Terrorist Financing: Agencies Can Improve Efforts to Deliver Counter-Terrorism-Financing Training and Technical Assistance Abroad
Published: 2006-04-06T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Disrupting terrorists' financing is necessary to impede their ability to organize, recruit, train, and equip adherents. U.S. efforts to strengthen domestic and global security include, among others, the provision of training and technical assistance in countering terrorist financing abroad. An interagency Terrorist Financing Working Group (TFWG), chaired by the U.S. Department of State (State), coordinates the delivery of this training and technical assistance to "priority" countries--those considered most vulnerable to terrorist financing schemes--as well as to other vulnerable countries. In addition, the Department of the Treasury (Treasury) Office of Foreign Assets Control (OFAC) leads U.S. efforts to block access to designated terrorists' assets that are subject to U.S. jurisdiction. In response to multiple congressional requesters, GAO examined U.S. efforts to combat terrorist financing abroad, publishing the report in October 2005. In this testimony, GAO discusses the report's findings about challenges related to (1) TFWG's coordination of the counter-terrorism-financing training and technical assistance abroad and (2) Treasury's measurement of results and provision of information needed to assess OFAC's efforts to block terrorist assets.
section_title: What GAO Found
paragraphs: Under State's leadership, TFWG has coordinated the interagency delivery of counter-terrorism-financing training and technical assistance--for example, providing training and placing resident advisors--in more than 20 priority countries as well as other vulnerable countries. However, TFWG's effort has been hampered by the absence of a strategic and integrated plan. GAO found that the effort lacks three elements that are critical to strategic planning for operations within and across agencies: (1) Key stakeholder acceptance of roles and practices; (2) strategic alignment of resources with countries' needs and risks; and (3) a process to measurement the effort's results For example, two key TFWG stakeholders, State and Treasury, disagree about the extent of State's leadership as chair of TFWG. GAO recommended that State and Treasury, with other government agencies, implement an integrated strategic plan that addresses these challenges and sign a Memorandum of Agreement to improve coordination of counter-terrorism-financing training and technical assistance abroad. State and Treasury responded that they are taking several steps to improve the interagency process, but they did not address all of GAO's recommendations. OFAC undertakes a number of efforts related to the blocking of terrorists' assets. For example, OFAC compiles evidence as a basis for designating terrorist groups and individuals. However, GAO found limitations regarding Treasury's measurement of results and provision of information about FAC's efforts. Inadequate measures. At the time of GAO's review, Treasury lacked adequate measures to assess the results of OFAC's efforts. OFAC was in the process of developing new measures, which it recently completed. Although GAO has not reviewed them, these measures may enable officials overseeing OFAC to ascertain the strengths and weaknesses of its efforts as well as hold OFAC managers accountable. GAO recommended that, in addition, Treasury develop an OFAC-specific strategic plan that describes, among other things, how its performance measures relate to general program goals and objectives. As of March 30, Treasury had not yet finalized the strategic plan. Insufficient information. Treasury's yearly report to Congress on terrorist assets blocked does not provide sufficient information for Congress to assess OFAC's progress. For instance, the report shows the total dollar value of blocked terrorist assets held under U.S. jurisdictions but does not show changes from amounts of assets blocked in previous years. GAO recommended that Treasury provide information on such changes, along with other key performance metrics, in its annual Terrorist Assets Report. Treasury responded that it would discuss with Congress recrafting the report to address congressional interests.

section_title: Letter
paragraphs: Thank you for inviting me here today to discuss GAO’s findings on certain  U.S. government counter-terrorism-financing efforts as well as various  recommendations we have made for improving the management and  oversight of these efforts. We appreciate the opportunity to contribute to  the record that this panel has created on the subject. Madame  Chairwoman, we also recognize and appreciate your consistent attention  to issues related to the financing of terrorism. For example, you  cofounded the bipartisan Congressional Anti-Terrorist Financing Task  Force in 2004 to bolster efforts to shut down terrorist funding networks.  You also coauthored recent legislation to create a certification regime, led  by the Department of the Treasury, that would annually report to Congress  the efforts of other countries to combat terror funding and would impose  sanctions on countries that fail to perform up to standard. Thank you for  your leadership in this area.
As you have stated on prior occasions, Madame Chairwoman, disrupting  terrorist financing can raise terrorists’ costs and risks of gathering and  moving assets and is necessary to impede their ability to carry out  significant operations. The United Nations (UN) reports that more than  ever before, security threats are interrelated; a threat to one country can  be a threat to all, and no country by its efforts alone can make itself  invulnerable. It is in every country’s interest, accordingly, to cooperate  both internally and with other countries in addressing threat priorities.
