tv Politics Public Policy Today CSPAN May 26, 2015 1:00pm-3:01pm EDT
i would like to thank the witnesses for joining us today. this will be a very important and very meaningful hearing. understanding the link between terrorism and crime is a vital step towards understanding what efforts we can to deter the financing. the drug lords and for what benefits, how are they working with transnational criminals, to move money through the financial system. how are they utilizing the same smuggling routes today that have been used for years in past? and what means have they been previously not been utilized like cyber warfare should we be preparing for today? and the bigger question -- what are we going to do to stop it? knowing that we have ended the threat finance cell there are strong concerns that we don't have the capabilities and intelligence necessary to be
effective in our goals. i also have concerns about the current effectiveness of intergovernmental cooperation to undermine the flow of money to terrorists. i look forward to hearing from the witnesses on these issues. continuing the task force effort to counter terrorist financing. thank you, and i yield back. >> chair recognizes the ranking member of the full committee, ms. waters, for one minute. >> thank you very much, mr. chairman. i applaud the bipartisan efforts surrounding this task force and believe it will serve us well as we work to guard against key threats to our national security. today the task force will explore dangerous new trend -- the growing convergence of terrorism and crime while terrorist organizations motivated by ideology and criminal enterprise is driven generally by greed have been thought to operate independent from one another. the testimony from the witnesses today makes it clear that this
is no longer the norm. furthermore, in an age of globalization, the growing convergence of terrorists means that illicit networks once seen as a local and regional concern now have global security implication, while the approach is necessary -- certainly necessary to tackle these issues effectively. i'm hopeful that this task force can serve as a catalyst for action on these issues and falls squarely in our jurisdiction. the value of our current anti-money laundering and counterterrorism financing enforcement regime would be a good place to start. i yield back the balance of my time. >> the chair recognizes the gentleman from arkansas, mr. hill, for one minute. >> thank you, mr. chairman, i'm honored to be a member of this task force. my thanks to the leadership for the formation. i think it's important that we focus on the transnational criminal organizations that they're driven by profit, number one. and how they interact with foreign terrorist organizations or driven by ideology. you combine those two things you have a toxic soup. we have seen many scary examples as noted as the relationship between criminal activity that interconnect throughout the world. i'm looking forward to this morning to learning more about
that and finding out how we can interdict that process and stop it. i appreciate it and i yield back, mr. chairman. >> chair recognizes the gentle woman from arizona, for one minute. >> thank you. terrorism is an undeniable threat to our global stability. terrorist networks develop new ways to finance share deadly operations. terrorists frequently leverage criminal networks and to keep our country safe we nuss stop their efforts. the islamic state is one of the most well financed terrorist groups. isil generated approximately $1 million per day predominantly through the sale of smuggled oil. that's why i offered an amendment to shut down the oil revenues and report on resources needed for the efforts. isil recently captured the famed
archaeological sites at palmyra, raising the possibility they will destroy or sell priceless artifacts to fund their militant violence. i look forward to working with my colleagues to keep money out of the hands of terrorists and strengthen america's security. i yield back. >> we now welcome our witnesses, celina realuyo is from the william j. center. professor is a former u.s. diplomatic, international banker with goldman sachs, u.s. foreign policy adviser, and professor of international security affairs at the national defense, georgetown, george washington and joint special operations universities. as the state department director of counterterrorism finance programs, professor realuyo safeguarded financial systems, and she's a graduate of the harvard business school. johns hopkins university school of advanced international studies.
and georgetown university school of foreign service. dr. david asher is anned a junts senior fellow at the national center for the new american security. and serves on the board of advisers of the center on sanctions and elicit finance for defense of democracies. over the last decade, dr. asher has advised the leadership of so com, centcom on top threat
priorities. dr. asher conceived of and spear headed several of the highest profile anti-money laundering actions in history. from 2002 until 2005, dr. asher organized and ran the north korea elicit activities initiative for the national security council and the department of state. dr. asher graduated from cornell university and received his doctorate in international relations from the university of oxford. richard barrett is a senior vice president, and a fellow at the new american foundation in washington. the royal united services institute in london, and the center for research and security studies in islamabad. from march 2004 to december of 2012, mr. barrett served as the coordinator of the monitoring team at the united nations in new york. in 2005, he helped establish what became the united nations counterterrorism implementation task force following the adoption by the general assembly of the global strategy to counter terrorism in 2006.
before joining the united nations, he worked for the british government both at home and overseas. douglas farah is currently president of ibi consultants, llc. he's also a senior non-resident associate at the center for strategic and international studies and from the assessment and strategy center. mr. farah works as a consultant on security challenges, terrorism and transnational organized crime in latin america. for the two decades before consulting, he worked as a foreign correspondent and investigative reporter for "the washington post" covering the drug wars in andean region, the diamond trade in west africa and
radical islam and terrorism financing. the witnesses will now be recognized for five minutes to give an oral presentation of their testimony. without objection the witnesses' written statement will be made part of the record following their oral remarks. once they have finished presenting their testimony, each member of the task force will have five minutes within which to ask their questions. on your table for the witnesses there are three lights. green means go. yellow means you're running out of time and red means stop. the microphone we're told is very sensitive so please make sure you're speaking directly into it. with that, professor realuyo, you're recognized for five minutes. >> thank you, mr. president, vice president, ranking member lynch and members of the task force to testify on the dangerous nexus of terrorism, crime and corruption that threatens us at home and abroad. the terrorists actively capitalize on weak governance
and corruption around the world. after examining the critical enablers of the networks in particular financing, illustrating the convergence in the case of isil i will propose specific measures to combat terrorism, crime and corruption. illicit networks threaten the four key missions of the nation state. to provide security, promote prosperity, safeguard the rule of law and ensure that the government represents the will of the people. elicit actors require critical enablers to realize their revenue objectives. they are logistics, communications, weapon, technology, corruption and financing. financing is the most vital enabler since money serves as the oxygen for any activity. following the money trail is needed to dismantle the networks. since 9/11, through intelligence and the lawmaker operations, like the iraq and afghan threat finance cells.
public sanctions and capacity building programs. as a result of these efforts, the al qaeda operatives complained about a lack of funding for terrorist operations, and the mexican cartels realized they could no longer launder profits through banks. it's also unexpected rooted out graft and corruption at the highest levels of government. terrorism, crime and corruption have existed since the dawn of time but now they have gone global with the record levels of profits and violence. in many cases terrorists, cartels and gangs are better armed and funded than the very government services, security forces responsible for confronting them. we are witnessing a dangerous convergence of terrorism and
crime that threatens our national security. convergence is the process of coming together and having one interest, purpose or goal. certain groups are demonstrating a hybrid terror crime behavior such as the network in afghanistan, the farc, hezbollah and isil. all eyes are now on isil with its brutal beheldings, military advances in syria and iraq. dramatic foreign fighter flows. it is an example of convergence with the ambitions for a caliphate and profit seeking activity. isil requires significant financing to realize its evil agenda and is considered the richest terrorist group in the world. as you all know, it derives much of the income from illegal oil sales with additional funding from extortion, kidnapping,
stolen antiquities, human trafficking and some donations from external individuals. one of the efforts of the u.s. strategy to counter isil is disrupting the finances. it is focused on restricting the access to international financial systems, and targeting isil leaders and facilitators with sanctions. on the military front, operation inherent resolve has conducted air strikes against the oil infrastructure and supply networks in syria and iraq. as of may 8th, 152 targets have been damaged or destroyed according to u.s. central command. this past weekend, u.s. special forces conducted a daring raid in syria against abu sayyaf. and it shows how valuable the financial intelligence connected could be to attack its networks. to counter the illicit networks
we need to leverage the international power and i have proposed the five following measures. number one, increase resources to government agencies to investigate, prosecute and prosecute terrorism, crime and corruption. number two, retain the afghan threat finance cell and establish new ones to target emerging threats like isil. number three, revitalize the inner agency working group to coordinate all activities across the agencies. number four, dedicate a percentage of the fines from money laundering to directly support counterthreat finance programs and lastly, promote public/private partnerships to serve a our eyes and ears to detect the crimes. in conclusion we must understand the illicit members that confront us and deny their access. stemming the flow of funding to groups like isis and hezbollah can neutralize their very violent agendas. only through comprehensive, interagency and international strategies can we effectively combat terrorism, crime and corruption around the world and the financial instrument of national power is a critical tool that we must take advantage of. thank you for your time and attention. >> dr. asher, you're now recognized for five minutes. >> chairman fitzpatrick, vice chairman, congressman lynch, it's an honor to speak before you. i actually want to say thank you
for giving a care about this issue. this is a very important issue. it's really not in the weed, it's the heart of the matter. money is the sinew of war and we are in a war around the world whether people want to admit it or not. i have been involved in nearly 25 years of working against terrorism financing, doing financial operations against drug cartels. adversarial governments, weapons proliferation networks, i have seen it all. what i hadn't seen until 2007 when i started to advise the drug enforcement agency which has done incredible stuff for our national security, well above and beyond its remit, i hadn't seen a case where the united states itself has become the largest money laundering vehicle in the world and that's involving the lebanese canadian bank. a bank under the command and control of hezbollah and the
element within hezbollah it appears -- and this is still subject to being proven in court, that it's tied to terrorism. the islamic jihad organization that attacked our embassy twice in the 1980s. that organization is known as the external security organization of hezbollah and controls the security opera us the of hezbollah which reaches into the united states of america itself. to garner profit and gain influence, they have engaged in something that i would call the criminal resistance. i.e., they have used the $80 billion u.s. dollarized lebanese banking system, which is the largest in the world for dollars, i believe, as a center point for their global money laundering empire. the united states has dozens of banks with correspondent relationships with lebanon. the largest -- the fastest growing bank in lebanon until three years ago was called the lebanese canadian bank. that was under the control of
hezbollah. through dea's operation tightening which i had the honor to advise on from 2007 onward, the dea used undercover informants and i'm speaking based on the classified information and from a personal viewpoint only. this bank was engaged in buying primarily used cars in the united states and europe as part of a massive money laundering
scheme in partnership with the outfit that pablo escobar himself set up in the 1980s and '90s to run the drug cartel. you can find this all on the web. so they were buying as much as $1 billion a year in used cars in the united states. cars which were generating almost no profit, actually. exporting the cars to west africa where the money was comingled with narcotics proceeds coming out of europe. this is the world we live in, it's very complicated. the drugs were flowing from colombia into europe. the money was being curried back to lebanon, being wired to the united states to buy used cars here.
