targeted financial sanctions. We support the Department of Homeland Security’s 

lead role in providing training to combat illicit cash couriers. 

In closing, we have made substantial progress since September 

11, 2001. We have developed a broad and strong international coalition against terrorist financing. We have supported development 

of laws, regulations, and regulatory institutions, as well as trained 

intelligence and law enforcement officials around the world to combat terrorist financing and money laundering. We are opening, cultivating, and strengthening dialogues and relationships with foreign counterparts in vulnerable regions as a means of strengthening their counter-terrorism financing regimes. As a result, we 

have made it harder for terrorists and their supporters to use both 

formal and informal financial systems. 

Chairwoman Kelly, Congressman Gutierrez, and members of the 

committee, our work is far from done. As we continue to fight on 

this and other fronts in the war on terror, we face a resilient, 

23

adaptable, and ruthless foe, and must constantly anticipate and 

help countries all over the world prepare for the next move before 

it happens. Terrorists and terrorist tactics are evolving and persisting, and so must our efforts. Key to our continued success in 

tackling terrorist financing is strong, effective U.S. interagency coordination. 

Chairwoman KELLY. Mr. Feierstein? 

Mr. FEIERSTEIN. Yes, ma’am. 

Chairwoman KELLY. Your red light has been on for some time 

and since we are going to be called for a vote shortly, I would ask 

you to sum up, please? 

Mr. FEIERSTEIN. Ma’am, I only had one more sentence. Therefore, 

we must continue to pool our expertise and resources in order to 

continue to realize real success in the future. 

I look forward to taking your questions. Thank you. 

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

51 of the appendix.] 

Chairwoman KELLY. Thank you. 

Mr. Sabin? 

STATEMENT OF BARRY M. SABIN, DEPUTY ASSISTANT 

ATTORNEY GENERAL, U.S. DEPARTMENT OF JUSTICE 

Mr. SABIN. Chairwoman Kelly, distinguished members of the 

subcommittee, I appreciate the opportunity to discuss the issue of 

the Government Accountability Office’s report on terrorist financing and the Department of Justice’s successful involvement in this 

cooperative effort to provide counter-terrorism financing training 

and technical assistance abroad. 

The Department of Justice plays a critical role in the delivery of 

training and technical assistance to our international partners. 

Justice plays a central role in this arena, in concert with the Departments of State, Treasury, and Homeland Security, even though 

the Justice Department does not receive direct appropriations from 

Congress to provide training and technical assistance to combat 

terrorist financing abroad. Consequently, we respectfully disagree 

with the GAO’s recommendation that the Departments of State and 

Treasury enter into a formal Memorandum of Understanding, without participation of the Department of Justice, to develop a training and technical assistance delivery plan. 

Justice and its interagency partners do not believe that such a 

Memorandum of Understanding is necessary or appropriate. More 

fundamentally, such a recommendation highlights our basic concern with the GAO report, that it overlooks the valuable contribution of the Justice Department and others, including DHS in providing legal training and assistance to combat terrorist financing 

and money laundering around the world. We also provide essential 

input to the fundamental interagency decisionmaking process of 

prioritizing and strategizing the delivery of technical assistance 

and training. Such input helps ensure that the training and technical assistance plan is consistent with other Department and Administration counter-terrorism initiatives. In addition, excluding 

the Department of Justice would deprive DOJ of one of the critical 

byproducts of technical assistance—the building of long-term operVerDate 0ct 09 2002 18:31 Nov 14, 2006 Jkt 030535 PO 00000 Frm 00029 Fmt 6633 Sfmt 6633 F:\DOCS\30535.TXT HFIN PsN: TERRIE
24

ational relationships which are critical to facilitating international 

cooperation. 

It is axiomatic that in providing terrorist financing and technical 

assistance to our most vulnerable partners in the war on terror, 

the U.S. Government should be represented by its most highly 

skilled and knowledgeable experts. In 2002, the Administration determined that the Department of Justice should be the Agency primarily responsible for training and technical assistance concerning 

our core areas: legislative drafting and training of prosecutors and 

judges in priority countries. DOJ assistance helps governments 

that are vulnerable to terrorist threats to draft legislation which 

criminalizes money laundering and financial and other material 

support to terrorists. DOJ also provides technical assistance and 

training to help such governments implement and enforce these 

laws. 

DOJ remains firmly committed to interagency efforts to ensure 

that priority and vulnerable countries receive substantive training 

and technical assistance from the most qualified experts that the 

U.S. Government has to offer. 

Preventing terrorist attacks and protecting our Nation is the top 

priority at the Justice Department. Aggressive investigation and 

prosecution of terrorist threats and activity, including terrorist financing and all other manner of providing material support to terrorists, is a principal means to achieve this end. 

As a result of our ongoing involvement in this rapidly changing 

area and our commitment to this objective as a first priority, Justice Department lawyers and investigative agents, both in Washington and in the field, have extensive experience in this area. The 

Department of Justice delivers approximately half of the antimoney laundering terrorist financing assistance to priority countries, acting either individually or in combination with our partners. 

The Department has participated in the interagency process 

since its inception. The interagency process provides a forum for 

candid discussions and strategic planning for delivering appropriate assistance. Consensus is reached in this forum to ensure our 

international partners receive the guidance necessary for them to 

build strong counter terrorist financing regimes. Through this process, the U.S. Government ensures that we take a holistic approach, 

avoid duplication, and prevent redundant delivery of previously 

provided assistance. 

In my written statement, I provide specific examples of countries 

which illustrate the assistance we have rendered in this field and 

the long-term gains it has yielded for the recipient countries and 

the international community. The Department is proud of its role 

in equipping other countries with the legal tools necessary to combat terrorist financing and money laundering, but we realize that 

there remains work to be done. 

Thank you for providing me the opportunity to discuss these important issues with you today. The Department of Justice looks forward to our continued role in the interagency process to deliver 

and develop effective anti-money laundering and counter terrorism 

financing training and technical assistance and to benefit from the 

goodwill, personal relationships, understanding of our international 

25

partners, and tangible operational benefits that result from our 

crucial role in providing that assistance. We are committed to 

working with our peer agencies to develop a comprehensive and integrated training and technical assistance program abroad. We 

each have our areas of expertise, and we believe that a unified, yet 

delineated approach, to the global problem of terrorist financing 

will result in success that is effective and enduring. 

Thank you. 

[The prepared statement of Mr. Sabin can be found on page 67 

of the appendix.] 

Chairwoman KELLY. Thank you very much, Mr. Sabin. Mr. 

McDonald, you said that you are very pleased with the cooperation 

that you have with State. The GAO sat here and said it is not 

working. As a matter of fact, in the letter that was sent to Chairman Oxley about this, and in the comments from the GAO as of 

your response involving State, and I quote from page 72 of their 

report, ‘‘As Treasury states, they believe that State’s role is limited 

to coordination for priority countries and does not accept State’s position that it leads all U.S. training and technical assistance efforts 

to vulnerable countries, not just priority countries.’’ Now, this is exactly what I believe we heard this morning. Who is the lead? 

