Audit Report

OIG-08-022

COMBATING TERRORISM: Treasury Provides Terrorism 

Information for Consolidated Watchlist Purposes Through Its 

Specially Designated Nationals List 

December 14, 2007 

Office of 

Inspector General 

Department of the Treasury 

Contents

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Audit Report................................................................................................. 1 

Background ................................................................................................ 2 

Treasury’s Participation in the Terrorism Watchlist Nomination Process.............. 7 

Appendices

Appendix 1: Objective, Scope, and Methodology........................................ 10 

Appendix 2: Management Response ......................................................... 12 

Appendix 3: Report Distribution................................................................ 13 

Abbreviations

EO Executive Order 

FinCEN Financial Crimes Enforcement Network 

HSPD-6 Homeland Security Presidential Directive-6 

NCTC National Counterterrorism Center 

OFAC Office of Foreign Assets Control 

OIG Office of Inspector General 

SDN Specially Designated Nationals 

TIDE Terrorist Identities Datamart Environment 

TSC Terrorist Screening Center 
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OIG Audit

Report

The Department of the Treasury 

Office of Inspector General 

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December 14, 2007 

Stuart A. Levey 

Under Secretary for Terrorism and Financial Intelligence 

This report presents the results of our audit on the Department of 

the Treasury’s participation as it relates to providing information to 

the National Counterterrorism Center (NCTC). We undertook this 

review as part of a joint evaluation by the Intelligence Community 

Offices of Inspector General (OIGs) on the process for nominating 

individuals to the federal government’s consolidated terrorist 

watchlist maintained by the Terrorist Screening Center (TSC). By 

analyzing information fed to it by a number of agencies through the 

NCTC, TSC generates the terrorist watchlist.

In brief, under the authorities granted to Treasury’s Office of 

Foreign Assets Control (OFAC), Treasury provides terrorism 

information by placing individuals and entities on the Specially 

Designated Nationals (SDN) list.1

 NCTC is then able to 

electronically access this information to check the names against 

the Terrorist Identities Datamart Environment (TIDE). The SDN list 

identifies individuals and entities for the purpose of blocking their 

property and prohibiting transactions or dealings with them. This is 

the only mechanism that Treasury currently has to “nominate” 

individuals to the federal government’s consolidated terrorist 

watchlist. We also found no indications suggesting a need for 

additional processes at this time. However, as the federal 

government’s efforts to combat terrorism evolve, Treasury should 

regularly reassess whether additional processes or measures, apart 

1

 OFAC administers and enforces economic and trade sanctions based on U.S. foreign policy and 

national security goals against targeted foreign countries, terrorists, international narcotics traffickers, 

and those engaged in activities related to the proliferation of weapons of mass destruction. OFAC acts 

under Presidential wartime and national emergency powers, as well as authority granted by specific 

legislation, to impose controls on transactions and freeze foreign assets under U.S. jurisdiction. 
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from SDN designations, are necessary to provide terrorism 

information to NCTC. 

The objectives of the Intelligence Community OIGs’ joint review 

and our scope and methodology are described in more detail in 

appendix 1. 

We provided a draft of this report to the Under Secretary for 

Terrorism and Financial Intelligence. The Under Secretary stated in 

his response that his office had no further comments. The response 

is provided as attachment 2. 

Background

Following the terrorist events of September 11, 2001, various 

efforts were undertaken to collect information on terrorists. One 

such effort, announced by the President in January 2003, was the 

Terrorist Threat Integration Center, created as part of the federal 

government’s counterterrorism strategy. A key component of the 

Center was to ensure that the agencies and departments involved 

in the war on terrorism would work closely together and share 

threat information and analyses that could be used to prevent 

terrorist attacks.