as well as buying used cars in europe with cash. it was making its way into the lebanese canadian bank which is at the center of the hezbollah money laundering empire. so it was the largest scheme in the world, and it remains the largest material scheme in the world for terrorists. the dea constructed a take down strategy that i helped to advise on. i won't get into all the details. we organized the designation of lebanese canadian bank under 311 of the patriot act. that cut it off, $5.3 billion hezbollah bank bankrupt in three
week, that was a success. so we designated the drug king pin, he was indicted in eastern district of virginia for laundering over $1 billion a year. he's indicted for his relationship with lebanese canadian bank and designated as well. he's been wanted for arrest. we went after the car parts in west africa. it was a huge success. but i'm here to tell you today unfortunately there are more cars being exported from the united states itself to west african car parks controlled by hezbollah than there were when we made the dez ig neighs in 2011 and 2012. our policy is a great success of international cooperation, i
feel very proud with the bush administration, even this administration have done to try to make a dent in this. unfortunately it's not succeeded. i want to talk about some that might advance that success. thank you. >> thank you, dr. asher. mr. barrett, you're recognized for five minutes. mr. barrett, can you turn your microphone on, please. >> i'm so sorry, thanks. thank you, chairman fitzpatrick, ranking member lynch, distinguished members of the house financial services committee. it is an honor to testify before you today on this issue of perennial concern. although terrorism along with other forms of violent crime lacks a profit motive, any terrorist attack costs money. it's reasonable to assume that for the less money that the terrorist group has available, the less able it will be to mount an attack. if it does so, limited finances should result in limited impact. but terrorism of course by its nature is asymmetric and asymmetric in all aspects including financially. even a relatively cheap attack can have a devastating impact. for example, the last al qaeda attack in a western country occurred in my country. on july 2005, four individuals associated with al qaeda blew themselves up on the public transport system in london,
killing 52 people. the official inquiry into the attack estimated that it would cost less than 8,000 pounds. that's about $13,000 or so. to quote from the report, the group appears to have raised the necessary cash by methods that would be extremely difficult to identify as related to terrorism or other serious criminality. kwan appears to have provide most of the funding. having been in full-time employment since university he had a reasonable credit rating, multiple bank accounts, each with just a small amount deposited for a protracted period. credit cards and a 10,000 pound personal loan. he defaulted on his personal loan payments and he was overdrawn on his accounts so very difficult to detect. but despite the low cost of that attack and the unremarkable financial activity associated with it, it had a devastating impact of course on the united kingdom beyond the deaths, the cost to the economy was estimated at 2 billion pounds just in the rest of 2005 alone. and the cost of the official inquiry itself i might say was put at 4.5 million pounds. so even unsuccessful attack which might therefore cost even less can have a huge impact. think of the other attack, the 2006 plot to blow up airlines traveling to north america. the additional security checks imposed on airports is a result of costing billions of dollars. the point i'm trying to make, terrorism does not have to be
expensive to be effective. whether it's in the primary objective of making people afraid or forcing governments to react. the second point is that terrorists can fund their operations through legal means, quasi-legal means and legal means. legal means might include the nations or the self-financing of the london bombings. quasi-legal means might include the raising through traditional means in controlled tex territory. as well as the legal means might include kidnap for ransom or the other things we have heard about. and it's my belief that although terrorists have few qualms about how they raise money, they don't have any preferred means. they do whatever is easiest and most effective. and they'll raise money according to opportunity, aiming all the while to minimize effort and risk while maximizing their returns. and this complicates the financing of terrorism as the money used is not necessarily
criminally tainted before it is collected. increasingly, terrorists are attracted to places where they can control the territory and inevitably too these areas are ones that criminals use for their own transshipments of drugs or other contra band and things like that. and to this extent, terrorists have established a closer relationship both with crime and with criminal gangs. in my view they're more likely to take a cut from the criminal gangs than to join their rackets or compete with them. terrorists and criminals who operate for profit are not natural bedfellows. criminals see terrorists as dangerous, both in themselves
and also in they're likely to bring attention from the authorities. and an official might be bribed to allow conventional activity but is less likely to turn a blind eye to terrorism. likewise, terrorists are sympathy of those who might attack or betray them. the point i wanted to make sure mr. chairman although there is undoubtedly an association between terrorism and criminality it's not necessarily straightforward or even universal. thank you. >> thank you, mr. barrett. mr. farah, you're recognized now for five minutes. >> members of the task force, thank you very much for the opportunity to testimony about the dangerous nexus between terrorism, crime and corruption. i speak only on behalf of myself, and not on behalf of the institutions i'm affiliated with. i'm going to focus on latin america where we see this in new and dangerous forms. the convergence of the crime and corruption are the core at what i believe is a significant strategic threat to the united states. i described this emerging tier one security prior as criminalized state. that is states that actively use
transnational organized crime as an instrument of state craft, rely on the revenues from illicit activities to fund themselves and often overlap this protective mechanism with terrorist organizations. in our hemisphere we're primarily seek this in the network that operates from venezuela, where you have the political project, the joint political project among multiple nations who is harming the united states, as well as operating in the cojoint criminal enterprise. rather that being pursued in an effort to impede the activities, the criminal networks and protected terrorist groups are able to operate in more stable secure environments, something that most businesses crave. rather that operating on the margins of the state or seeking to co-op small parts, the
criminal groups in the states are able to concentrate their efforts on -- at the statement on multiple levels. within the stable environment, a host of options become available. from shipping registries, the easing use of banking structures, the use of national airlines to move large quantities of unregistered goods and the acquisition of diplomatic passports and other identification forms. the threat originating in venezuela is not confined to venezuela. hugo chavez operating with others, fernandez in argentina, set out the redefine the political landscape. senior members of el salvador's current government are also alive in this movement. to a large degree, this movement self-describes the alliance that's been successful. unfortunately what their policies have brought internally are massive corruption, rising violence and disdain for the rule of law and the collapse of
institutions. on the strategic level, this has brought new alliances with iran and hezbollah, russia and russian organized crime, china and chinese organized crime as well as mexican drug cartels and colombian criminal organizations. the armed forces of colombia, a designated terrorist organization by the united states and a major drug trafficking organization is directly supported by the nations as a matter of state policy. such a relship between state and nonstate actors provides numerous benefits to both. the farc and hezbollah gain access without fear of reprisals. they gain access to identification documents and access to exporting cocaine to the united states. while using the same one to bring in large sophisticated
weapons and in return the government offers state protection and reaps the rewards of the individuals as well as institutions derived from the cocaine trade. iranian -- iran whose banks have been largely barred from the western financial system benefit from the access to the international markets through venezuela, ecuador and bolivian financial institutions which moves the iranian money as if it originated in their own unsanctioned banking structures. the significant new evidence of the criminalization of these states, the first is the recent investigation by brazilian magazine showing venezuela with the help of argentina tried to help iran's nuclear program in violation of international sanctions. "the wall street journal" has a long list of senior venezuelan officials being investigated for drug trafficking. the recent book, chavez bang rang describes the cocaine dealings of the highest level and their contacts with hezbollah and farc operatives in officially sanctioned meetings and at the highest level and the
recent designation by finn sen is of primary money laundering control. all of these mechanisms allow for literally billions of dollars to slosh through states that are completely unaccounted for both in their -- by legislative oversight or by any form of accounting. understanding how these groups develop and how they relate to each other in the form -- and form from outside the region particularly given the up a it pace with which they're expanding their control across the continent and across the hemisphere make -- i would argue a tier one threat in something critical that we need to understand is something we often don't look at in the underlying ideological underpinnings of the movement. thank you. >> well, we have -- we thank all the witnesses for the testimony. the chair will recognize himself for five minutes. at our first hearing of the task force, we had some testify on the question of the iraq/afghanistan threat finance cell and because that was