Mr. MCDONALD. State Department is the lead. 

Chairwoman KELLY. Well, then if the State Department is the 

lead, sir, then you are going to have to accept what you apparently 

have rejected here in this statement. 

Mr. MCDONALD. And I do. The information in the statement that 

you are reading from reflected the perspectives of Treasury officials 

who were reacting to a situation that they observed or they perceived at that time. And, as I think all of us have tried to explain 

today, a lot of water has flowed under the bridge since then and 

a number of clarifications and strengthening of the process have 

taken place. And I do believe that the Treasury Department and 

the State Department are completely on the same page with respect to the role of the lead agency, and it is the State Department 

for those countries. 

Chairwoman KELLY. Then why is the NSC reviewing it? 

Mr. MCDONALD. Why is the NSC reviewing what? 

Chairwoman KELLY. Reviewing the cooperative effort that is 

talked about here in this report, and certainly Chairman Oxley had 

some questions here. It says that, ‘‘NSC, the Departments of State, 

Homeland Security, Justice, and Treasury are reviewing the work 

of the Terrorist Finance Working Group and its operating procedures in light of the past 4 years experience with a view to making 

any appropriate updates.’’ Why are they reviewing it if you have 

already accepted it? 

Mr. MCDONALD. What was referred to in that letter, what is 

being reviewed is not only—not particularly the question of the 

lead role. What is being reviewed is the overall set of procedures 

and practices, and the lead role is a subset of that question. So we 

are taking a look at the whole operation in light of the GAO’s report to assess what we need to do better, what we need to adjust. 

Chairwoman KELLY. This GAO report came out in October. Everybody has been looking at it and so forth and yet there is still 

no Memorandum of Understanding between the agencies. My quesVerDate 0ct 09 2002 18:31 Nov 14, 2006 Jkt 030535 PO 00000 Frm 00031 Fmt 6633 Sfmt 6633 F:\DOCS\30535.TXT HFIN PsN: TERRIE
26

tion is why is that so? Why is there no plan to develop metrics for 

success to make this happen? It is frustrating to keep asking for 

people to review and review and review. There is more review here 

that is talked about in this letter that we just discussed. When 

does the review stop and when do we get a Memorandum of Understanding? Are you working on this? I would ask both of you. Well, 

actually all three of you. You too, Mr. Sabin. 

Mr. FEIERSTEIN. Madam Chairwoman— 

Chairwoman KELLY. Let Mr. McDonald answer. 

Mr. MCDONALD. I was just going to start by saying that there is 

not a Memorandum of Agreement. My understanding of the GAO’s 

thinking in making that recommendation was that it was a vehicle, 

a mechanism for encouraging and ensuring collaboration and the 

sorting out of any issues that there might be between Treasury, 

State, and other agencies about procedures, practices, objectives, 

and how to measure progress toward them. We are doing that. We 

have not waited for a Memorandum of Understanding. From the 

first day that I took my position in December, and I am sure that 

from the first day that Mr. Feierstein took his, we have been leaning into that entire set of issues. So I believe, this is my view and 

I will ask for Mr. Feierstein to express his, that the Memorandum 

of Understanding is not required for the things that we are already 

doing. 

Mr. FEIERSTEIN. Madam Chairwoman, that was also certainly 

our view and that was the view that we expressed to the GAO, 

both when they initially did their study and also in our response 

to their recommendations, that in fact the Terror Finance Working 

Group is much broader than just State and Treasury, that we do 

believe that we have an agreement in place about roles and responsibilities. Those are well understood by all of the participants in 

the Working Group. And, as Larry has suggested, we do believe 

that process is working effectively and efficiently now without need 

of drafting an additional agreement. So we think that we have the 

structure in place, we have the understandings in place, and we believe that we are moving forward. 

Chairwoman KELLY. As of when did you feel that that structure 

was in place? 

Mr. FEIERSTEIN. Ma’am, I started in this position in January and 

that was at a point in which the structures were evolving. The 

Training and Assistance Subgroup had just resumed its activities. 

The decision has been made that we would raise the level of the 

Chair of the Working Group to help facilitate and move forward 

with interagency coordination. And so I would say that certainly 

since the beginning of this year we have had in place the structures that we believe are appropriate and effective. 

Chairwoman KELLY. That is really not exactly the answer to my 

question, sir. I asked you when you felt this was finished, when 

you felt this comfort level that you spoke of? 

Mr. FEIERSTEIN. Ma’am, as I said, I have been on— 

Chairwoman KELLY. I am not asking about the history, I want 

to know within the last month, within the last week, within the 

last 2 weeks? 

Mr. FEIERSTEIN. As I said, since the beginning of this year, since 

I started in this position. 

27

Chairwoman KELLY. From January when you started? 

Mr. FEIERSTEIN. Yes. 

Chairwoman KELLY. Mr. Sabin? 

Mr. SABIN. I agree with the Comptroller’s remarks that we need 

to have an interagency process that is effective and accountable. 

The vehicle to achieve the delineation of the roles and responsibilities, I would suggest is not in a formulaic Memorandum of Understanding but in the structure of the interagency process in the 

Working Group, with clearly defined roles and responsibilities 

where people are accountable and can articulate our strategic planning in that regard. So to exclude Justice, as is recommended in 

the GAO report, I would respectfully suggest, is not the vehicle in 

which to achieve those ends, nor to exclude Homeland Security. 

There is a structure. There is an interagency process in the Terrorist Finance Working Group. People understand their roles and 

responsibilities, and we are going forward to ensure that we 

achieve the mission and that we are accountable for achieving that 

mission. But that vehicle to achieve that is not through a formal 

Memorandum of Understanding. 

Chairwoman KELLY. So if I understand what you are saying correctly, none of you really feel that you agree with the GAO report 

because you do not feel you need structure to make sure that the 

agencies are discussing and working with each other, you think you 

can do that on your own? 

Mr. FEIERSTEIN. Ma’am, we believe that the structure is there. 

The structure is there and the directions from the deputies and 

from the Counter Terrorism Support Group, which is chaired by 

the NSC, the guidance that they have provided to us and of course 

the guidance that we receive from the Training Assistance Subgroup. So we think that we have received the appropriate structure, the structure is in place, and the structure we believe is 

working effectively. 

Chairwoman KELLY. Mr. McDonald? 

Mr. MCDONALD. I was thinking about your question about the 

timing when I had this feeling of reassurance, and I remember two 

very precise moments when I felt that. It was in late January, I 

think, when I attended the first meeting of the TASG. I accompanied Assistant Secretary O’Brien from TFI. And both during that 

meeting, which was chaired by Ambassador Crumpton of the State 

Department, I felt that there was a real sort of center of gravity 

of leadership in that meeting. And, as I was walking back from 

that meeting with Treasury Assistant Secretary O’Brien, we both 

remarked that we felt like an important change had been affected. 

