Funds that support terrorist activity may come from illicit activities, such as counterfeit goods, contraband cigarettes, and illicit drugs, but are also generated through means such as fundraising by legal non-profit entities. According to State, it is the terrorists’ use of social and religious organizations and, to a lesser extent, state sponsorship, which differentiates their funding sources from those of traditional transnational organized criminal groups. While actual terrorist operations require only comparatively modest funding, international terrorist groups need significant amounts of money to organize, recruit, train, and equip new adherents and to otherwise support their activities. Simply, the financing of terrorism is the financial support, in any form, of terrorism or of those who encourage, plan, or engage in it. Some international experts on money laundering continue to find that there is little difference in the methods used by terrorist groups or criminal organizations in attempting conceal their proceeds by moving them through national and international financial systems. These experts simply define the term “money laundering” as the processing of criminal proceeds to disguise their illegal origin in order to legitimize their ill-gotten gains. Disguising the source of terrorist financing, regardless of whether the source is of legitimate or illicit origin, is important to terrorist financiers. If the source can be concealed, it remains available for future terrorist financing activities. The President established a Policy Coordination Committee under the auspices of NSC to ensure the proper coordination of counter-terrorism financing activities and information sharing among all agencies including the departments of Defense, Justice, Homeland Security, State, and the Treasury, as well as the intelligence and enforcement community. Treasury’s OFAC is the lead U.S. agency for administering economic sanctions, including blocking the assets of terrorists designated either by the United States unilaterally, bilaterally, or as a result of UN Security Council Resolution designations. The international community has acted on many fronts to conduct anti- money laundering and counter-terrorism financing efforts. For example, the UN has adopted treaties and conventions that once signed, ratified, and implemented by member governments have the effect of law and enhance their ability to combat money laundering and terrorist financing. FATF, an intergovernmental body, has set internationally recognized standards for developing anti-money laundering and counter-terrorism financing regimes and conducting assessments of countries abilities to meet these standards. In addition, the Egmont Group serves as an international network fostering improved communication, information sharing, and training coordination for 101 Financial Intelligence Units (FIU) worldwide. See appendix II for more information on key international entities and efforts. Countries vulnerable to terrorist financing activities generally lack key aspects of an effective counter-terrorism financing regime. According to State officials, a capable counter-terrorism financing regime consists of five basic elements: an effective legal framework, financial regulatory system, FIU, law enforcement capabilities, and judicial and prosecutorial processes. To strengthen anti-money laundering and counter-terrorism efforts worldwide, international entities such as the UN, FATF, World Bank and the IMF, as well as the U.S. government, agree that each country should implement practices and adopt laws that are consistent with international standards. U.S. government agencies participate in a number of interdependent efforts to address the transnational challenges posed by terrorist financing, including terrorist designations, intelligence and law enforcement, international standard setting, and training and technical assistance. U.S. agencies participate in global efforts to publicly designate individuals and groups as terrorists and block access to their assets. According to Treasury officials, international cooperation to designate terrorists and block their assets is important because most terrorist assets are not within U.S. jurisdiction and may cross borders. According to U.S. government officials, public designations discourage further financial support and encourage other governments to more effectively monitor the activities of the designated individual or organization. Importantly, designations may lead to the blocking of terrorist assets, thereby impeding terrorists’ ability to raise and move funds and possibly forcing terrorist to use more costly, less efficient, more transparent, and less reliable means of financing. U.S. agencies led by State have worked with the UN to develop and support UN Security Council resolutions to freeze the assets of designated terrorists. For example, in October 1999, the Security Council adopted UN Security Council Resolution 1267, which called on all member states to freeze the assets of the Taliban, and in December 2000, the Security Council adopted Resolution 1333, imposing targeted sanctions against Osama bin Laden and al Qaeda. Then, in response to the attacks of September 11, 2001, the UN Security Council adopted Resolution 1373, which required all UN member states to freeze funds and other financial assets or economic resources of persons who commit or attempt to commit, participate in, or facilitate terrorist acts. Later in January 2002 the UN Security Council adopted Resolution 1390, which consolidated the sanctions contained in Resolutions 1267 and 1333 against the Taliban, Osama bin Laden, and al Qaeda. In July 2005, the Security Council adopted Resolution 1617, which extends sanctions against al Qaeda and the Taliban and strengthens previous related resolutions. The UN has listed over 300 individuals and over 100 entities for