mentioned again here today, professor realuyo's testimony, i will ask the question that perhaps the professor if you could respond to it. and then i'd like to hear the response of the thoughts of each of the panel witnesses. it's whether a threat to the finance cell, if replicated in latin america could that be an effective means to combat these terror criminal hybrid franchises that operate there? in latin america. >> well, one of the lessons learned unfortunately from our experiences in iraq and afghanistan has been that inner agency and more importantly collaborative fusion cells have been effective. particularly when you're designing a list of targets and
more importantly harvesting information that comes of a financial and economic nature to actually incorporate it within our broader set of understanding these adversaries. in terms of latin america it would depend on different groups. more importantly, since a lot of the active cities are -- activities are drug trafficking related as well as human trafficking related we have to figure out which of the agencies would be the most suited. it's a concept of creating a task force. in the case of post 9/11 the joint terrorism task forces established by the fbi are a model that had been studied by many academics such as myself as well as other ways to actually leverage the know how and more importantly the resources that
each of the agencies brings to bear. one other one which we did thotd discuss today is a very -- which we did not discuss today which is the joint terror -- joint interagency task force, based in key west, florida. it actually is intraagency with all the uniform services but more importantly the intelligence and the law enforcement agencies represented there as well as liaison full-time officers from other countries. their primary mission is countering illicit trafficking which already reflects the way they're changing the look -- instead it used to be drug trafficking. they're encountering a lot of precursor chemicals as well as sadly alien smuggling going through there. so it's a better way of how to use the lessons learned and more importantly apply them to emerging threats. >> dr. asher? >> well, my experience at first to celina's is spot on. i do feel though that you almost need an untouchables type of approach to this stuff. you need a group of people that are in charge to go after the money and to have global authority to roam. the money goes global. you see more money being laundered if it's in to a lower
drug cartel and hezbollah and in china more than anywhere else. but we have a massive amount of laundering right through the united states, right to the purchase of used cars. we designated this, and we identified it to banks and people are accepting billions of dollars a year from lebanon for buying used cars that are going to west africa. we need a law enforcement top down task force approach and the law enforcement professionals and the prosecutors need to be held accountable for results. we know based on overt evidence that's been presented in court that this is going on. so why is it still happening? we also need an approach that -- so i think the task force approach that you're interested in is very important. but i don't think it be regional. but it needs to be almost threat specific. so hezbollah, al qaeda. why have not we applied the racketeering -- the rico charge against al qaeda? it's a racket. terrorism is against the law and the reason would matter on a financing level, we can go after long arm capabilities all their assets all over the world. we more than enough countries in the world that endorse terrorism as the national level crime. >> dr. asher, on the trade based
money laundering what's your assessment of the current u.s. policy? >> absolute interest and unfortunate ineffectiveness. everybody i have worked with, i have had a great honor and pleasure to work with. they're great people in our government. there is awareness of these issues that we never had before. there's awareness that we should go after the financial networks as a means to tackle the whole network. it's a revolution. i'm very proud of it. but it's not working. there's more hezbollah money being garnered in the united states than in 2011. we have to look at the strategies like rico. we need to approach them more like criminal rackets than just terrorism. terrorisms almost honors these people and we need to have met greater impunity and cut off our systems from threats. >> at this point i'm going to
recognize ranking member mr. lynch for five minutes. >> thank you. and again, i want to thank the witnesses. we had a chance to read your testimony, very helpful. dr. asher, for a while there with the lebanese canadian bank we had great success using section 311 sanctions and identifying them as, you know, -- you know, primary money laundering concerns and it was not just us. it was the financial community. that saw them as toxic and everybody backed away. so it basically shut them out of the legitimate, you know, banking system, especially the united states. would this work if we expanded 311 to go after say, you know t -- the auto dealers in west africa that are operating? if we -- you know, if we continue to use that 311 type mechanism, would that be enough to choke off some of this funding?
>> yeah, in my written testimony i recommended that we look at implementing 311 against the actual nation. i would propose it as a temporary measure. i don't want to obliterate the area, but the used cars are providing material support for a terrorist organization. of course we should be -- we have section 311 which is a regulation. okay? it can be lifted very easily. to protect our nation's financial system against money laundering. there is most definitely money laundering going on here and it's going to the terrorist organization and going to the military wing we believe of the military organization, the one that's killed hundreds of american citizens in the past and is engaged in activities against the interests in the middle east. i mean, we don't have the laws
on the books for nothing. but i do believe an enforcement approach is critical. we can't just force the banks to be the enforcers of the law. we need law enforcement to get into gear and to build financial cases against these complex conspiracies. they're very complicated and hard to prosecute. but they can be done. so i support a hybrid approach. >> let me stop you there. i have another question. i don't want to use all my time. we have got a -- we've got a problem coming up which is the agreement that the administration is trying to pursue with iran. we have -- we have sanctions against iran and a number of banks that had previously worked with them on nonproliferation issues and those are major sanctions. the iran sanction act, the iran syrian sanction act.
and the president is negotiating taking away those sanctions in return for assurances and verification that iran is no longer pursuing a -- not actively pursuing a military nuclear program. on the other hand, we also have a whole set of sanctions that are based on the work that you have been doing which is iran has also been financing hezbollah. islamic jihad. according to the book, they even gave money to al qaeda. so those activities if we're to drop the sanctions and allow their economy to grow, what's to stop them from continuing that activity with respect to some of the work that the islamic revolutionary guard is perpetrating which is directly supportive of some of this -- you know, illicit activity. the criminal activity that's
happening in so many other countries. >> moral and human outrage if those laws are rescinded. okay? at the end of the day, the terrorism record stands. you know, for those of that worked in the war in iraq we had more involvement in efp and other ied around than certainly any other nation state. you know, i was the senior adviser to the united states government for the talks in north korea. i know what nuclear diplomacy looks like and i understand, you know, we have to have a hybrid approach sometimes in the nuclear counterproliferation, but on terrorism we have to draw the line. >> right. your understanding is those sanctions, 311, things like that are are targeted towards the criminal activity that have been enforced by banks, banks that don't want to do any business
with a bank that's doing business with iran because of the criminal activity, those should remain, right? those should not be part of the -- >> terrorism record stands. >> okay. >> the chair recognizes the vice chairman of the task force, mr. pittenger, for five minutes. >> thank you. dr. asher, last march, i asked secretary lew about the effectiveness of our intergovernmental communication and coordination as it relates to stopping the financing of terrorism. specifically, u.s. customs in their full access of data with limited access by finn sen. should we be looking more seriously and in better coordination as it relates to trade based financing, should we be looking and targeting this type of better cooperation?
>> actually, first u.s. customs is an awesome organization. everyone deserves to take a look at what they do. they don't get enough credit. i have been so impressed by their data systems. however, sharing data is very important. they're very good at receiving data. i think that the ability to take some of their data and use it for example in organizations like finn sen would be very proper and to the greater good because so much of the trade based money laundering is going on in a way that's difficult to measure. one of the only ways to measure it is is through the bills of lading that occur when you export something. to the extent that that i aren't linked together it holds us back in enforcing the law against the trade based schemes and trade based money laundering is where it's at today for money laundering writ large. >> you mentioned section 311 and how effective that was with the lebanese canadian bank. of course we saw how important it was in the bank of macaw as it related to north korea.
and other instances. do you believe that this is a central focus that we should as well have in terms of trying to force some of these institutions no not be able to exist, utilizing 311? do you think that there's other institutions out there that clearly are in an unclassified briefing, but should that be a focus of our efforts? >> it's the most powerful lever we have ever developed in financial warfare against adversaries. and it's something that needs to be utilized, you know, not every day but periodically. it's an incredible course, a tool. and nothing like cutting someone off from the united states financial system which is -- it's not our job to offer access to terrorism -- terrorist groups to our financial system. when it happens we should be allowed to cut it off. 311 offers that opportunity.