In GAO’s October 2005 report on U.S. 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 others, 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 establish effective  counter-terrorism-financing regimes. To coordinate the delivery of this  training and assistance to about two dozen “priority countries”—those  considered most vulnerable—as well as to other vulnerable countries, the  National Security Council (NSC) established the interagency Terrorist  Finance Working Group (TFWG), whose members include, among others,  the Department of State (State), which chairs the group; the Treasury; and  the Department of Justice (Justice).
In addition, the United States has participated in global efforts to publicly  designate individuals and groups as terrorists and to block access to their  assets. U.S. officials have worked with members of the UN to develop and  support UN Security Council resolutions to freeze the assets of designated  individuals or groups that conduct or facilitate terrorist acts. The United  States successfully participated in bilateral efforts with Saudi Arabia and  jointly designated more than a dozen Saudi-related entities and multiple  individuals as terrorists or terrorist supporters. Officials of the Department  of the Treasury (Treasury) have stated that public designations discourage  further financial support and encourage other governments to more  effectively monitor the activities of the designated individuals or groups.  Treasury’s Office of Foreign Assets Control (OFAC) serves as the lead U.S.  agency for blocking the assets of terrorists designated by the United States  unilaterally or bilaterally or as a result of UN Security Council Resolutions.
As our October 2005 report showed, much has been accomplished.  However, our report also noted various challenges that could negatively  affect the results of some of these efforts as well as U.S. agencies’—and  Congress’s—accountability for, and oversight of, these efforts. Today, as  requested, I will discuss our report’s findings and recommendations  regarding challenges related to    TFWG’s efforts to coordinate interagency delivery of counter- terrorism-financing training and technical assistance abroad and    Treasury’s use of performance measures and provision of information  necessary to assess OFAC’s efforts to block terrorist assets.
In discussing these challenges, I will address the need for more strategic  and integrated planning that focuses on achieving results in connection  with U.S. counter-terrorism-financing activities rather than on the  activities themselves. Such planning should include a risk management  element—a systematic process for assessing threats and taking  appropriate steps to deal with them.
GAO’s mission is to help Congress improve the performance and ensure  the accountability of the federal government for the benefit of the  American people. We have been actively involved in improving the federal  government’s performance in the critically important area of homeland  security, including providing numerous products related to counter– terrorism financing. We have also been privileged to actively support  Congress and the 9/11 Commission by providing details about key  personnel, testifying before Congress and the 9/11 Commission, and  sharing our research, products, and experiences. In addition, GAO is an  active member of the International Organization of Supreme Audit  Institutions (INTOSAI), a professional organization of national supreme  audit institutions that provides its members opportunities to share  knowledge and experiences about the challenges in today’s global  environment, to ensure that government auditing continuously progresses  with new developments. GAO also serves on an INTOSAI task force on  international anti–money laundering that aims to design and promote  policies, strategies, and actions to enable INTOSAI members to strengthen  their anti–money laundering capabilities.
In preparing our October 2005 report, we examined documentation and  interviewed officials from State, Treasury, Justice, and the Departments of  Homeland Security and Defense as well as from the intelligence  community. We also assessed information from the UN, Financial Action  Task Force (FATF) on Money Laundering, World Bank, and International  Monetary Fund (IMF). We conducted field work in Pakistan, Indonesia,  and Paraguay, where we assessed information from government, law  enforcement, nongovernmental organizations, regional organizations, and  donor government officials as well as from U.S. embassy officials. We  performed our work for the report from April 2004 to July 2005. In  addition, for this testimony, we obtained information in March 2006 from  State and Treasury on their actions to implement our recommendations.  All work was conducted in accordance with generally accepted  government auditing standards.
subsections: section_title: Background
paragraphs: The financing of terrorism is the financial support, in any form, of  terrorism or of those who encourage, plan, or engage in it. Terrorist  financing may derive from licit activities, such as fundraising by charities,  or from illicit activities, such as selling counterfeit goods, contraband  cigarettes, and illegal drugs. Disguising the source of terrorist financing,  whether licit or illicit, is important to terrorist financiers: if the source can  be concealed, it remains available for future terrorist financing activities.  Some international experts on money laundering find that there is little  difference in the methods used by criminal organizations or terrorist  groups to conceal their proceeds by moving them through national and  international financial systems.
FATF, an intergovernmental body, sets internationally recognized  standards for developing anti-money laundering and counter-terrorism- financing regimes and assesses countries’ abilities to meet these  standards. To strengthen anti-money-laundering and counter-terrorism- financing worldwide, international entities such as the UN, FATF, World  Bank, and IMF, as well as the U.S. government, agree that each country  should implement practices and adopt laws that are consistent with  international standards. The U.S. government has worked with  international donors and organizations—for example, the United Kingdom,  Australia, Japan, the European Union, FATF, UN, the Organization of  American States, the Asian Development Bank, IMF, and the World  Bank—to build counter-terrorism-financing regimes in vulnerable  countries.
