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

Letter

Background

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.)

U.S. Government Lacks an Integrated Strategy to Coordinate the Delivery of Training and Technical Assistance

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.

U.S. Agencies Provide Wide Range of Training and Technical Assistance

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.

Key Stakeholders Disagree about Roles and Procedures

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.

U.S. Effort Does Not Strategically Align Resources with Related Needs and Risks

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.

U.S. Government Lacks Clear Record of Budget Resources for Training and Assistance

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.

U.S. Government Has Not Assessed Human Capital Resources for Training and Assistance

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.

U.S. Government Has Not Assessed Potential International Resources

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.

U.S. Government Lacks System to Measure Performance and Incorporate Results

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.

GAO Recommended Actions to Improve Interagency Coordination, and Agencies Are Taking Steps

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.

Treasury Needs Meaningful Performance Measures and Information to Show Results and Progress of Terrorist Asset Blocking

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.

OFAC Administers Terrorism-Related Sanctions

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.

Treasury’s Performance Measures Do Not Assess Results of Terrorist Asset Blocking

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.

Treasury Report Does Not Show Progress in Asset Blocking

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.

Conclusion

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.

Matter for Congressional Consideration

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.

Contacts and Acknowledgments

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.

Appendix I: Terrorist Finance Working Group (TFWG) Membership and Program Development Process

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.

TFWG Membership

TFWG Program Development Process

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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