>> mr. barrett, in your testimony you talked about smuggling and the link between terrorism and crime and some measure. can you briefly compare isis oil smuggling and the smuggling used by saddam hussein to evade the oil-for-food program? and my thought is that isis is using the same mechanisms and the same people. what haven't we been able to deal with this the second time around and what should we be doing to stop it? >> well, it's an interesting question, vice chairman. of course, the oil-for-food program was a huge agreement by the international community through the security council in 1991 with saddam hussein as you said, with the government. and did allow a certain amount of export of oil in order to be able to allow the iraqi government to feed its people.
and that was open to many abuses -- and that was open to many abuses and it was indeed abused but the scale on which saddam hussein was operating as a government is very different from the scale on which the islamic state is able to operate. whereas saddam hussein i think over the 12 or 13 years of the oil-for-food program probably sold about $50 billion worth of oil, the islamic state is selling perhaps now up to $2 million a week, and also whereas the export of oil under saddam hussein was authorized and therefore done in a regular way, in the islamic state it's done very much in small scales out of sort of almost home grown refineries into trucks which may take it into turkey. may take it into kurdish areas. may sell it to the syrian government. or most of it in fact is probably sold and consumed within the area controlled by the islamic state itself. so this makes its very much harder for outside powers to control there. possibly turkey, but generally speaking it's difficult. >> thank you.
to step the demand blocally. a lot is crossing into turkey. is. >> gentleman's time has expired. >> thank you. correction. iraq. gentleman recognizes miss waters for five minutes. >> thank you very much. >> thank you. i'd like to continue on money laundering. an investigation recently conducted by the new york reveals the ease by millionaires can purchase real estate in the united states. and half the most expensive red
den residential properties in the united states have purchased anonymously through shell companies. one of the questions asked about a buyer's identity is because persons identities have not been flown in developments and not asked questions as part of maintaining an anti-money launds laundering program. one of the exemptions was persons involved in real estate settlements and closings. >> that's always been a
question. there's been moves afoot not just in the united states but in the world to try to enforce a broadening of the coverage of who would be required to know your customers and looking at things such as real estate. i do a lot of work in mexico, where this is a huge issue of the cartels buying out businesses, but more importantly real estate. and now a move there for notary publics who are critical in order to transact the purchase or the sale, to actually also be required to do reporting diligence on their clients, and it's something we may be able to consider here in terms of the u.s. as well. a lot of the flows of the money, particularly in real estate here in the u.s. by foreigners is also suspect of tax evasion of their home jurisdictions, which is something we should also be concerned about.
particularly if that's coming from corrupt governments abroad, coming to seek financial safe haven within the financial markets. >> several years ago i became interested in money laundering because we discovered that one of the national banks had purchased a lot of the small banks in mexico, that were known to launder drug money. and so in taking a look at that, we discovered that our banks were not following any know your customer policy. i don't think they had a registration on hand for one of the officials at that time. i think it was a brother of one of the presidents of mexico. the same thing was true with the brothers from nigeria, who had all of their money in our banks. and while i'm interested in the real estate aspect. you did mention you brought up know your customer products with our banks and given that the statute that i referenced allowed only temporary
exemptions, do you believe it's time that those involved in these type of real estate transactions should be required to implement u.s. anti-money laundering programs? in these type of real estate transactions should be required to implement u.s. anti-money laundering programs. >> that's what we're trying to take a look at now. as financial innovations and new ways of moving and potentially laundering money or financing terrorism evolve, things such as the virtual world we need to think about legislation that keeps up with these financial innovations in order to preclude dirty money from entering the u.s. system. thank you very much for your interest on this topic. anything that moves in terms of hiding money, the criminals and terrorists are very good at trying to sercircumvent our measures. >> i'm sure you're aware of the article done of the time warner
center. it's absolutely startling to take a look at the purchase of those properties and who is buying them and how it all operates. i think that this information is very instructive. certainly should cause us to want to take a closer look at what we do about these kind of real estate transactions. thank you very much. i yield back. >> chair recognizes the gentleman from texas, mr. williams, for five minutes. >> thank you mr. chairman. i have two questions. first to you, mr. farah and the second to dr. asher. in your testimony this morning, you spoke about how countries like iran, whose banks are largely barred from the western financial systems, have been able to gain access to international markets through countries in latin america. would you help this committee understand what implications terrorists or criminal groups who are supported or allowed to operate in latin american have
on this country. >> thank you for the question sir. i think if you look at the way iran has penetrated the financial systems of the bullstates particularly venezuela and ecuador, where you have iranian banks setting up under false flag banks and operating as venn save -- vennezuela banks. or they were going to have their communications encrypted in the encryption key for the financial communications to be held in the iranian embassy, it's unusual for normal banking structure. i think what the problem is in this setting, when you have a state sanctioning those activities, no one is going to investigate them and no one is going to move further down the road. that goes to the point of the
absolute impunity that the state cover provides. once you have a state that is willing to use either transnational criminal organizations or terrorist groups or botheçç as part of their state sanctioned policy, as opposed to what we see perhaps in mexico. where what do they want? a judge who won't condemn them. a border patrol who lets them cross. with the new construct in latin american, it's state protected and state driven. i think that is a fundamental shift, and i think that opens the door for what you see hezbollah doing in the region. what you see iran doing in the region. which is having unfettered access to financial institutions in ways that would not be possible without direct state participation. >> thank you for your answer. dr. asher let's go back to the used car situation. what was the number you said used cars were going out of this -- was it $1 billion?
>> well, it may be as much as $1 billion. >> my question is where and who are buying these cars? at auctions? buying them from dealers? buying from individuals? where are the cars being purchase purchased? >> auctions typically. the money is coming out of lebanon. thousands and thousands of people. i think the customs cvp probably denied thousands of these from people from lebanon. it's unfortunate for our relationship with lebanon. but people are coming here and told to buy cars. they do it. they'll get a cut on the payment because it's drug money. there is a profit associated with it. they don't care about the car transaction itself. they just want the car. without the car, they can't launder the money. they buy them. a lot of car lots you see in the state of virginia or baltimore. you go there and see all the cars sitting there and no one is ever in the lot. who is running the racket? they season these cars on these
lots and sit there a few days. then they're off to west africa to car lots owned by hezbollah. >> did you say the cars are around the $2500? >> there are a lot of cars they're buying below the $2500 customs threshold. they don't come into our statistical database. they know our laws better than we do. >> they know how to beat the system. >> these guys are really brilliant, actually. >> how are they being paid for it, cash? >> no. they typically -- it's wire transfers so the banks are involved. this is an issue. i don't want to blame our bankers. our bankers are trying hard to enforce money laundering and probably giving hugely onerous responsibilities to do so. we need to target the lebanese who are sending the money and saying this, which is subject to 311, is a money laundering for
terror and should be banned until it can be proven otherwise not involved with terrorism. >> then you said this but, again, tell us. to get these cars how are they being used? >> they're driven around nigeria by relatively poor people who want a cheap car. there's nothing wrong with the cars themselves. what's wrong is that they're buying them as part of a money laundering scheme. >> i'm in the car business is why i'm asking. i want to talk to you later. i yield back my time. >> the gentleman from california, mr. sherman for five minutes. >> much of our u.s. government is doing an outstanding job. some agencies aren't. i've got an example that may beat the ones of our witnesses. example where giving money to terrorists is not only easy, it's tax deductible. in 2009, i brought to the attention of the irs that an organization called the ifco a
501 c 3 organization said on the website, give us our money and we'll give it to viva pal stinstinia who will give it to hamas. it took them four years to take it seriously. in october 2013, the organization put on its website the irs report, as to why the organization should lose its tax exempt status and used it as a fund raising device. look, the irs doesn't like it. give us more money and we'll give it to hamas. even today, somebody who looks at the list of organizations to which they can give tax exempt contributions can give it to the ifco. i think just the fact that we make it a little easy for the terrorists, we make it tax deductible.
