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8. Freeze on Terror Cash Not WorkingJOHN SOLOMONAssociated PressThe top senators on the powerful Senate Finance Committee are openly questioning a keyfederal agency's ability to block terrorist money, citing exam ples in which U.S. o fficials failed tofreeze the m oney of people identified as terrorist financiers by Ame rican allies."Other nations rightly look to the United States for leadership and information in the war onterrorism. We should not be playing catch-up," Sens. Charles E. Grassley, Iowa Republican, andMax Baucus, Montana Democrat, wrote the Treasury Department's Office of Foreign Ass etsControl (OFAC) in a letter just before Christma s.Mr. Grassley, the com mittee chairman, and M r. Baucus, its senior Dem ocrat, cited nu merousconcerns about OF AC's perform ance, including evidence of sloppy record keeping, failure toprovide required information to Co ngress and reliance on voluntary compliance by banks toimpose sanctions against suspected terrorists.Though an internal investigation in 2002 recom mended OFAC make changes to ensure it has thelegal authority to test banks' compliance with sanctions, the agency hasn't taken steps to do so,according to the letter obtained by the Associated Press."This leaves O FAC in a position of not knowing what it does not know," the two senators wrote."While many financial institutions report their own violations when they are detected, we do nothave the luxury of assuming that all financial institutions do this."The dangers of terrorism financing operating unhindered are too great to take a passiveapproach," the letter said.Treasury Department spokeswoman Tara Bradshaw said Wednesday she was not familiar withthe lawmakers' complaint, and OFAC D irector Richard Newcomb was out of town andunavailable for comment.OFAC is an obscure office that plays a key role in the war on terrorism. It is charged with freezingthe bank accounts an d other financial asse ts of countries, companies and individuals who aredeemed enemies of the United S tates -- everyone from Saddam Hussein to Osama bin Laden.Based on orders from Congress and the president or just raw intelligence, OFA C nam es peopleto a "specially designated nationals" list that requires all financial institutions to block their money.It is one of the most po werful tools for choking off terrorist finances.Earlier this month, a U.N. mon itoring comm ittee com plained that 108 nations have failed to filerequired reports on their actions in the war against terrorism , such as freez ing assets andreporting the names of suspected terrorists.Frustrated com mittee m embe rs said they are considering asking for a stronger Secu rity Councilresolution with "m ore teeth" to force com pliance from member states.The United States, which has met most of its reporting requireme nts, has questioned the need fora stronger counterterrorism resolution.The reports are required under S ecurity Council resolutions passed since 2001, which imposedsanctions first on the Taliban and later on al Qaeda and the 30 to 40 terrorist groups thought tobe affiliated w ith them.

