Remarks of Under Secretary for Terrorism and Financial Intelligence David Cohen Before the Center for a New American Security on ‘Confronting New…
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Remarks of Under Secretary for Terrorism and Financial Intelligence David Cohen Before the
I am grateful to be invited to speak here at the
Before I turn to the focus of my remarks, let me say a few words about the situation in
As the President has said,
Introduction
The focus of my remarks this evening will be the evolving landscape of terrorist financing, the challenges we face, and the steps we are taking to meet these challenges.
As this audience knows, since the attacks of
There is no doubt that we have made significant progress over the past 12 years. Most dramatically, al-Qa'ida today is far less well-funded than it was a dozen years ago. But I am not here to recount our successes; rather, I want to describe the new challenges we face and open a dialogue on how we should adapt to address them. Because despite our progress, one need only open a newspaper to see that terrorist threats and, more specifically, terrorist financing threats, persist.
The Dollars and Cents of Terrorist Financing
Just as we are focused on undermining the financial wherewithal of terrorist organizations, terrorists, of course, also remain focused on their finances.
Recently discovered documents belonging to al-Qa'ida in the Lands of the Islamic Maghreb (AQIM) perfectly illustrate the almost mundane financial reality for many of these groups. Among the documents found were receipts, scribbled on post-it notes:
A focus on finances has also provided propaganda value for terrorists. In 2010, the English language magazine of al-Qa'ida in the
The message AQAP was trying to send was clear: By its accounting, attacking
On one level, that message is borne out in reality. The recent attack on the
But while organizing a single terrorist attack may be relatively inexpensive, managing a terrorist organization capable of conducting an attack - particularly a sophisticated, mass casualty attack on the scale of 9/11 or the
Substantial funds are required to finance each component of the terrorist life cycle: communications, logistics, recruitment, salaries, training, travel, safe havens, bribes, weapons acquisition, payments to the families of the deceased fighters, and support to other groups. This is especially true for terrorists who aspire to strike from a distance, and even more so to strike targets that are well-defended. Their sizable operating budgets and global supply chains create vulnerabilities for even the most nimble and methodical terrorist group.
We focus our efforts on exploiting these vulnerabilities by severing terrorist financing and support. To do so effectively requires a nuanced understanding of the different methods terrorists use to raise and move funds so that we can best tailor our efforts, and try to stay one step ahead of our adversaries.
From Global to Local: How Terrorists Raise Funds Today
Now traditionally, terrorist groups relied on a variety of external funding sources to meet their needs and had comparatively easy access to the global financial system to move and store their funds. It was a rather simple system: Terrorist groups, appealing to the misbegotten sympathy of foreign states, organizations, and individuals alike, collected contributions to fund their activities, and then placed those funds into the financial system, taking advantage of unwitting and poorly defended financial institutions.
Over the past decade, powerful financial sanctions at the national and international levels, coupled with close cooperation among governments and the private sector, have helped combat these traditional methods of terrorist financing. Focusing on the potent combination of legal risk and reputational risk has proven particularly effective.
Efforts to enhance financial transparency have also made it harder than ever for terrorists and other illicit actors to exploit the international financial system. At the core of these efforts is the work of the
Turned away by banks and other reputable financial institutions, terrorist groups have increasingly turned to less regulated channels - including hawaladars, exchange houses, and cash couriers - to transfer funds. None of this is new, of course, but these channels are decidedly less effective than transacting through the global financial system. Using these alternative transfer mechanisms carries greater transaction costs; higher risk of loss and theft; logistical complications - cash is bulky and heavy; and its own legal risk, as terrorists are forced to navigate border controls to transfer funds. These mechanisms also require terrorist groups to rely on more people and larger networks than simple wire transfers, making these financing channels and the terrorists who stand to benefit from them more vulnerable to discovery.
While improved international counter-terrorism cooperation and steadily improving implementation of financial transparency standards have forced terrorist groups to alter their funds transfer patterns and diversify their revenue sources, some of the traditional fundraising and transfer practices persist and still require our attention.
First, it should come as no surprise to anyone that states continue to fund terrorism.
It is worth noting that while we continue our negotiations with the Iranians concerning their nuclear program, we will not let up one iota in our efforts to disrupt
In fact, the success of our unprecedented Iranian sanctions regime - including sanctions on Iranian financial institutions and
But, distressingly,
Most notably,
With new leadership in
Meanwhile, other traditional means of funding terrorist groups, such as deep-pocket donors and charitable organizations, have experienced a resurgence of late.
Al-Qa'ida still looks to these tried and true methods to raise funds. Since early 2012, senior al-Qa'ida leaders in
Nevertheless, al-Qa'ida is currently experiencing financial hardship. The death of several key religious and financial leaders in
Al-Qa'ida's financial strain is also the result of critical bilateral cooperation. Our partner Saudi Arabia has made great progress in stamping out al-Qa'ida funding sources within its borders. Still, we have more work to do with the Saudis to prevent other groups, such as the Haqqani Network and Lashkar-e Tayyiba (LeT), from accessing sympathetic donors in the Kingdom.