remittences. a lot of ordinary americans want to send money to somalia, to their relatives. would it make sense for the united states to green list licensed organizations where you know if you give them the money, the money will go to an individual somali relative? of course, there's always the possibility that your relative has been saeduced by terrorist propaganda and gives some of the money to terrorists. at least the money gets to the relative of an american. does it make sense for the united states government to give americans an avenue where they can feel relatively safe? do we have a witness to answer that? mr. barrett? >> somalia is a good example. many many sa malliansomalians rely
on that income. there aren't operating banks in somalia. many of the remittences are made through relatives and so on. you notice the other day that after the attacks in kenya, kenyan government wanted to shut down some of these remittent services because they reckoned they were funding terrorism. there was an outcry internationally because it would mean so many somalians would be disadvantaged. what needs to be done is bring these informal systems into a more formal structure, rather than banning them and pushing them out. one of the problems we face now is formal banks are unwilling to offer banking services because they fear the regulations and so on. >> thank you. i want to move on to another issue. isis and the iraqi government. one of the best ways isis has financed itself is seizing a lot of currency. what various countries have done
is they've issued new currency. replacing old bank notes with new bank notes. this is incredibly inconvenient for criminals and corrupt politicians, say, in baghdad, just as it would invalidate the bank notes stolen at the regional bank by isis. first, does anyone here have a good estimate as to the value of the bank notes seized by isis? i've heard various reports. i don't see anybody. >> i think it's very hard to say. in mosul they were alleged to have stolen $500 million worth. whether that was in gold or bank notes or whatever -- >> you would hope that the iraqi government would at least know the gold and currency it had in its bank before its american armed troops turned tail and ran and left the money for isis.
it goes beyond that. the government is paying salaries to bureaucrats in mosul, and that money is freely taken by isis. it's my understanding, and i'd like mr. barrett or any other witness, that the iraqi government is sending electricity into mosul free, and then isis gets to collect from the utility users. and i get conflicting arguments or propaganda -- i wouldn't use the word propaganda -- spin from our government. half the time the iraqi government, our government, are boasting they're undermining isis' support by making it impossible for isis to provide good governance. the other half u$e time they're saying we care about thq people governed by isis and want to make sure their lives are comfortable.
finally, there is the oil that the professor spoke about. the oil wells. it's hard to -- we can bomb the oil wells. have we chosen not to do that because we want to make sure mosul motorists are not in inconvenienced? >> more importantly, the bigger question is, after you bomb the oil wells whoever is going to territory in a legal infrafrukin infra infrastructure infrastructure. you're looking pá the supply chain, like any business. >> professor, i know we're bombing the refinery. i asked about the oil wells. we didn't hesitate to bomb factories in france in 1941 and '42 when we were serious. i yield back. - >> chair now recognizes the gentleman from maine, mr.
poliquin, for five minutes. >> thank you for being here today in dealing with this new dimension of terrorism financing. i encourage everybody to continue to do your good work to make sure our country stays on offense and make sure we do everything humanly possible to stop the flow of funds to terrorist groups that threaten our homeland. i'm a little concerned today as all of a sudden we see a marriage between organized crime and te)rorism. it's an additional source of funding to terrorism. i know all of us until the koun !in the country are alarmed by the savagery in the middle east, dealing with these organizatrjj p r(t&háhp &hc% i'd like to follow up with you question dealing with the administratio=óbwié f negotiations currently with respect to a nuclear deal with iran. and if, in fact, sanctions are lifted that are currently
it'll be very hard to actually apply these so-called snap back sanctions. more importantly you'll see that they will be able to enter into the global economy. lis illicit illicitly. iran is a state sponsor of terrorism as declared by the state department but is the godfather and patron of hezbollah, which hasn't been raised today, is supplying the foreign fighters for the assad regime in syria. it's so complex and convoluted. if we look from an economic point of view, other countries who would like to do trade with
iran can get the access to the oil iran produces, once you live the punitive measures of the sanctions. it would be hard to background and reimpose them. >> let's drill down a little more professor. assuming those sanctions were to be lifted. and as you stated, iran is a sponsor of terrorism throughout the middle east. syria, somalia or yemen. what would be the mechanics? what would we see if you were involved in the international banking community with respect to how the lifting of those sanctions might facilitate organized crime inter connecting with terrorist act tift s -- activityiesactivities? >> you'd lift first the financial sections, meaning iran could bank globally, which is the most painful of the sanctions piece. more importantly, if we look from a physical trade piece
their ability to think about importing or exporting components that are perhaps could be used for other nuclear aspirations. in terms of a bank itself we all -- when i was working at goldman sachs did a ton of compliance and there are other global financial actors who are going to see this and seize the opportunity to increase their physical ability to access iran. once iran also lends more money they'll be able to use more money. there's not much difference between the private sector and the state. that's what we fare. doug mar arksfarah took a look at how the actors in latin america could destabilize others in the world with their agenda. >> let's stay on offense. thank you. give back my time. thank you, sir. >> gentleman yields back. now recognize the gentleman from texas, mr. green, for five
minutes. >> thank you, mr. chairman. thank the witnesses for appearing as well. mr. chairman, i'm very much concerned about the notion that we should follow the money. i'm also concerned about following the counterfeit money. what's called super notes. these -- this currency is so finely tuned that sometimes it's very difficult to be detected but for some sort of special technology. as you know, the dollar is the reserve currency of most of the world. there is a war for currency supremacy. my concern, or maybe i shouldn't be and i'll let you tell me is whether or not the super notes flowing in and out of our country and into other countries, can pose some sort of threat to security in this country in the long run. i do understand that we retooled
our currency but i'm still concerned about nationals. nationals larger than terrorist organizations. countries, if you will, that can play a role in the valuing and creating mistrust in our currency. does anyone care to respond? >> having overseen the multi-year initiative for the u.s. government against north korea's illicit financial networks including super note, i guess i can comment. it is a -- it has been a costly endeavor for the u.s. we had to redesign our currency twice as a result of north korea's national level counterfeiting of our currency. i do not know that they have succeeded at counterfeiting the latest version of the $50 and $100. congressman, i definitely appreciate your interest and
concern in this. it's cost us hundreds of millions to redesign the currency over the years. north korea did spur on several huge bank runs overseas. in taiwan, we had over $500 million in bank runs in a period of a couple weeks back in 2003 or 2004. the amount of money that the regime in north korea has garnered from super note circulation is probably not as high as some people think. the damage they've done is considerable. the damage they could do. if they can indeed counterfeit the security features on the new notes, it would be -- first, it would be incredible technologically. but they've been good up to now. they've managed to do it four different times i believe with notes. we know that they're essentially printing their notes in our notes, they're making their version of our notes on their printing presses. north korea is using its
absolute best capabilities here. it's a concern. i think that the department treasury is very much on top of it. the bigger issue is why didn't north korea get prosecuted when we investigated them. the state department played a role, the fbi had an incredible investigation into the super note activity including its ties to the official ira and ties to japanese terrorist groups from the 1970s. it was wild stuff. featured in "vanity fair" and wall street journal and things. president bush, who i had the honor to serve decided it was too controversial and we couldn't press charges against the kim regime as the same time we were negotiating with them. of course, i was negotiating with them and involved in trying to press charges at the same time. i didn't understand the reason not to do that. the north koreans know damn well what we were doing, and somebody needed to be accountable. we didn't do it. that evidence still exists. in theory, somebody could make a
case. the statute of limitations probably doesn't expire at the state-sponsored terrorism. >> i appreciate your answer. i do want to interrupt for this reason. i have one other question for you. this one relates to knock offs. i want to move to a more pedestrian level if i may. knock offs. we see a lot of it on the streets. the question is to what extent are these knock offs related to either networks of criminal activity, not just individual, but networks and also the possibility of being linked to terrorism. you talked about -- >> the largest export for north korea is counterfeit cigarettes coming out of north korea government controlled criminally run factories. they're making $700 million to
$1 billion a year. they're coming through china because north korea doesn't export directly to the united states. is it benefitting the regime? absolutely. is it benefitting the most dangerous elements of the regime? >> absolutely absolutely. are they tied into transnational crime? absolutely. you should be concerned. >> thank you. i yield back. >> chairman recognizes my colleague from pennsylvania, mr. rothfus for five minutes. >> thank you, mr. chairman. mr. farah, you point out in your testimony that iran, whose banks are largely barred from the western financial system, benefits from access to the international financial market through venezuela ecuador and bo bolivian financial institutions by moving money as if it originated in their own
unsanctioned financial institutions. can you describe how iran was able to use the institutions to evade international sanction regimes and what the u.s. has tried to do, clearly unsuccessfully, to prevent this? >> thank you, sir. there are two specific cases i can go into some detail. one is in venezuela, which was set up as a bank but all the directors were iranian. it was eventually when i and some others dug up the initial document showing that the directorships were all iranian citizens and operating as a subsidiary of an iranian bank, not the venezuelan bank as venezuela claims. they are now functioning but at a smaller level than they were before. they still have the iranian influence. the other case is the case of a bank in ecuador, where we were able to get the records to
investigate journalists in the region. got the records of the meeting between the presidents in february 2012. the president acknowledged these documents were legitimate, so we don't have the debate over whether it was real or not. he asked for a bank. the president says i have a bank for you. it was a national bank that was virtually nonfunctional at the time but till existed as a bank. after they reached the agreement, the president sent the president of the central bank of ecuador with the delegation to iran to negotiate which bank with whom they'd have korcorrespondent relationships. on the way there, they stopped in russia and opened an account in a russian bank that maintains correspondent banking relationships with iran. therefore, you can have inter bank transfers without
registering through the system. then they go negotiate with the iranian banks. there's communications from the people on the delegation saying these are all sanctioned banks. the ecuadoran government says yes. >> are there policies that we could implement to better prevent this from happening? >> absolutely. i think one of the things you're seeing now in central america where you have literally billions of unexplained dollars washing through banks that have regular relationships with the united states, there would be multiple things, which dr. asher led on the lebanese canadian bank type thing. the chairman's first question was latin america would the joint task force be good. they were looking at pocket litter and did well in what they did. we're now looking at state-run banking systems, where we have multiple banks in central america growing exno penponentially with no explanation. panama banks are doing the same thing. >> would any measures we take
though be moot? by a lifting of sanctions with respect to iran's banks. >> i think it would make it much more difficult. i think once the sanctions are lifted, the snap back is not going to be very rapid or nearly as forceful as the initial sanctions. >> let me bring professor in for a minute. in the testimony, one of the measures that you identified to counter the networks were to maintain a vigorous designation and sanctions regime against state-sponsors of terrorism, transnational criminal organizations, foreign narcotics kings pins and designated nationals. i've contended that the sanctions regime in place that we have today is justified completely on the fact that they've been exploiting terror for decades. responsible for hundreds of american deaths since 1 980.