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Aufhauser, DavidFrom: McHale, StephenSent: Thursday, November 01, 2001 7:44 AMTo: Aufhauser, David; Wolfe, George; Fox, WilliamSubject: Terrorism for the unforeseeable futureYou asked for my thoughts on a structure for Treasury and the Executive Branch to deal with its terrorism responsibilitieson a (sadly) more permanent basis. Treasury first:-As Bill and I said, we still seem to be operating in stove pipes. IA has its "war room"; OFAC has FTAT and its normalprocesses; the rest of Enforcement has "Operation Green Quest" which is housed at Customs but staffed by IRS,Customs, LJSSS (?) agents, and has FinCEN and OFAC (?) reps, as well as plans for two DoJ prosecutors; FinCENcontinues to do its thing; and your PCC tries to coordinate; and Jim Gillis and I are working on an ad hoc basis tostrengthen our case against one designee (work that I believe will have to be done for a number of others as we start to goseriously against banks and financiers whe have the resources tochallenge designations).-FTAT, Green Quest and the IA war room should be combined (because we made a big noise about setting up each one,we can structure it so that OGQ and the war room are subgroups of FTAT). FTAT should be separated from OFAC andgiven the broad mission of developing strategic and tactical approaches to attacking the financial support for terrorists,terrorist orgs., and financial backers and facilitators of terrorists. Its mission should be to use all available resources todevelop information and action plans on each target whcih it then presents to the PCC or other suitable body. The actionplans might call for referral for criminal investigation, OFAC blocking, diplomatic action by State and IA or other responses.--FTAT would need up front to deal with FBI concerns by making clear that it is not preparing criminal prosecutions andthat all information it develops will be available to the FBI close FBI liason is essential. We need to build on your work towrap the Intell. Community tightly into the process.-As I noted onTuesday, budget is the key. This is doable within Treasury because we can establish task forces withmulti-bureau funding. There will, however, be sginificant resistance if bureaus think they are losing control. It will take asales job and some high-level push to bring it off. There will also be Hill concerns to be dealt with. Specifically, themoney and personnel that OFAC has hired using the FTAT budget would have to come with FTAT. TheEnforcementbureaus would have to provide money equivalent to the cost of supporting their current agents and participation. DOwould have to kick in money equivalent to the IA, Enforcement and GC resources currently being given. We should avoidtrying to do this thru' non-reimbursable details. The head of FTAT needs to have some measure of budgetary control.-Even so, FTAT should rely largely, if not entirely on detailees. That will avoid the appearance of the creation of a rival,peramnent structure, and (maybe) lessen turf fears. The reliance on a staff of detailees brings strengths and weaknesses.The strengths are the knowledge gained and contacts in their home organizations; the weakness is that is where they willlook for their long-term career prospects and may be inhibited in acting in ways that might be frowned upon by their homeagencies. There is also the very real possibility that FTAT will be seen as a place to park deadbeats and problememployees. From the outset, therefore, it must be seen as a choice assignment being in the front line on the war againstterrorism should be a strong selling point. The head of FTAT must be given authority to reject or return detailees and getappropriate replacements. On occasions, I suspect detailees will need to be drafted over the objectins of bureau heads.This will require a long-term solid, high-level commitment.-Because of the large Enforcement contribution, it probably make sense to have the FTAT head report to the US(E), butFTAT could be placed under the Dep. Sec. for greater stature. That would be a departure for Treasury.-The head of FTAT would have to be someone of stature. IT would be a significant enough job that you could attractoutside talent. But there are significant bureaucratic hurdles to the structure and whoever got the job would have to besomeone who thoroughly understands the levers and buttons of government. The job would have to be at the S ES level,maybe with an SES deputy.-Despite the recent focus, I suggest a low profile for FTAT giving existing orgs. the spot-light to reduce jealousies.For the Exec. Branch, the problem is harder. There is no clear leader of this fight below the President and the turfproblems are of historic proportions. Ridge has not yet been given sufficient authority. In my view, his lack of budget mayprove fatal. There is no terrorism Tsar in the sense that anyone's order must be obeyed.-Instead, the process you are grappling with is probably the most effective model. Weekly or bi-weekly meetings of seniorlevel reps of various agencies. The only thing I would add to a small (2-3 person) "secretariat" to follow-up on decisionsand set agenda. Frankly, this is what the NSC staff is for, but it usually loses sight of that role. The hard part is that thesenior level commitment must be maintained. If delegation goes to too low a level, the committee(s) fail and should beabolished and reformed as appropriate.-As you can see, the Exec. Branch piece needs more thought. I'll keep at it, as well as continuing to think on Treasury.

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October 16, 2001

MEMORANDUM FOR: MARK ROBERTS, ACTING CHIEF, FTATFROM: Jared FeinbergSUBJECT: Engagement and Education of the Money Service Industry and Law Enforcement

After initiating research on companies that advertised in newspapers for money remittingservices to South Asia and the Middle East, it has become clear that FTAT does not have theresources to identify actively all of the potential hawaladars in the United States as I describedto you in my memo of September 27 (Memo 927).Rather, I recommend that FTAT seek to increase its knowledge of illicit money service business(MSB) activities by engaging legitimate MSBs as information sources and requestinginformation from local law enforcement. Requesting MSBs to identify their illicit competitorsexploits connections among MSBs and hawaladars. Furthermore, I also recommend that FTATdetermine the desirability of creating an educational campaign for the law enforcement andregulatory communities about informal remittance systems. Banking regulators and local lawenforcement interact with MSBs and the banking sector every day and may not be aware thatthey are investigating a piece of a larger informal network that would be of great interest toFTAT's research on hawaladars and efforts to counter terrorist financing.RESEARCH ACTION PLAN1. Identify all state registered MSBs in selected locales (ATTACHED); forty-five states require