U.S. offices and bureaus—primarily within the Departments of State, the  Treasury, Justice, and Homeland Security—and the federal financial  regulators provide training and technical assistance, chiefly funded by  State and Treasury, to countries deemed vulnerable to terrorist financing.  One of TFWG’s functions is to prioritize the delivery of such assistance to  countries that it deems most vulnerable. To identify priority countries,  TFWG considers intelligence community analysis of countries’  vulnerabilities to terrorist financing, importance to U.S. security, and  capacity to absorb U.S. assistance. NSC guidance for TFWG states that  delivery of assistance to other vulnerable countries—that is, those that  have not been designated as priority—may proceed so long as it is  possible without adversely affecting the delivery of assistance to priority  countries. Other vulnerable countries receive counter-terrorism-financing  training and technical assistance through other U.S. government programs  as well as through TFWG. (See app. 1 for TFWG membership and  process.)
section_title: U.S. Government Lacks an Integrated Strategy to Coordinate the Delivery of Training and Technical Assistance
paragraphs: Although the U.S. government provides a range of training and technical  assistance to countries it deems vulnerable to terrorist financing, it lacks  an integrated strategy to coordinate the delivery of this assistance.  Specifically, the effort lacks key stakeholder acceptance of roles and  practices, a strategic alignment of resources with needs, and a process to  measure results—three elements that previous GAO work has identified as  critical to effective strategic planning within and across agencies. GAO  recommended that the Secretaries of State and the Treasury implement an  integrated strategic plan and a Memorandum of Agreement for the delivery  of training and technical assistance. According to March 2006  correspondence from State and Treasury, the departments have taken  several steps to enhance interagency coordination.
subsections: section_title: U.S. Agencies Provide Wide Range of Training and Technical Assistance
paragraphs: The training and technical assistance that U.S. agencies provide to  vulnerable countries are intended to help the countries develop the five  elements that, according to State, are needed for an effective anti-money- laundering and counter-terrorism-financing regime: a legal framework, a  financial regulatory system, an FIU, law enforcement capabilities, and  judicial and prosecutorial processes. The training and assistance are  offered through courses, presentations at international conferences, the  use of overseas regional U.S. law enforcement academies or U.S.-based  schools, and the placement of intermittent or long-term resident advisors.  According to State officials, at the time of our review, TFWG had  coordinated the delivery of training and technical assistance in at least one  of these five elements to more than 20 priority countries.
section_title: Key Stakeholders Disagree about Roles and Procedures
paragraphs: U.S. agencies involved in providing counter-terrorism-financing training  and technical assistance disagree both about agencies’ roles relating to the  coordination of the training and assistance efforts and about training and  assistance procedures and practices. Consequently, the overall effort lacks  effective leadership, resulting in less than optimal delivery of training and  technical assistance to vulnerable countries.
State and Treasury disagree regarding State’s role in coordinating the  training and technical assistance. According to State, its Office of the  Coordinator for Counterterrorism is charged with directing, managing, and  coordinating all U.S. agencies’ efforts to develop and provide counter- terrorism financing programs, including, but not limited to, those in  priority countries. Treasury, a key stakeholder, asserts that there are  numerous other efforts outside States’ purview and that State’s role is  limited to coordinating, as chair of TFWG, the provision of such assistance  in priority countries. In addition, senior Treasury officials told us that  they strongly disagree with the degree of control State asserts over TFWG  decisions and said that State creates obstacles rather than coordinating  efforts. Officials from Justice, which provides training and technical  assistance and receives funding from State, told us that they respect  State’s role as the TFWG chair and coordinator and said that all counter- terrorism-financing training and technical assistance efforts should be  brought under the TFWG decision-making process. While supportive of  State’s position, Justice’s statement demonstrates that State’s role lacks  clear definition and recognition in practice.
In addition, State and Treasury officials disagree about procedures and  practices for delivering the training and technical assistance. State cited  NSC guidance and an unclassified State document focusing on TFWG as  providing procedures and practices for delivering training and technical  assistance to all countries. Treasury officials told us that the procedures  and practices defined by NSC were pertinent only to the TFWG priority  countries and that TFWG has no formal mandate or process to provide  technical assistance to non-priority countries. Moreover, Justice officials  indicated that differences in the procedures and practices for delivering  training and technical assistance to priority countries versus those for  other vulnerable countries had created problems.
State and Treasury officials cited numerous examples of their  disagreements on procedures and practices. For example:    According to Treasury officials, funding provided by Treasury’s Office  of Technical Assistance (OTA) should primarily support intermittent  and long-term resident advisors, who are U.S. contractors. According  to State officials, OTA should instead supplement State’s funding for  counter-terrorism-financing training and technical assistance, which  primarily funds current employees of other U.S. agencies.