go back to the rescue attempt and the people we lost there. then through the list of what they've been doing including the killing of hundreds of our soldiers in iraq. that alone justifies the sanctions regime. without regard to the nuclear program they have. i guess my question, doctor, professor, if we lift these sanctions on iran, will we see more terror financing coming from iran? >> it's one of the things that's limited them from supporting hezbollah. >> current sanctions have? >> right. if you think about it, if that's the measure and they were going to alleviate a lot of the economic stress that the country that is a state sponsor is actually -- it's a question of, we have been able to basically make their pocket smaller. as a global sanctions regime. the question is, what are they going to use with all the income
they'll have once they reenter the global marketplace, whether it's financial as well as the import and export and trade. there are more than enough countries willing to do business with iran. that's the downside of globalization, which i also wrote about in my testimony. as we benefitted tremendously from a productive and inter connected world, unfortunately, the terrorists and the criminals are taking the same advantages. >> i think my time has expired. thank you for your testimony and work in this field. >> we recognize the gentleman from arkansas, mr. hill, for five minutes. >> thank you, mr. chairman. thank the panel for participating. dr. asher, reflect for me on -- when we put pressure on particularly developed countries and through the financial process, through the patriot act, we squeeze legitimate users and illegitimate users out of those marketplaces, rather to the uk banking system or the american banking system. in lats have been an important tool we've had diplomatically,
whether it's finding assets or other players around the world. what can we do in that arena? can we expand the process? can we amend it? is there a mini version we can use with countries we don't have a treaty with? >> interesting question. we haven't really utilized outside of the world of just straight up drug trafficking the m lat process of assets that effectively. something i've advocated against, hezbollah is the use of rico which is a huge transnational resonance against terrorist organizations as criminal entities. terrorism is a specified, unlawful act, sua under the law. if you engage in more than two
suas that are allowed under rico, you are engaged in a criminal conspiracy and can be prosecuted. the thing about rico, you can charge anyone. if you're in isil and say i'm a member al qaeda member people like to brag about it you're charged. it's an interesting tool. you can more go after their money. if there is a foundation in a far flung land, even a country that doesn't honor our m lat lebanon, for example. we found $150 million of the proceeds of the force sale in a bank. they put the money in that. apparently, it was hezbollah's money. under our law, we have a section, a law called section 981 k of the title 18 that allows the assets to be confiscated where the u.s. government can actually reach the assets. even though we didn't have an m lat with lebanon, we were able
to freeze the money in the correspondent bank account. it was the proceeds the department of justice froze. not me. forfeit millions of dollars of hezbollah's money without going to lebanon. if we have m lats, it would be exponentially more effective. even where we don't have it, we have legal tools that can be useful. we have to deprive financial assets from our adversary's pockets. >> thank you. mr. farah, is there a model you can see in the charitable arena maybe a best practice, through either forced disclosure of legitimate charities to warn potential donors that they actually have a record of bad acting through the file of their 990 report with the irs, if it is a u.s. charity. or is there a way to formalize a
receipt of remittents, that would be better to monitor the flows? do you have further opinion on that? >> i think you're right. public awareness is enormously important. indeed, the public, who are donating to charities, have a responsibility also to know how the charities are going to spend the money. there are regulations which are developed over the years best practices as you say in this country, in the united kingdom as well, which i think require the registration of charities and the auditing of their accounts with much more detailed scrutiny than there has been in the past. that is having a real effect. fewer charities now which can be found funding terrorism in jurisdictions where the law is applied properly and fully. on remittences, too, there is a
mistake often made that somehow, they're willing to turn a blind eye, which banks may stop. but they have to know their customers more than banks. it is based entirely on trust rather than a commercial basis. >> thank you. i yield back, mr. chairman. >> chair recognizes gentleman from kentucky, mr. barr, for five minutes. >> thank you mr. chairman, for calling this important hearing and exploring and learning more about the dangerous nexus between terrorism and criminal organizations. i'm particularly interested in whether or not there is substantial evidence of u.s.-based criminal organizations that have partnered with islamic terrorist organizations. and what is the extent of the nexus between -- we've heard about international drug cartels involvement and partnerships
with terror organizations. but to what extent are american-based, u.s.-based, criminal organizations affiliated with islamic terrorist organizations like hezbollah, like isil, for anyone? >> i think that there are times when you see u.s.-based criminal organizations overlapping into the drug trade with hezbollah activities. i'm not aware of any systemic or systematic or larger scale u.s. criminal organizations. i think that's the line that most people won't cross. i think the price would be very, very high for them and they're aware of it. i think criminal organizations are largely rational actors. when the price they'd pay would be that high and the profit
would probably -- they don't need the groups to do what they need to do particularly in drug trafficking. i'm not aware of that on a significant scale. >> briefly, the drug cartel is not based in the united states. it drives a lot of income in the united states. the cartel which is basically pablo escobar's empire still living on, is exporting massive amounts of cocaine in the united states. in a partnership. they're earning a lot of income here. in both cases, there is a partnership going on with lebanese hezbollah, particularly the darker side of hezbollah. in my work personally i can attest that we've seen it. hopefully, it'll be prosecuted in criminal court. the confluence between the major cartels and criminal states, which doug pointed out, like venezuela, organizations like
hezbollah, is out of control. >> let me turn to isil for a moment. we know from your testimony and from previous hearings that the sources of isil funds are predominantly in oil and the looting of the banks from mosul and kidnappings and randsom and the like. to what extent do they participate in the international banking? what could american policymakers do to disrupt the islamic state's access to financial institutions? >> i think that's an excellent question, and one that is puzzling many experts who look at isil. the fact of the matter is most of the money is in a cash based economy, in that the money circulates within the
territories occupied by isil. insofar as monies coming from the outside, it seems to come into isil-controlled territory in cash. rather than anything else. i think increasingly we will see the sort of transfer of money through the internet which is becoming more common elsewhere. people who want to make donations will be able to send it to a bank, probably in turkey or parts of syria and iraq not controlled by isil. but it will be cashed and brought over the border. there will be some sort of interaction with the international. >> section 311 there becomes -- is that the best tool available to the united states to disrupt those banking activities? >> i would say the best tool is to determine how it's happening and deal with the individual cases as they come up. i think a blanket approach would be difficult when you look at the variety available and the
fact that the predominantly, the cash will come into the territory in physical form rather than electronic form. >> my time is ready to expire. if any of you could offer an opinion on what is the single most important policy change that this congress could enact that would disrupt terrorists access to criminal organizations, is there any one recommendation that you would highlight? >> i think the bank secrecy act of 1971 needs to be revised. we need to update it. there's too much money spent on unsuccessful attempts by banks to limit terrorism financing of organized crime. we're not focused on the important things. there's a regulation of the financial institutions. i've pioneered this stuff but i'll admit, it's not working. that's why i came before you today. we could do a much better job
with less cost to our financial institutions if we just focused on the problem actors. there's not that many drug cartels in the world. our financial institutions need to be told who is in the cartel what they're doing. they need to be given watch list information like we do with transportation companies. the airlines know if a terrorist gets on the airplane. why wouldn't a bank know if they're banking with a terrorist? >> thank you. i yield back. >> the gentleman from arizona, mr. schweikert, for five minutes. >> thank you. we try to get through so much in five minutes. i'm trying to understand flow and also cost, discounts. drug cartel sells its illicit products this north america. first, how does it get the cash back across the border in is it converting it to gold? carrying suitcases of cash?