MSBs to register, and on December 31, 2001, FFNCEN will require MSB principals toregister at the federal level (ATTACHED)2. Contact registered MSBs for assistance in identifying non-registered competitors;3. Continue investigating targets through advertisements related to Memo 927;4. Contact and educate local and state law enforcement to obtain local information and insight

into informal remittance systems;5. Contact federal enforcement agencies, DEA, Customs, Secret Service, ATF, to review casefiles for information; and6. Discuss the ultimate need to hire an independent contractor to perform field research ofMSBs.

Agree Don't Agree Let's Discuss_

OFAC - 12460


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ANNEXFINCEN MONE Y SERVICES BUSINESSES REGULATIONSIn the March 14, 2000 Federal Register Vol. 65, No. 50, FINCEN issued final rules that wouldrequire MSB principals to register with the Department of the Treasury by December 31, 2001and maintain a current list of its agents fo r examination beginning January 1, 2002. Prior toSeptember 11, FINCEN was prepared to require MSBs to file SARs by September 2002.FINCEN , in consultation w ith the Under-Secretary, is now reevaluating this date and will mostlikely require MS B SARs between the spring and summer 2002.MSBs under the BSA include agents, agency, branch or office of any establishment undertakingthe following capacities: Retail currency dealer or exchanger; Check casher; Issuer of traveler's checks, money orders, or stored value; Seller or redeemer of traveler's checks, money orders, or stored value; Money transmitters;and TheUnited States Postal Service.

SELECTED LOCALES FO R INVESTIGATIONVirginia: Arlington CountryMaryland: Prince Georges County for the Tacoma Park areaNew Jersey: Middlesex County, specifically IselinNew York: Queens and ManhattanMichigan: Wayne Country fo r Detroit and DearbornOhio: Lucas Country fo r ToledoCalifornia: City of San Jose, Los AngelesTexas: Dallas-Fort WorthIllinois: Cook County, Chicago

OFAC - 12461


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WITH D R A W A L N O T I C ERG: 148Box: 00007 Folder: 0018 Document: 6Series: Team 4 FilesCopies: 1 Pages: 94

ACCESS RESTRICTEDThe item identified below has been withdrawn from this file:

Folder Title: FTATDocument Date:Document Type: MiscellaneousSpecial Media:From:To:

Subject: Miscellaneous m emos, letters, and other clasifieddocuments relting to terrorism inancing

In the review of this file this item was removed because access to it isrestricted. Restrictions on records in the National Archives are stated ingeneral and specific record group restriction statements which are availablefo r examination.

NND:401Withdrawn: 10-23-2008 by: (RETRIEVAL #: 401 00007 0018 6System DocID:5172


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WITH D R A W A L N O T I C ERG: 148Box: 00007 Folder: 0018 Document: 7Series: Team 4 FilesCopies: 1 Pages: 6

ACCESS RESTRICTEDThe item identified below has been withdrawn from this file:

Folder Title: FTATDocument Date: 07-31-2001Document Type: Note/NotesSpecial Media:From:To:

Subject: FTAT meeting notes

In the review of this file this item was removed because access to it isrestricted. Restrictions on records in the National Archives are stated ingeneral and specific record group restriction statements which are availablefor examination.

NND:401Withdrawn: 10-23-2008 by:RETRIEVAL #: 401 00007 0018 7System DocID: 5173

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T4 B18 FTAT Fdr- Entire Contents- 2 Withdrawal Notices- Memo- Email- Solomon AP Article- 1st Pg Scanned for Reference- Fair Use 689