According to OTA officials, their contractors provide assistance in  drafting counter-terrorism-financing and anti-money-laundering laws in  non-priority countries and OTA provides the drafts to Justice and other  U.S. agencies for review and comment. State officials cited NSC  guidance that current Justice employees should be primarily  responsible for working with foreign countries to assist in drafting  counter-terrorism-financing and anti-money-laundering laws and  voiced strong resistance to use of contractors. Justice cited two  examples in which contractors’ work resulted in laws that did not meet  FATF standards. According to OTA officials, the host country itself is  ultimately responsible for final passage of a law that meets  international standards.
State officials said that OTA’s use of confidentiality agreements  between contractors and the foreign officials they advise had impeded  U.S. interagency coordination in one country and that the continued  practice could present future challenges. However, Treasury officials  said that the incident was an isolated case involving a contract problem  and that procedural steps have been taken to ensure the problem is not  repeated.
According to TFWG procedures for priority countries, if an assessment  trip is determined to be necessary, State is to lead and determine the  composition of the teams and set the travel dates. However, this  procedure becomes complicated when a vulnerable country is  designated a priority country. For example, in November 2004,  Treasury conducted an OTA financial assessment in a vulnerable  country and subsequently reached agreement with the country’s central  bank minister to install a resident advisor to set up an FIU. However,  after TFWG had changed the country’s status to priority, State officials,  in May 2005, denied clearance for Treasury officials to visit the country  to arrange for the placement of a resident advisor; according to State  TFWG officials, State delayed the officials’ visit until a TFWG  assessment could be completed. At our review’s conclusion in July  2005, Treasury’s work had been delayed by 2.5 months. However, the  U.S. embassy requested that Treasury proceed with its visit and TFWG  delay its assessment.
section_title: U.S. Effort Does Not Strategically Align Resources with Related Needs and Risks
paragraphs: The U.S. government, including TFWG, has not strategically aligned its  resources with its mission to deliver counter-terrorism-financing training  and technical assistance. The U.S. government has no clear record of the  budgetary resources available for counter-terrorism-financing assistance.  Further, the government has not systematically assessed the suitability  and availability of U.S. human capital resources or the potential  availability of international resources. As a result, decision makers do not  know the full range of resources available to meet the needs and address  the related risks they have identified in priority countries and to determine  the best match of remaining resources to other vulnerable countries’  needs.
subsections: section_title: U.S. Government Lacks Clear Record of Budget Resources for Training and Assistance
paragraphs: State and Treasury do not have clear records of the funds that they  allocate for counter-terrorism-financing training and technical assistance.  Each agency receives separate appropriations that it can use to fund  training and technical assistance provided by themselves, other agencies,  or contractors. State primarily transmits its training and technical  assistance funds to other agencies, while Treasury primarily employs  short- and long-term advisors through contracts. However, because  funding for counter-terrorism-financing training and assistance is mingled  with funding given to the agencies for anti-money-laundering training and  assistance and other programs, it is difficult for U.S. government decision- makers to determine the actual amount allocated to these efforts.
State officials told us that funding for State counter-terrorism-financing  training and technical assistance programs derives from two primary  sources:    Non-Proliferation, Anti-Terrorism, Demining, and Related  Programs. State’s Office of the Coordinator for Counterterrorism uses  funding from this account to provide counter-terrorism financing  training and technical assistance to TFWG countries. Our analysis of  State records showed that budget authority for the account included  $17.5 million for counter-terrorism-financing training and technical  assistance for fiscal years 2002-2005.
International Narcotics Control and Law Enforcement. State’s  Bureau of International Narcotics Control and Law Enforcement uses  funding from this account to provide counter-terrorism-financing and  anti-money-laundering training and technical assistance to a wide range  of countries, including seven priority countries, during fiscal years  2002-2005, as well to provide general support to multilateral and  regional programs. Our analysis of State records shows that budget  authority for this account included about $9.3 million for anti-money- laundering assistance, counter-terrorism-financing training and  assistance, and related multilateral and regional activities for fiscal  years 2002-2005.
State officials also told us that other State bureaus and offices provide  counter-terrorism-financing and anti-money-laundering training and  technical assistance (e.g., single-course offerings or “small-dollar”  programs) as part of regional, country-specific, or broad-based programs.