Another effort, in September 2003, was Homeland Security 

Presidential Directive 6, Integration and Use of Screening 

Information (HSPD-6), to further strengthen the abilities of the 

federal government to protect its citizens against terrorism. Among 

other things, HSPD-6 required the Attorney General to establish an 

organization to consolidate the government’s approach to terrorist 

screening and provide for the appropriate and lawful use of terrorist 

information in screening processes. That organization, TSC, 

became operational by December 2003 and is administered by the 

Federal Bureau of Investigation. HSPD-6 also required executive 

departments and agencies to provide to the Terrorist Threat 

Integration Center on an ongoing basis, all appropriate terrorist 
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information2 in their possession, custody, or control as permitted 

by law. 

Executive Order (EO) 13354, issued in August 2004, established 

NCTC under the direction of the Director of Central Intelligence. 

NCTC assumed the tasks of the Terrorist Threat Integration Center. 

In December 2004, Congress codified NCTC in the Intelligence 

Reform and Terrorism Prevention Act of 2004 and placed NCTC 

within the Office of the Director of National Intelligence.3

 NCTC 

serves as the primary organization in the federal government for 

analyzing and integrating all intelligence possessed or acquired by 

the federal government pertaining to terrorism and 

counterterrorism, excepting intelligence pertaining exclusively to 

domestic terrorists and domestic counterterrorism. 

NCTC’s Terrorist Identities Group maintains the federal 

government’s central repository of international terrorist identities 

information in support of the government’s terrorist screening 

system and the intelligence community’s counterterrorism mission. 

The Terrorist Identities Group obtains watchlist nominations from 

various sources and creates or enhances records in its terrorist 

identities database, TIDE. In turn, the Terrorist Identities Group 

exports terrorist identifiers (a subset of the data in TIDE) to TSC 

daily. TSC maintains this information in the federal government’s 

consolidated terrorist watchlist, known as the Terrorist Screening 

Database.4

TSC supports law enforcement agencies and some foreign 

governments that conduct terrorist screening by making the 

Terrorist Screening Database information available to them for 

screening purposes. TSC’s 24-hour call center also supports 

agencies’ terrorist screening processes by determining whether the 

person being screened is an identity match to the Terrorist 

Screening Database. TSC supports terrorism screening at such 

agencies as the State Department (passport and visa applications), 

2

 HSPD-6 defines terrorist information as information about individuals known or appropriately 

suspected to be or have been engaged in conduct constituting, in preparation for, in aid of, or related to 

terrorism. 

3

 P.L. No. 108-458. 

4

 The Federal Bureau of Investigation provides purely domestic counterterrorism information directly to 

the consolidated terrorism watchlist. 
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the Bureau of Customs and Border Protection (border crossings and 

international flights), the Bureau of Citizenship and Immigration 

Services (immigration and citizenship applications), and the 

Transportation Security Administration (domestic flights). TSC has 

also made terrorist identities information accessible through the 

National Crime Information Center system to law enforcement 

officers, including state and local officers, nationwide. 

OFAC Sanction Programs

OFAC acts under presidential and national emergency powers, as 

well as authority granted by specific legislation, to impose controls 

on transactions and freeze foreign assets under the jurisdiction of 

the United States. Many of the sanctions are based on United 

Nations and other international mandates, are multilateral in scope, 

and involve close cooperation with allied governments. 

Under the International Emergency Economic Powers Act,5

 the 

principal statutory authority for OFAC’s terrorism sanctions 

programs, the President, upon determining that there is an unusual 

or extraordinary threat, which has its source in whole or in 

substantial part outside of the United States, to the national 

security, foreign policy, or economy of the United States, may 

issue an EO declaring a national emergency with respect to the 

threat and specifying measures to be taken in response. 