Traditional terrorist financing sources have also helped fuel the ongoing conflict in
Certainly much of the private fundraising in the Gulf related to
But a number of fundraisers operating in more permissive jurisdictions - particularly in
The influx of funds to these groups in
To confront this challenge, we are closely tracking the movement of funds to
But there are countries in the region that could be doing much more. Our ally
While we congratulate the Kuwaiti Government on steps it has taken recently to enhance its capacity to combat illicit finance, such as enacting a new law outlawing terrorist financing, we urge the Kuwaitis to do more to effectively stem the flow of money to terrorists.
There have been some encouraging conversations recently, but the appointment of
As the Kuwaitis have been reminded recently, we are committed to helping them redouble their efforts to counter those collecting funds for terrorists while ensuring that legitimate charitable donations ease the suffering of the Syrian people. But the Kuwaitis must understand that the unregulated funding of extremists does more to destabilize the situation in
Constraining this flow of funds is particularly challenging in an era when social media allows anyone with an Internet connection to set himself up as an international terrorist financier. We see this activity most prominently in
Private fundraising networks in
There should be no doubt that while we remain committed to working with countries such as
In that vein, Treasury recently designated prominent terrorist financiers
During the past few years, a diminished al-Qa'ida "core" has spawned numerous affiliates that recruit their own jihadists, organize their own operations, and raise their own funds. Other terrorist groups, with loose or no affiliation to al-Qa'ida, have also emerged, including, for example, the recently designated terrorist organizations
Many of these groups generate capital locally, often in areas subject to little if any governmental control. The funds that are raised often stay essentially where they started. Without the need to move money, terrorists can avoid key international controls and, in so doing, limit governments' ability to track and disrupt their funding flows.
These groups also increasingly have turned away from the traditional "donor" model of fundraising and rely more on criminal activity for their financial support.
Just like their longstanding reliance on less-regulated channels for transferring funds, terrorists profiting from criminal activity is hardly new. From Hizballah's cigarette smuggling to the
And while the growing terrorist reliance on garden-variety crime poses certain challenges, it has a potentially perverse upside too: Terrorist funding networks that rely on criminal activity tend to alienate the populations where they operate, draw the attention of traditional law enforcement authorities, and are vulnerable to detection by well-designed, well-implemented, and well-resourced AML/CFT programs.
Even so, the magnitude and scale of this crime-terror nexus has reached new heights with the spread of kidnapping-for-ransom (KFR) as a fundraising strategy.
Apart from state sponsorship, KFR is today's greatest source of terrorist funding and the most challenging terrorist financing threat. Groups such as AQAP, AQIM, and al-Shabaab continue to collect tens of millions of dollars from ransoms. And they are putting that money to work.
AQAP used ransom money it received for the return of European hostages to finance its over
AQIM, which has provided funding for other terrorist groups including
And in
Meanwhile, other terrorist groups, such as Boko Haram and its offshoot, Ansaru, also are increasingly turning to KFR to finance their operations.
If we are going to successfully combat terrorist financing - especially in
First is prevention. We are working closely with international counterparts to develop and implement best practices for governments and companies to reduce the risk that their citizens and employees are kidnapped in the first place. Some kidnappings could be prevented if relatively easy precautions were taken to, in effect, harden the target. We are exploring whether the structure and terms of insurance for businesses operating in high-risk areas could be modified to create additional incentives to implement these best practices.
We know, however, that even the best efforts at prevention are not failsafe. So we are also working to reduce the underlying incentive to take hostages by encouraging governments to refrain from making concessions to terrorists. Refusing to pay ransoms or to accede to other terrorist demands is the surest way to convince potential hostage-takers that they will not be rewarded for their crime.
This has been U.S. policy for many years. The U.S. government will not pay ransoms or make other concessions to hostage-takers. Although this may appear to be cold-hearted and is often agonizingly difficult to sustain in practice, plain logic and long experience demonstrate that this policy has led to fewer Americans being taken hostage, which protects the safety and security of our citizens around the world. We are not alone in this approach; the
We are working to change that and we are making some progress. In its
When ransoms are paid, our final line of defense is to deny the terrorist kidnappers the benefits of their crime. We work with governments and the private sector to identify, arrest, and prosecute hostage takers, and, when possible, to locate, freeze, and seize their assets. This can be difficult because of geography and the often limited resources of the jurisdictions where terrorist kidnapping activity is most prevalent. But there have been some notable successes.
In 2012, for example, Nigerian authorities arrested an accountant for Boko Haram after he made several money transfers that aroused the suspicion of bank officials. Those officials alerted security agents, who took both the accountant and an associate into custody. At the time of his arrest, the accountant is reported to have been carrying nearly
Terrorist groups that control territory have employed yet another self-generated revenue source - "taxing" local populations. Pioneered by groups such as
For example, despite losing control of the port of Kismayo, which was its key revenue source, al-Shabaab continues to generate at least hundreds of thousands of dollars per month, primarily through taxation and extortion, in its remaining strongholds in southern Somalia.