Treasury officials told us that OTA’s counter-terrorism-financing technical  assistance is funded through its Financial Enforcement program. Our  analysis of Treasury records showed that OTA received budget authority  totaling about $30.3 million for all financial enforcement programs for  fiscal years 2002-2005. However, because OTA funding for counter- terrorism-financing training and technical assistance is embedded with  funding for anti-money-laundering assistance, the exact amount allocated  to countering terrorist financing cannot be determined. One OTA official  told us that in any given year, as much as two-thirds of these program  funds may be spent on counter-terrorism-financing or anti-money- laundering assistance.
section_title: U.S. Government Has Not Assessed Human Capital Resources for Training and Assistance
paragraphs: The U.S. government, including TFWG, has not systematically assessed the  availability and suitability of the human capital resources used by the  agencies for counter-terrorism-financing training and technical assistance.  As a result, agency decision makers lack reliable information to use in  determining the optimal balance of government employees and  contractors to meet the needs and relative risks of vulnerable countries.
According to State and Treasury officials, the effectiveness of contractors  and current employees in delivering the various types of training and  technical assistance has not been systematically evaluated. Decisions at  TFWG appear to be based on anecdotal information rather than  transparent and systematic assessments of resources. In addition,  according to the State Performance and Accountability Report for fiscal  year 2004, a shortage of anti-money-laundering experts continues to  hamper efforts to meet the needs of nations that request assistance,  including priority countries. According to State officials, U.S. technical  experts are especially overextended because of their frequent need to  divide their time between assessment, training, and investigative missions.  Moreover, officials from State’s Office of the Coordinator for  Counterterrorism said that a lack of available staff had slowed the  disbursement of funding at TFWG’s inception.
Although Treasury said that there may be a shortage of anti-money  laundering experts in the U.S. government who are available to provide  technical assistance in foreign countries, Treasury officials told us that  many such experts, recently retired from the same U.S. government  agencies, are available as contractors. A senior OTA official said that OTA  has actively sought to provide programs in more priority countries but that  State, as chair of TFWG, has not supported OTA’s efforts. Specifically, our  analysis showed that OTA obligated about $1.1 million of its financial  enforcement program funding in priority countries, in part to place  resident advisors, in fiscal years 2002-2005. State officials said that they  welcomed more OTA participation in priority countries as a component of  applicable resources; however, they questioned whether OTA consistently  provides high-quality assistance. At the same time, State officials  repeatedly stated that they needed OTA funding, not OTA-contracted staff,  to meet current and future needs.
section_title: U.S. Government Has Not Assessed Potential International Resources
paragraphs: The U.S. government, including TFWG, has not systematically  consolidated and synthesized available information on other countries’  and international entities’ counter-terrorism-financing training and  technical assistance activities or integrated this information into a  decision-making process. Further, TFWG has not developed a strategy for  encouraging allies and international entities to contribute resources to  help vulnerable countries build counter-terrorism-financing capabilities  and coordinate training and technical assistance activities—one of  TFWG’s stated goals. State and Treasury officials told us that, instead, they  take an ad hoc approach to working with allies and international entities  on coordinating resources for training and technical assistance. These  officials also noted that at TFWG meetings, interagency issues are given  higher priority than international resource sharing. Without a systematic  way to assess information about international activities and to consolidate,  synthesize, and integrate this information into the U.S. interagency  decision-making process, the U.S. government cannot easily capitalize on  opportunities for resource sharing with allies and international entities.
section_title: U.S. Government Lacks System to Measure Performance and Incorporate Results
paragraphs: The U.S. government, including TFWG, has not established a system to  measure the results of its training and technical assistance efforts and to  incorporate this information into its integrated planning efforts. According  to an official from Justice’s Office of Overseas Prosecutorial Development,  Assistance and Training (OPDAT), OPDAT led an interagency effort to  develop a system for measuring the results of training and technical  assistance provided through TFWG and related assistance results for  priority countries. In November 2004, OPDAT assigned an intern to set up  a database to track such results. Because the database was not accessible  to all TFWG members, OPDAT planned to serve as the focal point for  entering the data collected by TFWG members.
OPDAT asked agencies to provide statistics on programs, funding, and  other information, including responding to questions concerning results  that corresponded to the five elements of an effective counter-terrorism- financing regime. OPDAT also planned to track key recommendations for  training and technical assistance and progress made in priority countries  as provided in FATF and TFWG assessments. However, as of July 2005,  OPDAT was still waiting to hire an intern to complete the project. OPDAT  and State officials confirmed that the system had not yet been approved or  implemented by TFWG.
section_title: GAO Recommended Actions to Improve Interagency Coordination, and Agencies Are Taking Steps
paragraphs: To ensure that U.S. government interagency efforts to provide counter- terrorism-financing training and technical assistance are integrated,  efficient, and effective, ‘particularly with respect to priority countries, we  recommended in our report that the Secretary of State and the Secretary  of the Treasury, in consultation with NSC and relevant government  agencies, develop and implement an integrated strategic plan for the U.S.  government that    designates leadership and provides for key stakeholder involvement;  includes a systematic and transparent assessment of the allocation of  U.S. government resources;   delineates a method for aligning the resources of relevant U.S. agencies  to support the mission based on key needs and related risks; and   provides processes and resources for measuring and monitoring  results, identifying gaps, and revising strategies accordingly.