The other time that it struck me was the first meeting of the 

TFWG that I attended under Mr. Feierstein. I think it was in early 

February, so it happened in a couple of steps. And I left that meeting feeling like there was a very different atmosphere and a different way of doing business. So those are the moments when it occurred to me. 

Chairwoman KELLY. Well, then that leads me to the next question that I have. I am going to go to the State Department first because you came here, the State Department came and repeatedly 

said that the Saudi FIU was operational. When I went a year ago 

to Saudi Arabia, it was not operational. Treasury came here and 

28

said it is not operational. State came here and said it is operational. Was this matter ever discussed with what you call the 

TFWG? 

Mr. FEIERSTEIN. Ma’am, I would have to take that question and 

go back, that long pre-dates my arrival on the scene so I cannot 

respond to your question, but I will be happy to ask and see if we 

can get an answer for you. 

Chairwoman KELLY. Mr. Feierstein, I wish you would, please. I 

still feel a great deal of skepticism about how this is working, 

about how it is integrated, and how the chains of command are 

braided together to give us one unified approach and understanding of what is happening with regard to terrorist financing. 

We have been called for a vote. We have two votes, so I am not 

finished with my line of questioning. I have a couple more questions. I am going to, however, recess the committee temporarily. I 

would imagine it would take us—one is a 15 minute and one is a 

5 minute vote, I imagine within that timeframe, it will be probably 

25 to 30 minutes before we arrive back here to be able to continue. 

Mr. Scott, we will keep going with questions when we come back. 

I thank you very much, and I apologize for the interruption but we 

will be back presently. 

[Recess] 

Chairwoman KELLY. Thank you very much for your indulgence 

in our going off to a vote. I would like to resume with the line of 

questioning that I was starting with. I want to go back to the question about the issue of the fact that we had different statements 

from different agencies about the state of the Saudi FIU. And it involved setting up an FIU, joining the Egmont Group is to be encouraged in all of the countries that we deal with. It is one of the 

very real ways that countries can all cooperate in a very transparent and supportive way to try to stop the terrorist movement 

of money around the world. Not knowing whether or not an FIU 

is actually in place is a serious problem, and I am concerned about 

what the process was that caused the disparity in the responses to 

the questions that I asked about the FIU. I really did not get an 

answer that I was comfortable with, and I would like to go back 

to ask that question about the TFWG. If there was discussion at 

the TFWG prior to the testimony that was given here at the committee, whether anybody here knows, maybe somebody sitting behind you might know, whether there was discussion there about 

the Saudi FIU? And any one of you can answer that or I will ask 

you each individually. 

Mr. FEIERSTEIN. Madam Chairwoman, during the brief recess, we 

did discuss this, and I can offer you only that to the best of the 

recollection of the people who are sitting behind me, some of whom 

were involved at that time, this was not an issue that came before 

the FIU—or before the TFWG. But having said that, I must say 

that I am still not comfortable, and I would much prefer to have 

an opportunity to take that question back and research it more 

thoroughly and give you a considered response. 

Chairwoman KELLY. Okay, thank you. I am more comfortable 

with that answer, thank you. I want to go then to my other question that I asked just before I left and that was the question about 

what plan is being developed to set in place some metrics for sucVerDate 0ct 09 2002 18:31 Nov 14, 2006 Jkt 030535 PO 00000 Frm 00034 Fmt 6633 Sfmt 6633 F:\DOCS\30535.TXT HFIN PsN: TERRIE
29

cess in this interagency discussion? When Secretary Snow was here 

at one point, I asked him where the buck stopped on this, and he 

said, ‘‘It stops on my desk.’’ And he then came back and told us 

that they had set up within Treasury an interagency desk that was 

working fairly well. I do not know at this point whether it is still 

working well within Treasury or whether it has been stood down? 

And, Mr. McDonald, maybe you can answer that question for me. 

Mr. MCDONALD. I know that as Under Secretary Levey testified 

earlier this week before a Senate committee, that he has been in 

very close touch with the Secretary and other senior officials within 

Treasury about the entire range of issues that have to do with terrorist financing, of which technical assistance is one component, 

and that developing metrics for measuring success and combating 

terrorist financing is a very big item on his agenda. I do not know, 

frankly, the status of efforts to develop metrics for success for combating terrorist financing broadly. I can tell you— 

Chairwoman KELLY. Can you find that out for us and come back 

with an answer? 

Mr. MCDONALD. Yes. 

Chairwoman KELLY. Can you answer the second question that I 

asked—is that desk that had several agencies from Justice and 

other Departments still in existence at Treasury and is it still functioning? 

Mr. MCDONALD. I don’t know about that, and I will have to find 

that out too. 

Chairwoman KELLY. Can you come back with an answer for 

that? 

Mr. MCDONALD. Yes. 

Chairwoman KELLY. Thank you. 

Mr. SABIN. Madam Chairwoman? 

Chairwoman KELLY. Yes. 

Mr. SABIN. I can supplement on the metrics point. 

Chairwoman KELLY. Yes. 

Mr. SABIN. The Criminal Division of the Justice Department has 

a metrics system that examines the five basic areas of an effective 

counter terrorism financing and asset forfeiture, money laundering 

mechanism for each of the countries that receive United States assistance that goes to, as articulated in the GAO report, the five key 

areas of legal development and reform, financial regulatory aspects, 

capacity for financial investigations, law enforcement and judicial 

and prosecutorial capabilities, so in those five areas. As a baseline, 

you have reports, initial reports that are conducted called the Financial Systems Analysis Team Reports, and that is also referenced in the GAO report. That baseline information is compiled 

and then used against those five areas to ascertain, both short 

term and long term, whether there is appropriate reporting and to 

analyze what kind of practical impact occurs, so how U.S. foreign 

assistance has been allocated, to which countries, for which particular courses for training, for how many different foreign counterparts. And then drilling down in terms of the specifics, what legislative drafting has been undertaken in those particular areas, what 

reports have been issued relating to bulk cash smuggling, and how 

that, in turn, has led to specific actions by an FIU. Those kinds of 

specifics compiled, analyzed, tracked, I am not saying it is perfect 

30

or that it is all that we would want to be and that it is to the extent of something that we are comfortable with, but we are committed to making sure that, as we indicated before, that it is an 

integrated approach that is accountable and that we can, when 

called upon to do so, be accountable and transparent in relaying 

that information. 

Chairwoman KELLY. An integrated intra- and interagency? 

Mr. SABIN. Correct. 

Chairwoman KELLY. Good, thank you very much. For that, I 

thank you because that is much more information than I was getting before. 

I now want to go on to how you are working with the other nations, our friends and our allies, with regard to the terrorist money 

movement. Are you working at doing some parliamentary assistance with the other nations of the world with regard to trying to 

get them to pass laws and do what you can to get them to use—

everybody has to use the same set of metrics or it is not integrated 

enough to be worthwhile—are you doing that? And I am going to 

each Agency to answer that. Let’s start with you, Mr. McDonald. 