Such an EO will often include provisions blocking the assets of, 

and prohibiting U.S. persons from dealing with, designated 

individuals and entities that have been determined to be 

contributing to the threat addressed by the EO. The EO typically 

delegates authority to Treasury and the State Department to 

designate persons subject to the EO’s prohibitions based on criteria 

set forth in the order. These designated persons are then included 

on the SDN list. Potential targets can be identified for designation 

pursuant to an EO and inclusion on the SDN list by one of the 

following methods: (1) internal investigations by OFAC or the 

Office of Intelligence and Analysis (OIA), (2) interagency processes 

where potential targets are forwarded to OFAC for possible 

5 50 U.S.C. §§1701-1706 
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inclusion on the list, or (3) requests from other countries or from 

international organizations such as the United Nations.

When a potential target is identified, OFAC or OIA analysts perform 

any necessary research to determine if there is sufficient evidence 

to support a finding that the target meets the criteria for 

designation under the applicable EO. An administrative record is 

prepared and includes descriptions of the information as well as the 

underlying evidence showing that the target meets the EO criteria. 

The record then goes through a series of reviews to ensure that it 

is a legal sufficient basis for the target’s designation and that the 

designation is otherwise appropriate. If these requirements are met, 

the designation will be approved and a notice will be published on 

the OFAC Web site and in the Federal Register adding the 

designated person to the SDN list.

There are three specific EOs targeting terrorists and their 

supporters, and persons designated pursuant to those EOs are 

referred to as Specially Designated Terrorists or Specially 

Designated Global Terrorists. Names included in these groups are 

subsets of and are included in the SDN list. The SDN list also 

includes persons designated by the Secretary of State as Foreign 

Terrorist Organizations. 

OFAC-Administered Terrorism Sanction Programs

OFAC administers terrorism sanctions programs under the following 

authorities:

x EO 13224 On September 23, 2001, President Bush declared a 

national emergency pursuant to the International Emergency 

Economic Powers Act and other authorities in EO 13224, 

“Blocking Property and Prohibiting Transactions With Persons 

Who Commit, Threaten to Commit, or Support Terrorism.” EO 

13224 imposes economic sanctions on persons who have been 

determined to have committed or pose a significant risk of 

committing acts of terrorism, as well as on persons determined 

to be owned or controlled by such persons or to provide support 

to such persons or acts of terrorism. It prohibits any transaction 

with, or dealing in property or interests in property of, any 

person (i.e., an individual or entity) designated under its 
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authority, including the donation of funds, goods, or services, 

and it blocks all property in the United States or within the 

possession or control of a U.S. person in which there is an 

interest of any designated person.

x EOs 12947 and 13099 Prior to September 11, 2001, sanctions 

targeted terrorists threatening the Middle East peace process, 

who are referred to as Specially Designated Terrorists. In 

January 1995, President Clinton declared a national emergency 

pursuant to the International Emergency Economic Powers Act 

and other authorities in EO 12947, “Prohibiting Transactions 

With Terrorists Who Threaten to Disrupt the Middle East Peace 

Process.” EO 12947 prohibits dealing in property or interests in 

property of any organization or individual designated under its 

authority and it blocks all property in the United States or within 

the possession or control of a U.S. person in which there is an 

interest of any designated person. Twelve terrorist organizations 

were named in the Annex to EO 12947. In August 1998, 

President Clinton issued EO 13099, which amended EO 12947 

by adding three individuals including Osama bin Ladin and one 

organization, Al-Qaida, to the Annex of EO 12947. 

x Antiterrorism Act The Antiterrorism and Effective Death Penalty 

Act of 1996 authorizes the Secretary of State, in consultation 

with the Secretary of the Treasury and the Attorney General, to 

designate organizations meeting criteria as Foreign Terrorist 

Organizations.6

 The act also makes it a crime for persons within 

the U.S. or subject to U.S. jurisdiction to knowingly provide 

material support or resources to a designated foreign terrorist 

organization. Additionally, except as authorized by Treasury, 

U.S. financial institutions in possession or control of funds in 

which a foreign terrorist organization or its agent has an interest 

are required to block such funds and report on the funds to 

Treasury.