Newer groups are also translating territorial control into revenue. ISIL generates a portion of its extortion-derived proceeds from Iraqi and Syrian oil resources, while its al-Qa'ida-linked rival, al-
Attacking locally-derived financial flows that largely avoid the regulated financial system is, to be sure, a real challenge. While we continue to utilize our tools and authorities to expose and isolate many of these terrorist groups and their facilitators, and while we continue our efforts to bring transparency to those corners of the financial system that remain susceptible to abuse, combatting locally-sourced capital requires some new approaches as well.
Coercing funding out of local populations often foments bitterness within the very populations on which terrorist organizations rely. While capitalizing on this "rejection" dynamic is complex, we should use every tool available - from continuing to highlight the way terrorists exploit local populations to focusing aid efforts to compete with the services terrorist organizations provide - to turn this resentment into financial strain for the occupying terrorist groups and to deny them any mantle of legitimacy. We should also continue to provide robust technical assistance and training to willing countries worldwide to increase international financial transparency and improve global capacity to disrupt illicit finance.
The Critical Contribution of the Private Sector
As terrorist financing practices evolve, our tactics and approaches to combat terrorist financing also must evolve. But one constant will be our need for collaboration with the private sector.
At first glance, the increasing use by terrorist groups of less-regulated, local, and criminal means to raise and move funds might seem to imply a less prominent role for financial institutions in combatting terrorist financing.
But the opposite is true. The clues may be better masked and the footprints fainter, but terrorist groups still systematically intersect with the international financial system - albeit in more remote and obscured ways. Complicit hawaladars still send wire transfers and dispense cash to extremists with the aid of regulated financial institutions. Corrupted exchange houses still maintain bank accounts to launder illicit funds. And terrorist groups and their supporters still establish front companies to "layer" their financial transactions and avoid detection.
Our recent actions directed at the Lebanese financial sector - beginning with our action against the
Hizballah benefitted from the money laundering scheme that was the focus of these actions. The scheme spanned several continents and involved the laundering of hundreds of millions of dollars in drug proceeds. The perpetrators used bulk cash shipments, deposits into exchange houses with accounts at Lebanese banks, and a trade-based money laundering scheme involving wire transfers into
So, even in this new era of terrorist financing, banks must continue to be vigilant partners in protecting the global financial system from being infiltrated by terrorist groups and their facilitators. They can and must continue to be force multipliers, including by helping us as we work to identify new typologies of abuse, sharing that knowledge with their colleagues and the government, and implementing effective risk management strategies to address current and forthcoming terrorist financing threats.
We are looking to do our part to improve this sharing of information by exploring changes to the rules governing information sharing among financial institutions and between financial institutions and the government.
In particular, we are exploring ways to expand the use of Section 314 (a) and 314 (b) of the
Confronting Morphing Tactics in Terrorist Financing
Perhaps the most important lesson gleaned over the past 12 years is that terrorist financiers are consummate opportunists. And, if the past is any indication, we can expect to see further adaptation and evolution in how terrorists raise and move capital over the next few years.
Innovations in traditional modes of terrorist fundraising, particularly through the use of social media, will continue to pose new challenges. As we have seen in the context of
While social media already has helped terrorists raise funds, the emergence of so-called "crypto-currencies" or "virtual currencies" could conceivably help terrorists move and spend funds. But like any other form of value transfer, well-designed, well-implemented, and well-enforced regulation can combat the abuse of these new payment methods. Guidance issued by Treasury's
Back in the tangible world, terrorist groups continue to forge new alliances and revamp old approaches, and our efforts need to take account of this as well.
Established terrorist groups are increasingly acting as financial incubators for the next generation of extremists by providing capital to newer groups. This malignant form of mentorship can be seen in the tens of thousands of dollars that the
And following the model of LeT,
The need to counter these disingenuous groups cannot be minimized. Even legitimate charitable activity that benefits a terrorist organization strengthens that organization; this is why they do it. Although some of our international partners may disagree with us, we must not allow terrorist organizations to use the cover of seemingly legitimate charitable activity to mask and advance their broader violent objectives.
Rather than focusing their efforts locally, some other groups and individuals have aimed their charm offensive at international audiences to provide a cloak of legitimacy for their terrorist ambitions. Nu'aymi, the recently designated terrorist financier, embodied this duplicity as he promoted humanitarian causes in European capitals while surreptitiously providing money and material support to al-Qa'ida and its affiliates in
Despite his extensive terrorist financing record, Nu'aymi has maintained his position as president of the Swiss-based organization, Alkarama. We strongly urge Alkarama and other organizations that have a relationship, directly or indirectly, with Nu'aymi to distance themselves from this disgraced terrorist financier. Benign neglect cannot provide cover for those advocating for human rights while underwriting terror.
Conclusion
The dynamic nature of terrorist financing presents new challenges, but also new opportunities. As we confront those challenges and exploit those opportunities, we remain as dedicated as ever to deploy our tools - astutely crafted, surgically targeted, and aggressively implemented - to protect our country from those who would do us harm.
Thank you, again, to CNAS for inviting me to speak this evening.
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