worldwide asset blocks. Additionally, State’s Bureau of International Organization Affairs ensures designations related to al Qaeda, the Taliban, or Osama bin Laden are made worldwide obligations through the UN Security Council Resolution 1267 Committee and helped to craft and aided the adoption of UN Security Council Resolution 1373 and assisted in the creation of the UN Counterterrorism Committee to oversee its implementation. The United States has also participated in bilateral efforts to designate terrorists. For example, as of July 2005, the United States and Saudi Arabia jointly designated over a dozen Saudi-related entities and multiple individuals as terrorists or terrorist supporters, according to State. U.S. agencies including the Departments of Homeland Security (Homeland Security), Justice, State, and Treasury, and other law enforcement and intelligence agencies have implemented an interagency process to coordinate designating terrorists and blocking their assets. For example, State’s Economic Bureau coordinates policy implementation at the working level, largely through the network of Terrorism Finance Coordinating Officers located at embassies worldwide. Through this interagency coordination, the agencies work together to develop adequate evidence to target individuals, groups, or other entities suspected of terrorism or terrorist financing. As the lead agency for the blocking of assets of international terrorist organizations and terrorism-supporting countries, Treasury’s OFAC compiles the evidence needed to support terrorist designations conducted under the Secretary of the Treasury’s authority. State’s Office of the Coordinator for Counterterrorism follows the same process for terrorist designations conducted under the Secretary of State’s authority. State’s Bureau of International Organization Affairs may present this evidence to the UN for consideration by its members. According to a senior State official, the agencies work together on a regular basis to examine and evaluate new names and targets for possible designation and asset blocking and to consider other actions such as diplomatic initiatives with other governments and exchanging information on law enforcement and intelligence efforts. The U.S. strategy to combat terrorist financing abroad includes law enforcement techniques and intelligence operations aimed at identifying criminals and terrorist financiers and their networks across borders in order to disrupt and dismantle their organizations. Such efforts include intelligence gathering, investigations, diplomatic actions, sharing information and evidence, apprehending suspects, criminal prosecutions, asset forfeiture, and other actions designed to identify and disrupt the flow of terrorist financing. According to State, in order to achieve results, the intelligence community, law enforcement, and the diplomatic corps must develop and exploit investigative leads, employ advanced law enforcement techniques, and increase cooperation between domestic and foreign financial investigators and prosecutors. U.S. intelligence and law enforcement agencies work together and with foreign counterparts abroad, sometimes employing interagency or intergovernmental investigative taskforces. U.S. agencies work domestically and through their embassy attachés or officials or send agents on temporary duty to work with their foreign counterparts on matters of terrorist financing, including investigations. The Federal Bureau of Investigation is the lead domestic law enforcement agency on counter- terrorism financing and makes extensive contributions to law enforcement efforts abroad, including through their legal attachés. Homeland Security’s Bureau of Immigration and Customs Enforcement attachés and agents conduct work in trade-based money laundering and transporting of cash across borders. The Internal Revenue Service’s Criminal Investigation Division has an expertise in nonprofit organizations. The Drug Enforcement Administration focuses on the narcotics trafficking nexus. Moreover, Treasury’s Financial Crimes Enforcement Network (FinCEN) is the U.S. government’s FIU and, as such, serves as the U.S. government’s central point for the collection, analysis, and dissemination of financial intelligence to authorized domestic and international law enforcement and other authorities. Financial intelligence is sent through secured lines among the FIUs belonging to the Egmont Group and shared with law enforcement as part of these investigations. The U.S. government has taken an active role in the development and implementation of international standards to combat terrorist financing. The UN conventions and resolutions and FATF recommendations on money laundering and terrorist financing have set the international standards for countries to develop the legal frameworks, financial regulation, financial intelligence unit, law enforcement, and judicial/prosecutorial elements of an effective counter-terrorist financing regime. Importantly, international cooperation is a cornerstone of these international standards. The United States has signed each of the relevant UN conventions and implemented its obligations pursuant to UN Security Council Resolutions related to anti-money laundering and counter-terrorism financing. According to State and Justice officials, they have provided training on implementing the conventions, and State officials have drafted UN Security Council Resolutions concerning terrorist financing. For example, according to State, officials from Treasury and State met with the UN Security Council Resolution 1267 Committee in January 2005 to detail U.S. implementation of the resolution’s asset freeze, travel ban, and arms embargo provisions and proposed several ideas aimed at reinforcing current sanctions including enhancing the sanctions list, promoting international standards, and improving bilateral and multilateral cooperation.