We also recommended that the Secretaries of State and the Treasury enter  into a Memorandum of Agreement concerning counter-terrorism-financing  and anti-money-laundering training and technical assistance to ensure a  seamless campaign in providing such assistance programs to vulnerable  countries. The agreement should specify, with regard to U.S. counter- terrorism-financing training and technical assistance,  the roles of each department, bureau, and office;   methods to resolve disputes concerning OTA’s use of confidentiality  agreements in its contracts; and   coordination of funding and other resources.
In March 2006 letters to relevant congressional oversight and  appropriation committees, State and Treasury describe general steps that  they are taking to improve the interagency process in delivering counter- terrorism-financing training and technical assistance abroad. The agencies  report engaging with each other at all levels to ensure increased  coordination. In addition, they report that, in concert with the NSC and the  Departments of Homeland Security and Justice, they are reviewing TFWG  and its procedures with a view to enhancing its effectiveness. Also, State  reports that it has begun chairing TFWG at the Deputy Assistant Secretary  level to further enhance coordination. State also says that it is reconvening  a senior-level interagency Training and Assistance Subgroup that is  responsible for coordinating all U.S. government assistance on  counterterrorism matters, including counter-terrorism-financing training  and technical assistance.
Although these steps could provide a basis for improved stakeholder  acceptance of roles and procedures, State’s and Treasury’s letters lack  sufficient detail to affirm that the preparation of an integrated and risk- based strategic plan is under way. The letters also do not address efforts to  strategically align resources with needs or to measure performance.  Moreover, the letters do not address our recommendation regarding the  Memorandum of Agreement or offer alternative means of ensuring the  duration of any improvements in coordination.
section_title: Treasury Needs Meaningful Performance Measures and Information to Show Results and Progress of Terrorist Asset Blocking
paragraphs: Treasury’s OFAC undertakes a number of activities as part of its efforts to  block terrorist assets. However, although Treasury uses some limited  performance measures related to OFAC’s efforts, Treasury officials  acknowledged that the measures do not assess results or show how  OFAC’s efforts contribute to Treasury’s terrorist financing-related goals. In  addition, OFAC officials acknowledged that Treasury’s annual Terrorist  Assets Report to Congress on the nature and extent of blocked terrorists’  U.S. assets does not provide the information needed to assess progress  achieved. In our report, we recommended that the Secretary of the  Treasury finalize the development of the performance measures as well as  an OFAC-specific strategic plan and provide more complete information in  its annual reports to Congress on terrorist assets blocked. As of March  2006, OFAC had developed new performance measures and said it would  work with Congress to provide the information needed regarding OFAC’s  terrorist asset blocking efforts.
subsections: section_title: OFAC Administers Terrorism-Related Sanctions
paragraphs: OFAC administers and enforces economic sanctions, based on U.S. foreign  policy and national security goals, against designated individuals or groups  that conduct or facilitate terrorist activity. Once individuals or groups are  designated by Treasury or State, OFAC serves as the lead agency  responsible for prohibiting transactions and blocking assets subject to U.S.  jurisdiction. As part of its efforts, OFAC    coordinates and works with other U.S. agencies to identify and  investigate prospective terrorist designations;    compiles the administrative record or evidentiary material that will  serve as the factual basis underlying a decision by OFAC to designate  individuals or groups; and   engages foreign counterparts to gather information, apply pressure, or  request or offer assistance in support of terrorist designation and asset  blocking activities.
OFAC may use the threat of designation to gain cooperation, forcing key  sources of financial support to choose between public exposure of their  support of terrorist activity of their good reputation. OFAC also works  with the regulatory community and industry groups to assure that assets  are expeditiously blocked and the ability to carry out transactions through  U.S. parties is terminated.
section_title: Treasury’s Performance Measures Do Not Assess Results of Terrorist Asset Blocking
paragraphs: At the time of our October 2005 review, Treasury lacked effective  performance measures to assess the results of OFAC’s terrorist asset  blocking efforts or show how these efforts contribute to the department’s  goals of disrupting and dismantling terrorist financial infrastructures and  executing the nation’s financial sanctions policies. Treasury’s 2004  Performance and Accountability Report contained limited performance  measures related to asset blocking, including terrorist designations,  including     an increase in the number of terrorist finance designations in which  other countries join the United States,    an increase in the number of drug trafficking and terrorist-related  financial sanctions targets identified and made public, and the estimated number of sanctioned entities no longer receiving funds  from the United States.
OFAC officials told us that they recognized the inadequacy of these  measures to assess progress in blocking terrorist assets. According to the  OFAC officials:    The measures in the 2004 Performance and Accountability Report are  not specific to terrorist financing. Two of the three measures do not  separate data on terrorists from data on other entities such as drug  traffickers, hostile foreign governments, corrupt regimes, and foreign  drug cartels, although OFAC officials acknowledged that they could  have reported the data separately.