Mr. MCDONALD. Sure, yes, by all means. Although Treasury 

technical assistance providers tend to be based in a finance ministry or a central bank or an institution like that, they spend a lot 

of time and work a lot with parliamentarians. Intermittent advisors provide executive seminars to parliament in many countries 

around the world to explain the rationale and the benefits of passing anti-money laundering legislation and legislation related to creating Financial Intelligence Units. Resident advisors who are on 

the ground week after week in those countries do not spend all 

their time in the central bank and the finance ministry but spend 

a good deal of their time with officials from parliament, reinforcing 

those same points. 

I would add, although this was not specifically in your question, 

a public information campaign is an important part of informing 

parliament and helping to encourage them about the importance of 

this. I saw that when I was in Zambia just 2 weeks ago. That is 

a country where anti-money laundering legislation is important—

it is before the parliament, and has not been passed yet, I met with 

members of the press and among the things that I talked about 

was the importance of passing such legislation. I confess that I did 

not meet with the parliamentarians, but I will take from our discussion today the note that I will make sure that I do on my next 

trip. 

Chairwoman KELLY. I think that is a good idea. I wonder also 

if you have anything in place where you can actually measure the 

success of the kind of thing that I understand that you have been 

doing, which is sending people out to talk to these parliaments and 

the financial officers in the various countries. Is there any kind of, 

I don’t want to say report card, but is there some kind of a way, 

do you have anything in place to measure step by step because 

some of these things must take into account cultural considerations 

as well as the financing situation. So if you have that in place, 

what is it? And I am not going to ask you to detail it, but I just 

want to know if it is there and if it works? 

31

Mr. MCDONALD. The best thing that I would reference in answer 

to your question is the work plan that is developed for each advisor, for each technical assistance provider, that lays out at the beginning, and in consultation with counterparts from that country, 

and taking into account the cultural issues that you mentioned, a 

detailed road map of what is to be accomplished. And if within that 

road map there is work on legislation and dealing with parliaments, that would be highlighted. And there are monthly reports, monthly reports on progress towards the meeting of those objectives. Those monthly reports are made available to other agencies within the U.S. Government, through the TFWG, and are 

available to the Congress. 

Chairwoman KELLY. Good. Thank you. Okay. 

Mr. FEIERSTEIN. Madam Chairwoman, if I could respond also to 

the two questions. And in the first one, certainly to mirror what 

Larry said in terms of the emphasis that we place on working with 

governments overseas, with host governments, to promote the passage of anti-money laundering and counter terrorism financing legislation. This is a very high priority with our embassies overseas 

that engages the chiefs of mission, it engages other officers in the 

embassy on a regular basis to use their positions to reach out not 

only to the appropriate government agencies in those countries but 

also to work with parliamentarians. This is certainly part of the 

performance responsibilities and goals and objectives that any embassy would have. And also to use our own bilateral dialogues at 

senior levels to continue to pursue that. 

I can mention in particular that yesterday, for example, we had 

a bilateral discussion with our counterparts from the Government 

of Pakistan where passing a money laundering deal is a very high 

priority for the U.S. Government. One of Mr. Sabin’s colleagues 

was there from the Department of Justice, and we spent a good bit 

of the afternoon actually talking about anti-money laundering legislation and how we might move forward on getting that bill 

through the Pakistani parliament. 

In terms of the second question you asked, whether there is a report card or not, I would draw your attention to the INCSTR report, the International Narcotics Control Strategy Report. The latest edition came up to the Congress in March of 2006 and it does 

rate the performance of governments in 16 different categories, including criminalized drug money laundering, criminalized beyond 

drugs, record large transactions, maintains records over time, reports suspicious transactions, a Financial Intelligent Unit, a system for identifying and forfeiting assets, arrangements for asset 

sharing, cooperates with international law enforcement, international transportation of currency, mutual legal assistance, nonbank financial institutions, disclosure of protection of safe harbor, 

state’s party to the 1988 UN Convention, criminalized financing of 

terrorism, and International Terrorism Financing Convention. So 

each country is rated in each of those categories. 

Chairwoman KELLY. Mr. Feierstein, I thank you very much for 

that information. INCSTR has always been pretty good, my question was actually addressed to what you are doing within your own 

Agency. 

Mr. FEIERSTEIN. In terms of? 

32

Chairwoman KELLY. In terms of how do you measure your own 

success? How do you, and obviously Treasury has a work plan that 

they set out for every person who is going out and they set goals 

for achievement. 

Mr. FEIERSTEIN. Right. 

Chairwoman KELLY. Do you do that? 

Mr. FEIERSTEIN. Yes, in any agreement that we sign. And, of 

course, the State Department itself is not a provider of technical 

assistance or training. We do turn to our counterpart agencies, to 

our partners, like Department of Justice or the others, to actually 

carry through with the training. But in any agreement that we negotiate in terms of training or technical assistance that is going to 

be provided, that does include a performance indicator, and what 

it is that we expect to see at the end of the training or technical 

assistance and what are the parameters for measuring success. 

Chairwoman KELLY. In the field? 

Mr. FEIERSTEIN. In the field. 

Chairwoman KELLY. Mr. Sabin? 

Mr. SABIN. It goes back to your point about the integration of the 

different roles and responsibilities. So, as Mr. McDonald pointed 

out, the building of goodwill, the ability to execute in the particular 

country for that legislation was preceded by Justice Department 

lawyers involved in the actual drafting of the particular legislation. 

So we understand that we will provide those skills and experiences 

to build the trust, work through the particular issues involved in 

that country and that region regarding the appropriate legislation. 

And then if called upon to do so by our partners in the interagency 

process, assist in the execution under their direction as appropriate. 

Chairwoman KELLY. Thank you. I have a question for you, Mr. 

Sabin. I would like to know what contributions the OCDETF has 

its fusion center play in identifying the vulnerabilities to money 

laundering and enabling the Federal Government to bring prosecutions, can you identify that for us? 

Mr. SABIN. If I understand your question, you are referring to the 

Organized Crime Drug Enforcement Task Forces. 

Chairwoman KELLY. Yes. 

Mr. SABIN. That has the combination of narcotics-generated information dealt with in terms of a task force approach to determine 

and prioritize significant targets, both domestically and internationally. 

Chairwoman KELLY. Well, we know there are a few, there is a 

mix, the bad guys and the terrorists sometimes talk to each other 

and work with each other. 

Mr. SABIN. Absolutely. 

Chairwoman KELLY. So that is the basis for my question. 