According to OFAC, as of December 31, 2006, a total of 466 

individuals and entities had been identified or designated and 

remain listed as Specially Designated Global Terrorists for having 

met one or more of the criteria for designation in EO 13224. 

Included in this total are 41 organizations or groups designated as 

6 P.L. No. 104-132 
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foreign terrorist organizations by the Department of State under the 

Antiterrorism Act.7

Terrorists, terrorist groups, and terrorist support networks that are 

designated as a foreign terrorist organization, Specially Designated 

Terrorist, or a Specially Designated Global Terrorist are placed on 

OFAC's public list and generically referred to as SDNs. U.S. 

persons are prohibited from conducting unauthorized transactions 

or having other dealings with or providing services to the 

designated individuals or entities. Any property or property interest 

of a designated person that comes within the control of a U.S. 

person is blocked and must be reported to OFAC. 

Treasury’s Participation in the Terrorism 

Watchlist Nomination Process 

We determined that Treasury does not have a specific process to 

nominate individuals to the consolidated terrorist watchlist. 

However, under sanctions programs administered by OFAC, when 

individuals are added to the SDN list, this information is 

communicated by electronic alert to NCTC to be checked against 

TIDE.

According to NCTC personnel, NCTC’s Terrorist Identities Group 

did an initial processing of the SDN list during the last quarter of 

2004 and then established a mechanism to receive periodic SDN 

list updates via e-mail directly from Treasury. Once notified of an 

addition to the SDN list, NCTC checks to see if the individual is

7

 Source: OFAC report entitled TERRORIST ASSETS REPORT Calendar Year 2006: Fifteenth Annual 

Report to Congress on Assets in the United States of Terrorist Countries and International Terrorism 

Program.
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already included in TIDE.8 If the individual is not included in TIDE, 

NCTC analysts determine whether the individual should be added. 

NCTC then exports the identifier information to TSC for use in the 

consolidated watchlist.9

 When OFAC deletes an SDN, NCTC 

deletes the OFAC source from the TIDE record. 

As part of our audit, we sought to determine whether Treasury 

should have a process other than the SDN list to provide terrorist 

information to NCTC for watch list purposes. We interviewed the 

Treasury Under Secretary for Terrorism and Financial Intelligence, 

the Assistant Secretary for Intelligence and Analysis, the Director 

of OFAC, the Director of the Financial Crimes Enforcement 

Network (FinCEN),10 and attorneys with the Office of General 

Counsel about their perspective on this subject. All the officials 

stated that Treasury did not need a separate nomination process. 

Furthermore, we did not find any indicators to suggest otherwise. 

That being said, as the federal government’s efforts to combat 

terrorism evolve, we believe that it would be prudent for Treasury 

to regularly reassess whether additional processes or measures are 

necessary to provide terrorism information to NCTC apart from 

SDN designations for purposes of the consolidated terrorist 

watchlist.

* * * * * * 

I would like to extend my appreciation for the cooperation and 

courtesies extended to my staff during the review. If you have any 

8

 According to NCTC, the specific categories of SDNs that are processed are: Specially Designated 

Terrorist, Specially Designated Global Terrorist, and Specially Designated Narcotics Trafficking Kingpin. 

Also processed are SDNs designated pursuant to EO 13315, “Blocking Property of the Former Iraqi 

Regime,” issued in August 2003. 

9

 According to NCTC, when the SDN is a new name, the Terrorist Identities Group only selects options 

to export the identifier for purposes of screening visas and at ports of entry when exporting the data to 

TSC. As additional information about the individuals is received from other agencies, the TIDE record is 

updated and additional screening systems are selected and exported to TSC as appropriate. 10 Established in 1990 as an office and later designated as a Treasury bureau by the USA PATRIOT Act 

of 2001, FinCEN’s mission is to support law enforcement efforts and foster interagency and global 

cooperation against domestic and international financial crimes, and to provide U.S. policymakers with 

strategic analyses of domestic and worldwide trends and patterns. FinCEN is the administrator of the 

Bank Secrecy Act. Among other things, this act requires financial institutions to file reports with FinCEN 

on currency transactions exceeding prescribed thresholds and on suspicious financial activities. 
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questions, please contact me at (202) 927-5400, or Robert A. 