Progress on asset blocking cannot be measured simply by totaling an  amount of blocked assets at the end of the year, because the amounts  may vary over the year as assets are blocked and unblocked.
As of October 2005, Treasury had not developed measures to track  activities and results related to asset blocking. For example, Treasury’s  underlying research to identify terrorist entities and their support  systems is used by other U.S. agencies for activities such as law  enforcement investigations. However, Treasury lacked measures to  track other agencies’ use of this research.
Treasury officials also noted that measuring the effectiveness of these  efforts in terms of their deterrent value is problematic, in part because the  direct impact on unlawful activity is unknown and because precise metrics  for illegal and clandestine activities are hard to develop. According to  Treasury officials, measuring these efforts’ effectiveness can also be  difficult because many of them involve multiple U.S. agencies and foreign  governments and are highly sensitive. However, contrary to a U.S.  legislative directive to agencies to ascertain and explain the infeasibility or  impracticableness of a performance goal for a program activity, Treasury’s  annual report does not address the deterrent value of designations or the  difficulties in measuring their effectiveness.
In October 2005, in commenting on a draft of our draft report, Treasury  officials told us that they were in the process of developing better  quantitative and qualitative measures for assessing the results of OFAC’s  terrorist asset blocking efforts. In addition, Treasury officials said that  they were developing a strategic plan to guide OFAC’s efforts. The  officials stated that they expected OFAC’s new performance measures to  be completed by December 1, 2005, and its new strategic plan to be  completed by January 1, 2006. We recommended in our report that the  Secretary of the Treasury complete the efforts to develop meaningful  performance measures and an OFAC-specific strategic plan to ensure that  policy makers and program managers are able to examine the results of  U.S. efforts to block terrorists’ assets. According to discussions with  OFAC officials in March 2006, OFAC has developed new measures to  assess its role in administering and enforcing economic sanctions against  terrorists; however, we have not assessed the adequacy of these new  measures. According to OFAC officials, as of March 30, 2006, the strategic  plan had not yet been finalized.
section_title: Treasury Report Does Not Show Progress in Asset Blocking
paragraphs: Treasury’s annual Terrorist Assets Report, which offers a year-end  snapshot of dollar amounts of terrorist assets held in U.S. jurisdiction,  does not provide sufficient information to demonstrate OFAC’s progress in  its terrorist asset blocking efforts. In 2004, OFAC reported that the United  States blocked almost $10 million in assets belonging to seven  international terrorist organizations and related designees. The 2004  report also noted that the United States held more than $1.6 billion in  assets belonging to six designated state sponsors of terrorism. However,  the report does not document or quantify changes from amounts of assets  blocked in previous years. For example, the 2004 report stated that the  United States held $3.9 million in al Qaeda assets, but it did not show that  this represented a 400 percent increase from the value of al Qaeda assets  held by the United State in 2003 or offer an explanation for this increase.
We noted in our October 2005 report that although the amounts of assets  blocked are not in themselves a complete measure to assess progress over  time, such information, along with other key performance metrics, could  help policy makers and program managers examine the results of OFAC’s  asset blocking efforts. We recommended that the Secretary of the  Treasury provide more complete information in the annual Terrorist  Assets Report on the nature and extent of assets blocked, such as  differences in amounts blocked each year, explanations for such  differences, results of OFAC’s terrorist asset blocking efforts, and  obstacles faced by the U.S. government. In commenting on a draft of our  report, Treasury observed that the Terrorist Assets Report “is not  mandated or designed as an accountability measure.” However, nothing in  the statutory language or the congressional intent underlying the mandate  precludes Treasury from compiling and reporting in this manner. Senior  OFAC officials acknowledged that the Terrorist Assets Report is not useful  for assessing results of asset blocking efforts. In its March 2006 letter to  relevant congressional oversight and appropriation committees, Treasury  responded that although it does not believe that the amounts of assets  blocked is a meaningful measure of its efforts’ effectiveness, it would work  with Congress to discuss recrafting the Terrorist Assets Report to address  congressional interests.
section_title: Conclusion
paragraphs: U.S. agencies have accomplished much in their efforts to combat terrorist  financing abroad. Despite the difficulties of interagency coordination,  TFWG has delivered counter-terrorism-financing training and technical  assistance to numerous vulnerable countries and has designated and  blocked significant amounts of terrorist assets. However, as GAO’s  October 2005 report described, several challenges impact the effectiveness  of U.S. agencies’ efforts. Without a strategic and integrated plan for  coordinating the funding and delivery of training and technical assistance  by the agencies, the U.S. government cannot maximize the use of its  resources in the fight against terrorist financing. Interagency disputes over  State-led TFWG roles and procedures have hampered TFWG leadership  and wasted staff energy and talent. In addition, decisions based on  anecdotal and informal information, rather than transparent and  systematic assessments, have hindered managers from effectively  addressing problems before they grow and potentially become crises.  Further, 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 meet related needs and risks,  particularly given the scarce expertise available to address counter- terrorism financing. Finally, without a functional performance  measurement system, TFWG lacks the information needed for optimal  coordination and planning.