Mr. SABIN. Absolutely, and we have seen that in the post 9/11 

world, the ability to not only act as independent cells but in the 

decentralized aspects and the desire to fund in this evolving nature 

of al Qaeda or other foreign terrorists organizations, how they piggyback upon traditional criminal enterprises, and how they use infant formula or cigarette smuggling or narcotics trafficking and 

those kinds of endeavors, both in the United States and with our 

partners abroad. I had the chance to appear before the OrganizaVerDate 0ct 09 2002 18:31 Nov 14, 2006 Jkt 030535 PO 00000 Frm 00038 Fmt 6633 Sfmt 6633 F:\DOCS\30535.TXT HFIN PsN: TERRIE
33

tion of American States with the lead investigating magistrate 

from Spain, Magistrate Garzon, to talk upon that precise issue. It 

is a very significant issue, not only within this hemisphere, but 

around the world. And how that is fueled by the Organized Crime 

Drug Enforcement Task Force is to ensure those particular metrics, 

who is the defendant, what are the links, how are the associational 

activities occurring, how can you in order to have a comprehensive 

disruption strategy not only go after a particular individual for putting that person behind bars but to go for the entire flow of the 

money chain. 

Chairwoman KELLY. Thank you. Mr. Scott. 

Mr. SCOTT. Thank you, Madam Chairwoman. Let me start off 

with a series of questions dealing with really the infrastructure 

and the need for you all to have some kind of infrastructure working together. My first point is, I want to start with both the State 

Department and the Treasury Department, Mr. McDonald and Mr. 

Feierstein, given the GAO’s conclusion that the U.S. Government 

lacks a unified picture of available budget resources that State and 

Treasury can allocate for training and technical assistance to foreign countries, what steps are Treasury and State taking toward 

gaining a systematic understanding of the available resources? 

Mr. FEIERSTEIN. Sir, that is a very good question. And I would 

say at the time that the GAO did their report, that was probably 

an accurate characterization of the state of affairs. Since then, 

however, I can say that under the auspices of the Technical Assistance Subgroup, in other words, the group that the TFWG reports 

to, we have been engaged in an interagency effort to build a comprehensive database of all of the training that the U.S. Government has provided and is providing around the world so that when 

we have completed that process, which is not complete yet, we 

should be able to respond very clearly and it will be a living document that all of the agencies participating in the interagency process can use in order to develop their own training plans and to 

identify areas where perhaps more work can be done and needs to 

be done. 

Mr. SCOTT. What is your take on the available resources, would 

you say we have sufficient available resources once you have this 

unified picture? 

Mr. FEIERSTEIN. Sir, I think that certainly the more resources 

that we have, the more that we can do. And we are, I think, becoming more efficient and effective in our ability to use the resources. 

When we first embarked on this effort in late 2001, 2002, I think 

that there was a period of time where we were just developing 

training programs, just going out and doing the assessments. As we 

move along, our ability to move more quickly has improved and our 

ability to utilize the resources has improved. So I think we anticipate—for the State Department of course, the Treasury Department also has its own source of funding, but for the State Department we use two categories of funding really for counter terrorism 

financing. We use the NADR accounts, the non-proliferation, antiterrorism, de-mining and related programs accounts, and then we 

use the INLEA, the International Narcotics and Law Enforcement 

Accounts. Between those two, we anticipate that we will obligate 

about $10 million this year, fiscal year 2006, for programs related 

34

to counter-terrorism financing. We anticipate or we have requested 

the Congress, again with between those two accounts, for an increase to about $13 million next year. And we do believe that we 

could use those funds. 

Mr. SCOTT. Great. I am trying to get as many questions as I can 

in my limited time. To Mr. McDonald from Treasury, in your testimony you stated that you accept the State Department’s lead in 

this endeavor. Does this extend to the delivery of technical assistance to countries that are not on the TFWG priority list where we 

do have efforts in progress? 

Mr. MCDONALD. There is a difference—in fact the GAO comptroller referred to different kinds of leadership, and I think that is 

an appropriate distinction to make here. In the TFWG area, the 

interagency process that we are talking about here, there is a level 

of leadership and a kind of leadership that goes beyond the norm. 

But I would not use the term—I would find a different term for the 

relationship that we have with respect to countries that are not 

part of the TFWG process. We coordinate closely with the State Department, both here in Washington and certainly at embassies. I 

do not think I would the term the ‘‘lead’’ with respect to those 

countries that are not part of the TFWG process. But I would hasten to add that when I speak of coordination, I do not mean ‘‘coordination-lite.’’ I mentioned earlier that I went to Zambia to talk 

about Treasury activities in Zambia, I would not have been able to 

go to Zambia if I had not consulted already with the State Department and with the embassy to explain the purposes of my trip, get 

country clearance. And, indeed, when I arrived in the country, the 

Ambassador accompanied me to many of my meetings. So even 

though I would not use the term ‘‘lead,’’ and I do not think the Ambassador herself would have used the term the ‘‘lead,’’ in terms of 

my trip there, we were linked up arm-in-arm at every stop during 

the trip. 

Mr. SCOTT. Well, let me ask you this, I know my time is getting 

short but I have a number of questions here. I am very concerned 

that you seem to reject the GAO’s, their recommendations for a 

strategic plan. I think you said that you probably would accept that 

but not to the non-priority countries. An example of why I think 

that you need a strategic plan and you need a shared plan and you 

need that Memorandum of Understanding and agreement with 

each other is because all of your agencies are so interlocking in this 

pursuit. And nowhere is this better dramatized than during my recent visit to Afghanistan and Pakistan, particularly, and also Bulgaria. And the reason I mention that if you know geographically 

what I am talking about, that is an extraordinary entry point, border point, for the process and the transportation of the number one 

product from that region, which is the poppy, which is the heroin, 

which is the morphine, which is the drug traffic. In my conversations there with each official, and knowing of our interest in this 

issue on terrorist financing, I raised questions and issues with 

these and one of which was in terms of our country, did they feel 

we are doing enough, was that effort coordinated? And we get a 

thumbs down, especially in the Bulgaria region where so much of 

the traffic comes through. And your comment, Mr. Sabin, I tend to 

sympathize with you more than anybody else, and I think I am 

35

sympathizing right, I think your objection to this Memorandum of 

Understanding is that you are not included. I cannot understand 

for the life of me why you are not included at an equal level, at 

an equal participatory level with Treasury and with State. And if 

there is one recommendation that ought to come out of this hearing, it should be that you lifted up and your Agency involved in 

this. Because so much of this terrorist financing is criminal. So 

much of it is coming right there out of Afghanistan. We talked with 

the generals and commanders in Afghanistan. We were talking 

about it with President Karzai in Kabul as we were meeting, and 

he said that is the number one problem. And when we talked with 

the generals and commanders on the ground in Afghanistan, they 

have a problem with al Qaeda, they have a problem with the 

Taliban, but their biggest problem is with the drug lords. And 

there is an interrelationship, they do not care how this money or 

where it goes, and so much of it, illicit money, coming out of the 

heroin trade and coming out of that region is used for terrorist financing. And I think that that is why we need to have a closer 

working relationship with the three of you. 