how are they getting it to central america first? what would your opinion be? then i'll ask if they end up in ecuador, what are they being charged? is there -- what's the cost of money laundering? walk me through a couple of the steps. >> thank you. i think on the drug trade, a lot of the money goes back in bulk cash. a lot goes back in wire transfers and bank transfers into central america. the cost is generally about 17% to 22%. there are banks in central america where if you deposit over a certain amount of money generally in the neighborhood of 3 or 4 million, they create all your tax records employment records, everything. that money is now untraceable. it's one of the full services that some of the banks are
offering. >> mr. farah how much do you think is going to the government leaders? >> of the drug -- >> of that -- let's say i just spent 22% to wash my couple million dollars of illicit cocaine money coming back in the country. the government has created a charter to allow me to have access to the bank. what's that president that administration, what's the government take out of that? >> i think you see right now the vice president of guatemala resigned. i believe her secretary was involved in a lucrative scheme where there were some banks involved and also largely to avoid taxes coming across the border, custom taxes. because as the state criminalized, it becomes a state operation. they end up paying a lot. i don't know the exact percentages. i know in some cases, the government officials will take up to half of what comes out of
there. you look at some of the cases that have been prosecuted, like the former president in dpaut guatemala who had multi-hundred millions of dollars. you have another foreign president of el salvador whose investigation showed he made $400 million. >> doentd we haven't we have investigations in panama and other places regarding the issues? >> you have a lot of really good, smart people looking at this. operating in severe resource constraints. when i talk -- you have, for example, the case in a 311 designation, collapsed one of the major money laundering operations a couple months ago. they had three branches operating in panama. in that branch we had at least $2 billion from the venezuela
oil company and china's organized crime. when you go to talk to the people, the authorities they don't have the resources to reach out and do all that stuff. this is great information. we'd like to help. we have three people to look at 45 cases. they lock and drop. >> about three weeks ago, i was in panama. sat down with the official from one of the countries you mentioned. he swears that he actually sat there and watched the check from ultimately iran being deposited. and tried to speak about it publicly and has made very, very little progress. dr. asher walk me through -- because i'm trying to get my head around sowhow formalized this is. we had a hearing a couple years ago, in venezuela, there was almost a shopping list for your
price if you're washing $100 u.s. currency, you pay this and this and here's how it breaks out. is it almost that formalized? >> it's national policy. a criminal state. it's crime being carried out as an act of national policy to benefit the leaders of the regime. they can use it. no surprise there's money in the oil accounts. how do you get money from the united states? congressman barr was asking how you get the money from the u.s. i can't prove it but there have been cases where you see the oil companies for countries like venezuela, showing up in law enforcement cases related to the movement of funds. you don't know what's going on. i have no idea if the companies are involved. when you read the law enforcement cases things pop up. there has to be something going on with the use of formalized transactions and trade with a lot of these states. it is concerning.
from my think tank perspective. we are doing perilously little to police it. they are being given the privileges of government even if they're in criminal activity. >> thank you for letting me go over. we'd love to see some of the charting to understand the movement between bad actors in governments, bad actors in business and plain old bad actors. see that flowchart. >> thank the gentleman. with that objection we'll proceed to a second round of questions. if any member wishes to be recognized? the gentleman from north carolina, mr. pittenger. >> thank you, mr. chairman. i appreciate the curtsy of each of you. when there is a settlement with a bank related to there being complicit in money laundering what happens to the proceeds of those settlement funds? could those funds be used for
counterterrorism efforts? how could we designate that? who would like to take that? it's an open question. >> the u.s. marshals manages those. there is freezing but the see sure -- seizure of assets. the dea and their raids and going after the cartels. it is divided among the agencies involved in the operation. it's actually an interesting u.s. model that we're exporting to other partner nations. who are looking at asset forfeiture as a useful tool. two things the cartel leaders are worried about. extradition to a solitary cell without a cell phone in the united states, and the appropriation of funds, that their children will live a less
luxurious lifestyle than themselves. the fines that are levied to the banks and institutions that are violateing known sanctions regimes. and laundering money. there should be a portion dedicated to helping those who are actually involved in uncovering and investigating and prosecuting these crimes. i think you've heard so much about how within the u.s. government, there are really fantastic experts and analysts doing this. because of the shortages of financial and human resources, and unfortunately, too, the fact that many of our best experts are actually leaving and going to the private sector, we need to really work on capacity building within the u.s. government for combating terrorism, crime and corruption particularly through the financial lens. >> resources are critical. we're talking of hundreds of millions and billions of dollars. the allocation of the funds, seems to me advancing our
counterterrorism efforts should be important. dr. asher? >> having contributed to the asset fund, i wonder what else happens to the money? yes, we have the several billion dollar pots used. far too little allowed to be used proactively. this is a controversial issue, i know, on the hill. i respect members' opinions on this. the whole fast and furious fi yas fiasco is something we'll regret. the use of money as a tool to do sting operations is indispensable. we have to put money on the table in law enforcement to interact with transnational organized crime groups. undercover operations are critical. the funds are critical. there is a tiny amount, frankly allowed to be used for any proactive approach. which paralyzes the effectiveness of our law
enforcement organizations. not just the asset forfeiture funds not being used for increasing it, it's how they're being used. we have to get much more aggressive, like we were in the 1980s and '90s against the colombian cartels because people were getting shot in the streets of miami. >> thank you. further comment? thank you, mr. chairman. >> the gentleman mr. hill is recognized. >> there's so many members of the house and senate that are concerned about the iranian negotiations that are underway between the administration and iran. when we had our last hearing, so many of us were, i think shocked at the magnitude of money that would flow back to iran for the proposed treaty to be successful. $50 billion signing inging bonus and
the freeing of cash in the accounts that have been frozen. then, of course, the flow, as was noted by the professor of future trade capability. in your role of intestopping terrorism, how would you rank the 100 plus, $120 billion that may flow to iran if this treaty proceeds? if one is of low importance to our national security and the ability to stop the expansion of terror finance, and ten is very important, critical, how would you rank the freeing up of the $120 billion? we'll start with dr. asher and let each of you give me a number. >> i'll give a rank. i don't think it's ten. maybe five. maybe three. but the big thing is iran's revolutionary regime and
externization of the regime, which is the top priority as a policy that is the problem. when we went to the north korea six-party talks, we should have been focused not just on exporting the nuclear reactor but also focused on the fact that the yesregime was not dpoesht negotiating about the regime. maybe there's something going on where they're going to change it. i hope so. to me, that's the problem that concerns me. they're opposed to us. it's their national ideology as a state. >> iran like all nations, operates in its own best interests. it will identify those best interests in different ways according to the context of the international community around it. sure, iran, if it had more money, might fund actors that the united states and its allies would not like to see petbetter
funded. iran is providing a huge amount of money to syria to prop up the assad regime. it's paying for various militia in iraq which, on the other hand, are probably the most effective forces against isil. i think that the main way of making sure that that additional money will not be used in ways that we wouldn't like is to try to bring iran much more into the international community, so identify their interest rather than the others. instead of being the outliar trying to find advantage. that comes back to the fundamental problems in the middle east of sectarianism, the competition between saudi arabia and iran and many other complex questions. >> i agree with david asher. one of the late prosecutors in argentina was the one who
pointed out to me when we were talking about iran in latin america, he said, have you read the iranian constitution? i said frankly, no. he said, read the preamble. their official translation. it is state policy to expand using the revolutionary armed guard as the armed guard of spreading jihad around the world for world conquest. that's in their constitution. i agree with david that there is a fundamental nature of the iranian regime as something that allowing fundable money into the system will inevitably point toward much more aggressive action outside, including terrorism. that is their core underlying belief, which they acknowledge and write about extensively. >> i think it's a great concern. in the united states, we focus on the nuclear deal. at the same time, a lot of our arab allies are more focused on iranian expansionism. more importantly, they talk
about the revival of a persian empire. you've seen the influence of iran in four major capitals. they call it the shia present. several of the arab gulf state allies are worried about becoming a shia circle. to have control or influence in baghdad, lebanon, syria and sadly, what you're seeing devolve in yemen. it's not even a question of a state sponsor of terrorism. it's this question about iranian hegemony in the meddleiddle east. it's complex because of the religious angle and the historical rivalry. it's something we're not covering here in the press as much because we're so focused on the iran nuclear deal. we're not looking at the geopolitical aspirations of iran. >> thank you, mr. chairman. >> chair recognizes the gentleman from new york, mr. meex meeks, for five minutes. >> thank you for your testimony. i have been listening attentively in my office at your