Although OFAC undertakes a number of important efforts with regard to  blocking terrorist assets, the lack of meaningful performance measures  and sufficient information regarding these efforts has created uncertainty  about their results and progress. The new performance measures that  OFAC has recently developed may enable Congress and other officials  with oversight responsibilities to ascertain the strengths and weaknesses  of these efforts as well as hold OFAC managers accountable. OFAC’s  strategic plan, when completed, could further facilitate the development of  meaningful performance measures by describing the relation of  performance goals and measures to OFAC’s mission, goals, and objectives.  In addition, including information in Treasury’s annual Terrorist Assets  Reports that shows changes in the amounts of assets blocked from year to  year may help Congress and other officials better understand the  importance of these efforts in the overall U.S. effort to combat terrorist  financing and may assist in the strategic allocation of resources.
section_title: Matter for Congressional Consideration
paragraphs: 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, Congress should  consider requiring the Secretary of State and the Secretary of the Treasury  to submit an annual report to Congress showing the status of interagency  efforts to develop and implement an integrated strategic plan and  Memorandum of Agreement to ensure TFWG’s seamless functioning,  particularly with respect to TFWG roles and procedures.
Madame Chairwoman, this concludes my prepared statement. I would be  pleased to respond to any questions that you or other members of the  subcommittee may have at this time.
section_title: Contacts and Acknowledgments
paragraphs: Should you have any questions about this testimony, please contact Loren  Yager at (202) 512-4128 or yagerl@gao.gov. Other major contributors to  this testimony were Christine Broderick, Kathleen Monahan, Tracy  Guerrero, Elizabeth Guran, and Reid Lowe.
section_title: Appendix I: Terrorist Finance Working Group (TFWG) Membership and Program Development Process
paragraphs: According to the Department of State (State), the Terrorist Finance  Working Group (TFWG) was convened in October 2001 to develop and  provide counter-terrorism-financing training to countries deemed most  vulnerable to terrorist financing. Composed of various agencies  throughout the U.S. government, TFWG is cochaired by State’s Office of  the Coordinator for Counterterrorism and Bureau for International  Narcotics and Law Enforcement Affairs. It meets biweekly to receive  intelligence briefings, schedule assessment trips, review assessment  reports, and discuss the development and implementation of technical  assistance and training programs.
subsections: section_title: TFWG Membership
section_title: TFWG Program Development Process
paragraphs: According to State, the TFWG process for developing counter-terrorism- financing training and assistance programs involves the following steps:  1.   With input from the intelligence and law enforcement communities,  identify and prioritize countries most vulnerable to terrorist financing ,  and needing the most assistance in combating it.  2.   Evaluate priority countries’ counter-terrorism-financing and anti- money-laundering regimes with Financial Systems Assessment Team  (FSAT) on-site visits or Washington tabletop exercises. State-led FSAT  teams of 6 to 8 members include technical experts from State,  Treasury, Justice, and other regulatory and law enforcement agencies.  The FSAT on-site visits take about 1 week and include in-depth  meetings with host government financial regulatory agencies, the  judiciary, law enforcement agencies, the private financial services  sector, and nongovernmental organizations.  3.   Prepare a formal assessment report on each priority country’s  vulnerabilities to terrorist financing and make recommendations for  training and technical assistance to address these weaknesses. The  formal report is shared with the county’s government to gauge its  receptivity and to coordinate U.S. offers of assistance.  4.   Develop a counter-terrorism-financing training implementation plan  based on FSAT recommendations. Counter-terrorism-financing  assistance programs include financial investigative training to “follow  the money,” financial regulatory training to detect and analyze  suspicious transactions, judicial and prosecutorial training to build  financial crime cases, financial intelligence unit development, and  training in detecting over- and under-invoicing schemes for money  laundering or terrorist financing.  5.   Provide sequenced training and technical assistance to priority  countries in the country, regionally, or in the United States.  6.   Encourage burden sharing with our allies, with international financial  institutions (e.g., IMF, World Bank, regional development banks), and  through international organizations such as the United Nations (UN),  the UN Counterterrorism Committee, Financial Action Task Force on  Money Laundering, or the Group of Eight (G-8) to capitalize on and  maximize international efforts to strengthen counter-terrorism- financing regimes around the world.
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