And I would like to, in my final point here, get from you why you 

are so obstinate about the recommendations about the GAO who 

clearly to me seems to be the referee in this and the person who 

is trying to give us the direction we need. We need glue between 

the three of you and that glue is not there. And the American people deserve that glue to be there and we are not going to make it, 

we are not going to be successful if we do not have some kind of 

understanding, some kind of agreement. So I just wanted to get 

your reaction to what I have said. And, number one, basically what 

will it take for you all to understand we need that Memorandum 

of Understanding and agreement and certainly with the strategic 

planning and the recommendations that the GAO has made? 

Mr. SABIN. I will start since it is a rare occasion when I can get 

a Congressman to agree with me. 

Mr. SCOTT. Well, I certainly agree with you on this because I 

have been over there and I know about the criminal activity and 

I know what is happening over in that region and how it is getting 

right into the terrorists’ hands. 

Mr. SABIN. I appreciate your comments and I appreciate the goal 

that we need to rise to the occasion to get this right for the American people. And I think everyone here, both at the table and the 

people that we are speaking for who are doing the work day in and 

day out, share that mission and share that goal. 

In terms of getting it right in terms of the specifics, I would say 

that the inclusion of all the sister agencies, the ones here and even 

Homeland Security, which is not, to make sure that we have it integrated. One of the fundamental points in the GAO report was to 

make sure that it is integrated. We would respectfully submit that 

we have a strategy in place. Is it evolving? Absolutely. Are we 

working to make sure that it is clearer, that roles and responsibilities and duties and responsibilities are understood so that it does 

not play out to negative consequences at the fundamental features 

of another country. Because when they are asking for our assistance, they are saying, okay, the U.S. Government, come here and 

share with us your expertise, your skills, and when we do not proVerDate 0ct 09 2002 18:31 Nov 14, 2006 Jkt 030535 PO 00000 Frm 00041 Fmt 6633 Sfmt 6633 F:\DOCS\30535.TXT HFIN PsN: TERRIE
36

vide the highest and best or we do it because of the initial points 

that folks are making because of ‘‘turf battles,’’ I think we all suffer, and we would suffer for a long-term basis. So I think we believe that we have strategic plans in place, that we are working to 

make them better and sharper and more focused, that would define 

the roles and responsibilities of each of the individual agencies, and 

that to enter into sort of a formulaic Memorandum of Understanding is not the mechanism to achieve that goal. That we need 

to in our strategic planning define those roles and responsibilities, 

I think we have articulated that here today and will continue to 

do so in order to achieve what you suggested we should be achieving. 

Mr. SCOTT. What would it hurt to have a Memorandum of Agreement, of Understanding between the three of you? I cannot—where 

is the rub on this? Why would the GAO make that their primary 

recommendation to improve our ability to access information on 

terrorist financing and you all reject it, saying what you have is 

there? Something is not clicking here. 

Mr. SABIN. Just to the finish the point, that goes back to their 

recommendation does not address Justice. So to take your 

premise— 

Mr. SCOTT. Well, if they put Justice in it, would you be all right? 

Mr. SABIN. Well, but take it to the next step, would you include 

Homeland Security? 

Chairwoman KELLY. If the gentleman will yield? 

Mr. SCOTT. Yes. 

Chairwoman KELLY. In TFWG, Justice is included and so is 

Homeland Security, and other participants are the National Security Council, the CIA, the FDIC, and the Federal Reserve Board. 

Perhaps all of those Agencies should be included in an MOU. I 

think that is what you are talking about, is that Mr. Scott? 

Mr. SCOTT. Yes, it definitely is. 

Mr. SABIN. And then our point is that interagency process is in 

place, that it is evolving but we do have that structure and that 

folks have their duties and responsibilities as articulated in the 

Terrorist Financing Working Group or the next level in the TASG. 

Chairwoman KELLY. Again, Mr. Scott, if you do not mind if I— 

Mr. SCOTT. Please do. 

Chairwoman KELLY. I suspect the evidence here is the frustration we all feel because it is not clear, it is not clear to us in Congress, it is not clear in the Senate and it is not clear here in the 

House, that it is structured, that there is working, that there is 

some kind of cooperation because the letters and responses we get 

say it is under study or we are discussing it. We do not see a clear 

structure and, clearly, that is exactly what the GAO was saying to 

us in their report. I do not know, Mr. Scott, if that characterizes 

what you are talking about but I believe that that is what we are 

all trying to do here, is find out if it exists, who is involved, what 

definition each person has, and if each Agency actually understands what they are supposed to be doing, and how it is working, 

whether this cooperation is working because we hear stories of the 

fact that there are still all the territorial fights going on. Go ahead, 

Mr. Scott, I am sorry, I yield back. 

37

Mr. SCOTT. Yes, that is fine, I really appreciate it, Madam Chairwoman, that we are both saying the same thing and we have to 

get an answer to this. The American people are demanding that we 

get an answer to this. It is not working, it has to be fixed and we 

have to find out what this objection is. If you all cannot do it, then 

maybe we in Congress will have to, by Congressional act, force you 

to have a simple Memorandum of Understanding. It is as plain as 

the nose on my face, and just judging from our testimony here, that 

you should have a Memorandum of Understanding and agreement 

with what each is to do. Yours is an extraordinary mission, it is 

to provide technical assistance to foreign countries in terms of 

counter-terrorist activities for terrorist financing. And each of you 

have a role to play. It is important that you be on the same page. 

And all we are saying is, let’s get the page. It is as plain as that. 

And I believe that this committee is going to get to the point, frustrated enough to the point, that we may have to introduce legislation for you to have to do that. That is what is going to help us. 

That is what is going to make sure that over in that region of the 

world where the money is coming from, if I am sitting up here and 

I have to go way to Afghanistan and Pakistan and Bulgaria and 

that whole region, that is where a great deal of the money is coming from. And our young men and women in uniform, doing a magnificent job over there, and they will tell you their biggest fight is 

against the war lords and the drug lords that is happening in that 

country. And President Karzai said the same thing. The officials in 

Bulgaria have indicated that their check point, that they don’t even 

have a working relationship with the Treasury Department, with 

the State Department, let alone Justice. So we are woefully neglecting this. That Memorandum of Understanding, that report 

that is required to be given to the Congress is all that the GAO 

report is asking for. It is sensitive information. There is so much 

of what I want to say and ask for but I know C-Span goes everywhere and the terrorists will watch C-Span as well. And we do not 

want to give the enemy and terrorists as much information as they 

may need to counter what we are doing. But, the American people 

are demanding that we get the information one way or another. 

And I think that a Memorandum of Understanding is not too much 

to ask for, and I am on record as advocating that. I think that the 

GAO report is absolutely right, and I think we should follow those 

recommendations. For them to give the recommendations and you 

all to stonewall it, is not in the best interest of what we are trying 

to do. 