testimony. let me ask first a few questions. my focus has been on this committee what we can do in congress to make sure that we are not allowing the internet and others to facilitate anti-money laundering, et cetera. mr. asher, i'll ask you the first question. i think in your testimony, you mentioned that congress should amend the bank secrecy act to facilitate anti-money laundering data sharing among banks. now, the issue that we recently had there is there is a general concern among americans about personal information being widely available to a range of institutions with little knowledge of how the information is being used. i was wondering if you could elaborate on this conflict and how congress should proceed with
improving the bank secrecy act, while also preserving the individual's human rights to privacy with the bank we have going on in congress right now. >> i appreciate you asking that question. look bank secrecy the bank secrecy act was not passed to protect bank secrets. or privacy. it was designed to stop money laundering in 19d71. they changed the name pauftbecause of the concerns. i'm concerned as an american citizen about private information being divulged. the cat is out of the bag. the amount of data anyone will have about us is almost ridiculous. it's ironic that banks are hesitant to share data with other banks, even though it is allowed under section 314 b. you can share -- a or b. banks can share money laundering data with each other. they can't pool it. if you could do the visa or
mastercard processing of anti-money laundering data you could see massive schemes that could be stopped by banks at a relatively low cost. this guy opened an account at this bank in whatever city. then at this bank in this city. they're smurfing the system. setting up a money laundering network. now, no one can see it. sharing the data would reduce cost dramatically for the banking system, but it would also improve effectiveness. still will obliged to not share the data with anyone outside of official channels. they couldn't provide it -- they would be just sharing with each other. they're allowed to do it. it won't be divulged any more than it already is. i'm not concerned. economy scale does help in trying to stop things from occurring. it can also bring down costs. moreover a consortium could be able to receive classified data
from the u.s. government. we need to consider providing it. we provided it to our ourlineairlines and shipping lines. if there is a ship full of weapons coming into the united states we'll tell them, there is a container and you have to inspect it. do we tell the banks they're doing business with drug traffickers or hezbollah? no. only through public divusions. >> the debate is going on. >> i know. it's a healthy debate and i am concerned. i don't think if the system is done right, it's not going to lead to any more information than already is. >> i would like to have this debate more. again, i'm trying to figure out what to do as a committee. i'll jump to mr. barrett. you stated in your testimony that corruption along with other
forms of poor governance particularly in the delivery of justice, is possibly the most significant driver of terrorism in the world today. i was asking maybe you can maybe you can e what role can we play in better ensuring governance in nations struggling with terrorist organizations. >> well -- >> go ahead. >> well, i think what you're doing is absolutely right. i think that as corruption corrupt officials criminality and so on the lack of rule of law is a driver of terrorism in these areas where essentially people are completely dismied dissatisfied with what's provided by government. the more you can sanction as government leaders and others involved in the corrupt practices and in the you know, financial skull dugry that goes on.
in the general criminal world and the less, obviously the less dissatisfied people will be. if they see justice being served at least, in another jurisdiction, even if not in the own. it is an effect on the terrorist problem. >> again i'd like to thank the witnesses for their testimony and time today. >> i asked our witnesses to please respond as promptly as you're able. without objection, this hearing is adjourned.
>> in about ten minutes here on c-span 3, we will bring you live discussion on women leadership in africa including peace building and development efforts. it's happening at the u.s. institute of peace in washington. >> cohosted by the african union and the african ambassador group. that's live at 3:00 eastern. the road to the white house is getting more and more crowded. we get an update from the washington journal. >> particularly on the republican side of those interested in running for president. >> well, we're going to see more people getting into the presidential race. with the new filing period starting in june. you're going to see a whole crowd of people jump in. this week we're going to see a
course of the democratic side, bernie sanders of vermont. he'll get into the race. and we'll see on the republican side former pennsylvania senator rick santorum. and then this summer of course, the debates start. and that's going to be a competition in a large field that gets momentum and buzz. >> he's been off the stage for quite some time. but i was with governor pataki in new mexico a couple of weeks ago and making a dogged effort. people seem to have forgotten him. a lot of the younger voters in the republican field.
depends on polling, if i'm correct. >> it will it's going to be fascinating to watch how this all unfolds? he's going to have more control of the process this time. but the rnc is not taking the lead role in dictating who could be at the debate as candidates. instead, it's the networks in cleveland and june. they're going to have ten people. they're going to let ten people on stage, ten candidates. you're going to have to be declared. and also have to be in the top ten of polling reported in the last five national polls that use cnn hosting and the ensuing debate. they'll have two tiers. a first tier and second tier they'll also have on television.
there's not really a process that's uniform. it's going to be based on the network's own decisions and that's going to lead to unrest in the field. and a lot of these candidates who are, perhaps, don't have to make it will be very frustrating. >> the washington journal also includes a compilation of polls about who is charting where. jeb bush got marco rubio, mike huckabee on the top of that list. robert costa talk a little bit and see in the future a little bit to the primary process. does this envision a long process? and does the gop want that? >> it sounds almost fanciful to say it. but because this field has more than a dozen contenders this could actually go all the way to a convention. and this is something that top republican officials have relaid to my privately. it's a thought that's not seen as something that could happen absolutely. but it's definitely a possibility. because the process has been elongated. you're going to have all these
debates. and the primary itself will have a lot together early next year. because the super pacs and the way a lot of candidates can get an angel benefactor and survive for a long time in the way that noouchl did newt gingrich did last time and rick santorum in 2012. even if they're not winning primaries, stay in the race. and the media coverage and the buzz that a strong debate performance provide it also was fuel. so this could go long and it could be a very long contest. >> robert costa while we've got you on the phone, you mentioned bernie sanders, tell us what to expect in burlington, vermont, today. >> this is someone who is a self-described socialist proudly so. he is a true progressive, someone who would be a competition and threat for hillary clinton. the former secretary of state is wildly popular in the democratic party. but she has some skeptics, as well, those people who wanted elizabeth warren to run.
they're disappointed she isn't. bernie sanders is the next best choice. and look for him in iowa to connect with the grass roots progressives there, the liberal voters who are anti-war, antibig banks. and in new hampshire, neighboring vermont, his home state, he could also be someone who could put up significant support in numbers. we'll have to see if he can be more than a fringe candidate in the polls. and i think he will be because at this moment, he's the only other real alternative to hillary clinton. >> and you called him a threat? you really think that? >> not perhaps in winning iowa and new hampshire at this point, but think back to 2004, howard dean with his message and momentum and just a little bit of money and a lot of young people support him was able to really become a threat to carry. i think bernie sanders because iowa has been a state in the past has gone to far left
candidates. if he can get 35% to 40% in iowa and go into new hampshire near his home state, he could provide a problem for clinton. we'll have to see. >> robert costa who reports on these things for the "washington post." thanks for your time. >> thank you. >> on the road to the white house goes through burlington, vermont, this evening. we'll be there too with live coverage beginning at 6:00 p.m. eastern on c-span. we will follow that with your calls and comments over on c-span. bernie sanders seeking the democratic nomination this year. live coverage, again, at 6:00 over on c-span. >> this summer, book tv will cover book festivals around the country and top nonfiction authors and books. this weekend, we're live at book expo america in new york city where they showcase the upcoming
books. we're live for the lit fest, including our three-hour live in-depth program with lawrence wright. and your phone calls. near the end of june, watch for the annual roosevelt reading festival from the franklin d. roosevelt presidential library. in the middle of july, we're live at the harlem book fair, the nation's flagship african-american literary event with author interviews and panel discussions. and at the beginning of september, we're live from the nation's capital for the national book festival celebrating its 15th year. and that's a few of the events this summer on c-span 2's book tv. with live coverage of the u.s. house on c-span and the senate on c-span 2, here on c-span 3, we complement that kovrm by showing you the most relevant congressional hearings and public affairs events. and then on weekends c-span 3 is the home to american history tv. with programs that tell our nation's stories. visiting battlefields and key
events. american artifacts touring museums and historic sites. history book shelf, with the best known american history writers. the presidency looking at the policies and legacies of our nation's commanders in chief. lectures in history delving into america's past. and our new series, "real america" featuring archiveal government from the '30s through the '70s. c-span 3 funded by your local cable or satellite provider. watch us in hd, like us on facebook, and follow us on twitter. >> we're live at the u.s. institute of peace in washington for a discussion on women leadership in africa. they'll also talk about peace building and development efforts. it's being co-hosted by the african union and the african ambassador group, the ambassador to the u.s. is expected to particip