Taylor, Deputy Assistant Inspector General for Performance Audit, 

at (202) 927-5792. The major contributors to this report are 

Thomas Byrnes, Audit Director (retired); Cynthia Milanez, Acting 

Audit Director; and Leslye Burgess, Audit Manager. 

Marla A. Freedman 

Assistant Inspector General for Audit 
Appendix 1 

Objective, Scope, and Methodology 

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In December 2006, the Intelligence Community Inspectors General 

Forum agreed to coordinate a review of the processes for 

nominating individuals to the consolidated terrorism watchlist that 

is maintained by the Terrorist Screening Center pursuant to 

Homeland Security Presidential Directive-6.11 The objectives of the 

review are to ascertain, both within agencies and across the 

intelligence community, whether: 

1. processes and standards for nominating individuals to the 

consolidated watchlist are consistent (both within agencies and 

across the intelligence community), articulated in policy or other 

guidance, and understood by nominators; 

2. quality control processes are in place to help ensure 

nominations are accurate, understandable, updated with new 

information, and include all individuals who should be placed on 

the watchlist based on information available to the agencies; 

3. responsibility for watchlist nominations is clear, effective, and 

understood;

4. nominators receive adequate training, guidance, or information 

on the nomination process; 

5. agencies maintain records of their nominations to the National 

Counterterrorism Center (and to the Terrorist Screening Center, 

in the case of the Federal Bureau of investigation), including the 

source of the nomination and what information was provided; 

and

6. organizations with terrorism, counterterrorism, and domestic 

counterterrorism information in their possession, custody, or 

control appropriately participate in the nomination process. 

To accomplish these objectives as they applied to the Department 

of the Treasury, we reviewed applicable laws, regulations, and 

Executive Orders and obtained an understanding of the government 

wide process for placement of individuals and entities on the 

Terrorist Screening Database maintained by the Terrorist Screening 

Center. We also obtained an understanding of Treasury’s (Office of 

Foreign Assets Control) process for adding individuals to the 

11 Participating in the review were the Offices of Inspector General (OIG) of the Office of the Director of 

National Intelligence, Central Intelligence Agency, Department of Justice, Defense Intelligence Agency, 

National Security Agency, Department of Homeland Security, Department of State, National GeospatialIntelligence Agency, Department of the Treasury, and Department of Energy. The Office of the Director 

of National Intelligence OIG coordinated the review. 
Appendix 1 

Objective, Scope, and Methodology 

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Specially Designated Nationals list for purposes of blocking their 

property and prohibiting transactions or dealings with the 

designated individuals. We interviewed Treasury officials and staff 

including the Under Secretary for Terrorism and Financial 

Intelligence, Assistant Secretary for Intelligence and Analysis, 

Director of the Office of Foreign Assets Control, and Director of the 

Financial Crimes Enforcement Network. We also interviewed staff 

with the National Counterterrorism Center. We did not, as part of 

work, test controls over the addition of individuals to the 

Specifically Designated Nationals list or the provision of terrorism 

information by Treasury to the National Counterterrorism Center. 

We performed our fieldwork from March through August 2007. 

Our audit was conducted in accordance with generally accepted 

government auditing standards. 
Appendix 2 

Management Response 

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Appendix 3 

Report Distribution 

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Department of the Treasury

Under Secretary for Terrorism and Financial Intelligence 

Assistant Secretary for Intelligence and Analysis 

Director, Office of Foreign Assets Control 

Director, Financial Crimes Enforcement Network 

Office of Accounting and Internal Control 

Office of Strategic Planning and Performance Management 

Office of the Director of National Intelligence

Inspector General 

Office of Management and Budget

OIG Budget Examiner