Chairwoman KELLY. Thank you, Mr. Scott. Mrs. WassermanSchultz. 

Mrs. WASSERMAN-SCHULTZ. Thank you, Madam Chairwoman. 

This question is for Mr. Sabin. Could you describe how the use of 

contractors by Treasury in the drafting of legislation in non-priority 

countries has created problems because I know that Justice feels 

strongly that is an issue? And can you also tell us what steps have 

been taken, if any, to remedy that problem? 

Mr. SABIN. We are working with Treasury effectively and efficiently. There have been issues in the past regarding contractors, 

but there are a number of people, as Mr. Scott and others have 

mentioned, who are passionate about contributing to the mission. 

38

And, as Mr. McDonald indicated, there are resources available in 

Treasury that can complement the Justice Department and other 

Agency’s allocation of resources. In Justice Department’s core 

areas, dealing with legislative drafting, assistance for judges and 

prosecutors, that is where our lane is and our primary focus. There 

have been instances in the past where because of 

miscommunication or other issues, we were not putting our best 

foot forward. I think we have addressed that. I think we understand where we need to be and that the Government is united in 

going forward to make sure that in those areas, there is not a 

misstep and that we are doing the best that we can do for our foreign partners in terms of training their judges, training their prosecutors, and drafting appropriate legislation for terrorist financing 

or money laundering. 

Mrs. WASSERMAN-SCHULTZ. Mr. Sabin, do not take this the 

wrong way but that is a little vague. Could you be more specific 

as to what steps are being taken to resolve the conflict? 

Mr. SABIN. Well, in terms of the Terrorist Financing Working 

Group, the individual countries that are requesting assistance, 

coming from the particular financial assessment reports that have 

been done by the country team that investigates what the needs 

are or the gaps are, we need a specific financial regulatory mechanism, a know your customer law, whatever the particular legislative need or gap that exists. So you sit down at the Terrorist Financing Working Group and say, ‘‘Okay, Justice, this is an area, 

a country that needs the assistance, do you have the appropriate 

resources, either in your Asset Forfeiture Money Laundering Section or your Office of Professional Development and Assistance in 

Training, where you can put a resident legal advisor in that particular country or some other mechanism, both in terms of your 

skills and experiences or your human capital to have them in 

place.’’ If Justice can serve that need, we will then go advise the 

other members of the Terrorist Financing Working Group that we 

are deploying and make appropriate arrangements to share what 

we are experiencing once we have deployed, whether that is short 

term or long term. So that there is an assessment of who is going 

to be held accountable, what the specific needs are, how long that 

needs to be implemented or deployed, and then how you will measure and track the success of the specific country. And we go 

through each of the different countries with that kind of analysis 

and coordination with Treasury. We cannot be everywhere at all 

times so we respect and understand the value that the Treasury 

contractors or other agencies provide and welcome that as long as 

there is appropriate coordination at the outset so that we are giving the best assistance that we can. 

Mrs. WASSERMAN-SCHULTZ. So the quarrel over contractors or no 

contractors has essentially been resolved and you are looking at it 

on a case-by-case basis? 

Mr. SABIN. I believe that it has been resolved. Will it be perfect 

for every matter going forward? I cannot promise you that. But I 

think that from our perspectives sitting here today, we understand 

our roles, we understand our particular lane, and hopefully that 

there will not be any issues in the future. 

39

Mrs. WASSERMAN-SCHULTZ. Thank you. My other question is for 

Treasury. According to the GAO report, Treasury rejected GAO’s 

recommendation that your Department provide more complete information on the nature and extent asset blocking in the United 

States in your annual report to Congress. And, in fact, the GAO report states that Treasury wants to discontinue the requirement 

that Treasury produce that annual report all together. Why does 

Treasury think that it should not be required to report to Congress? 

Mr. MCDONALD. I made it a point to touch base with my colleagues in the Office of Foreign Assets Control before I came up 

here today because since I am not an official from OFAC and do 

not really have a mandate in that area, I wanted at least to be able 

to provide as much information as I could about the current status 

of the issue that you raise. And I am advised by OFAC that the 

TAR, which is the vehicle for providing the information that you 

are referring to, is in the clearance process and is expected to be 

submitted to Congress this month. So I think that is in the next 

24 days, if my math is correct. And that is as much as I know 

about it as of today, but I will be happy to take your question back 

with me and get more from them if you would like. 

Mrs. WASSERMAN-SCHULTZ. Thank you. Madam Chairwoman, I 

realize my time has expired but I think that is a really important 

piece of information. 

Chairwoman KELLY. And the committee officially requests a response to that question. Mr. McDonald, would you like to continue? 

Mr. MCDONALD. May I share an anecdote that relates to the 

question that you raised earlier, Congresswoman, and that others 

have raised about how these kind of things can happen that an advisor might not respect or might overstep the boundaries of what 

he or she is supposed to do in a country and wander into the lane 

that is appropriately reserved for another Agency. When I was an 

advisor in Albania, I was from time to time asked to provide information on things that I knew something about actually, but I did 

not have a mandate to provide. My counterparts from that country, 

who did not understand really the structures of our Government, 

and whose own government did not have such formalized structures, found it very difficult to understand why, if I knew something, I couldn’t go ahead and just tell them. The answer is that, 

and this was not an answer that they enjoyed hearing, was that 

I have to be disciplined, I have to respect their own needs, and 

their desires for information as quickly as possible, that I have to 

respect the mandate under which I am operating in that country. 

And I offer that anecdote as a way of indicating that sometimes the 

difficulties that we are talking about today arise out of the most 

positive of motivations, the motivation from a country to get information as quickly as possible, as efficiently as possible. The motivation for an advisor who is on the ground and has established a 

working relationship with those counterparts is to be helpful, but 

the right answer and the right thing is to respect the lines of authority. We are going to do that, but I offer that just as a real life 

on the ground example of how sometimes these things can happen. 

Mrs. WASSERMAN-SCHULTZ. Madam Chairwoman, I would just 

conclude by saying that if there was a better working relationship 

40

between the three Departments, then you probably would not run 

into problems like that. That is what Memorandums of Understanding are for. 

Chairwoman KELLY. Let’s hope. Ms. Moore. 

Ms. MOORE. Well, good afternoon, thank you so much, Ms. Kelly, 

for calling this meeting. It certainly is responsive to the minority 

party to follow-up with this hearing. I wanted to follow up on 

things that have already been mentioned but give a very specific 

example, and I would like to ask Treasury and Justice about terrorist financing, about freezing the assets of the Muslim community. And, Madam Chairwoman, I would like to enter into the 

record an article from The Washington Post called, ‘‘The Crime of 

Being a Muslim Charity,’’ without objection? 

Chairwoman KELLY. So moved. 

