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.) 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. 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. 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. 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. 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.