Ms. MOORE. Thank you. And my constituents are concerned that 

of the dozen or so charities that have been frozen, they would like 

to know how many of these employees, board members, or officers 

of these charities has Treasury convicted of aiding terrorists and 

what specific steps have you taken to sort out those funds that are 

terrorist financing and those that are simply part of their Zakat, 

which is like our tithing, that they are required to do as one of the 

pillars of their religion. And to really release those funds toward 

the Tsunami and Katrina and certain other activities where they 

really have wanted to contribute? 

Chairwoman KELLY. Mr. McDonald, this is not a closed informational hearing, I just wanted to remind you of that. 

Mr. MCDONALD. Thank you. Here, again, I am going to have to 

take your question, and I will take your question immediately back 

to my colleagues in TFI. I do recall, again from Under Secretary 

Levey’s testimony earlier this week before another body on the Hill, 

he referred to and gave some information about the process of 

freezing assets of charities. I work everyday with my counterparts 

in TFI, Deputy Assistant Secretary Glaser, Assistant Secretary 

O’Brien, and others, and I will bring your question to them with 

dispatch. 

Ms. MOORE. Well, thank you. And I just want to pursue a line 

of questioning that my other colleagues have pursued as it relates 

to this Memorandum of Understanding. With all respect to your internal process and internal agreements, GAO, which is a respected 

organization for their audits, has indicated that your internal 

agreements are ad hoc, they are mutable, they are non-transparent, and I have heard you, Mr. Sabin, indicate that this process 

is evolving. Well, what would be the harm in having a Memorandum of Understanding as a baseline understanding so that we 

would have committed in writing a starting point and recognizing 

the evolution of the Memorandum of Understanding, why not take 

on seriously GAO’s recommendation to have this document at least 

as a starting point? 

Mr. SABIN. To take the GAO recommendation on its face, as suggested, would not include the Justice Department in that Memorandum of Understanding. The recommendation that came with 

their draft report, Justice said why are not we included even 

though we do not receive funding, we submitted that to GAO specifically and they rejected that. So to take your question at its face, 

41

they would not include Justice in that Memorandum of Understanding as presently drafted. So our request in that regard was 

not adopted. But we do agree that there should be a baseline understanding of duties and responsibilities, and we provided that information to the GAO. They did not think that was sufficient. We 

are mindful of that. And, as we indicated, are working to either 

clarify it here or as we go forward to make it as accurate as possible for both the folks at the headquarters level and in the field 

around the world about what our duties and responsibilities are. 

In terms of your question about investigations and prosecutions, 

we would be happy to provide you information on individuals like 

Abraham Alamoudi, who was head of the American Muslim Council, involved in raising of funds, who was charged with criminal offenses, pled guilty and was sentenced to 22 years incarceration and 

is currently cooperating with law enforcement personnel. I would 

refer you to the Dallas Holy Land Foundation, I cannot talk about 

it specifically because it is an indicted matter, but a grand jury has 

passed on a true bill of indictment regarding those individuals and 

a number of those individuals have previously been convicted of 

other offenses in the Infocom trial that was conducted down in Dallas last year. I would refer you to Chicago with Mr. Arnout who 

was convicted of racketeering charges and was sentenced to a considerable sentence in the northern district of Illinois. I can provide 

you other cases not only in domestic United States prosecutions, 

but with our foreign counterparts where we have either shared information on an informal or formal basis, provided cooperating individuals to testify in their terrorist financing prosecutions, so our 

cooperators not only fueling the intelligence cycle so that information is fully shared domestically but on an international realm. 

Ms. MOORE. Can I just follow up because I realize my time has 

expired, Ms. Kelly. Can you also include in that report, and congratulations on tracking down this terrorist financing, but could 

you also include in that report what efforts or what mechanisms 

are in place to divert those funds to the appropriate places where 

people claimed that they wanted the financing to go? My constituents have said that they have wanted it to go towards the Tsunami 

and Hurricane Katrina, and we sure need the extra bucks, so can 

you tell me about how we can unfreeze those assets so that they 

can reach the appropriate and intended charities? 

Mr. SABIN. The charity question is one that in the interagency 

process we are working to effectively address because you do not 

want the ideals of the American people that are contributing their 

monies for humanitarian goals to be abused by a particular entity 

or a specific individual, so it would be a fraud on the donor with 

respect to that particular mechanism. 

Ms. MOORE. Exactly. 

Mr. SABIN. And that is an area where we are really trying to ensure that we have not fraudulent practices and on top of that those 

fraudulent practices allowing for the flow of monies to terrorist organizations so that is a key priority, not only of the Justice Department but all colleagues in the interagency process. And we would 

be happy to work with our counterparts not only on the blocking 

aspect but the ability to investigate and effectively prosecute. 

Chairwoman KELLY. Thank you very much, Ms. Moore. 

42

Ms. MOORE. And unfreezing. Thank you so much, Ms. Kelly. 

Chairwoman KELLY. I might point out that part of the problem, 

as I understand the answer to your question, I do not know that 

anyone has an accurate accounting of what has been given where, 

and I think that may be part of the problem that they have with 

it. But I appreciate the line of questioning. I appreciate the fact 

that you came to the committee to participate. And I very much appreciate the patience and the cooperation of the people who are 

here on the panel, this panel of witnesses. The Chair notes that 

some members may have additional questions for the panel and 

they may wish to submit those in writing. So without objection, the 

hearing record is going to remain open for 30 days for members to 

submit written questions to these witnesses and place their responses in the record. 

Again, we thank you for your patience and your answers. This 

hearing is adjourned. 

[Whereupon, at 1:15 p.m., the subcommittee was adjourned.] 

(43)

A P P E N D I X

April 6, 2006

44


30535.001
45


30535.002
46


30535.003
47


30535.004
48


30535.005
49


30535.006
50


30535.007
51


30535.008
52


30535.009
53


30535.010
54


30535.011
55


30535.012
56


30535.013
57


30535.014
58


30535.015
59


30535.016
60


30535.017
61


30535.018
62


30535.019
63


30535.020
64


30535.021
65


30535.022
66


30535.023
67


30535.024
68


30535.025
69


30535.026
70


30535.027
71


30535.028
72


30535.029
73


30535.030
74


30535.031
75


30535.032
76


30535.033
77


30535.034
78


30535.035
79


30535.036
80


30535.037
81


30535.038
82


30535.039
83


30535.040
84


30535.041
85


30535.042
86


30535.043
87


30535.044
88


30535.045
89


30535.046
90


30535.047
91


30535.048
92


30535.049
93


30535.050
94


30535.051
95


30535.052
96


30535.053
97


30535.054
98


30535.055
99


30535.056
100


30535.057
101


30535.058
102


30535.059
103


30535.060
104


30535.061
105


30535.062
106


30535.063
107


30535.064
108


30535.065
109


30535.066
110


30535.067
111


30535.068
112


30535.069
113


30535.070
114


30535.071
115


30535.072
116


30535.073
117


30535.074
118


30535.075
119


30535.076
120


30535.077
121


30535.078
122


30535.079
123


30535.080