Speeches and Remarks 2009
Remarks by Daniel Glaser, Acting Assistant Secretary (Terrorist Financing) United States Department of Treasury at the India Today Conclave 2009, New Delhi, March 6, 2009
Thank you. It is an incredible honor to be included in such an esteemed program today. One that includes foreign ministers, former presidents and prime ministers. Even the Dalai Lama himself. It is also an honor to be included on this panel of distinguished counterterrorism experts. As would be expected, the other panelists are part of the law enforcement and intelligence communities. This reflects the reality that for many years, counterterrorism efforts were within the realm of police, intelligence officers, diplomats, and the military. The participation in this panel of a financial expert is a reflection of an important evolution in how the international community thinks about international security. One of the primary developments in the realm of international security over the past ten years has been the emergence of financial ministries and financial measures as a central component of security strategy. It is this evolution, and its implications for Indian and global efforts to combat terrorism, that will be the focus of my remarks.
Today, it is clear that any strategy to address a threat to international security—be it a national or multinational effort—is incomplete if it lacks a financial component. The financial component may not necessarily be the central component, but any comprehensive strategy will include it as an essential element. A review of United Nations Security Council Resolutions over the past several years confirms this: from terrorism to proliferation; from Iran to North Korea; and even the 2005 assassination of Former Prime Minister Rafik Hariri; the UN’s response to virtually every international security crisis has included a financial component in a prominent role. Moreover, previously obscure groups, such as the Financial Action Task Force, or FATF—the international standard setter for anti-money laundering and countering the financing of terrorism—have taken on a prominence never before imagined. And even bodies such as the International Monetary Fund and World Bank have taken on an important role in ensuring all countries have adequate authorities in place to participate effectively in this global effort.
The reasons for this evolution are clear in retrospect, even if they were perhaps less so during the evolution, itself. The emergence of the international financial system in the 1990s provided the ability to seamlessly move funds in amounts large and small across the world in the blink of an eye, whether for licit or illicit purposes. And even in our current financial crisis, the international financial system remains a fundamental fact of life. Any organized international activity is ultimately dependent on it, whether that activity is licit or illicit. This dependence on the international financial system by illicit actors—though it provides them with great capabilities — also represents for them a meaningful vulnerability.
First, the international system can provide an evidentiary trail from those who commit the crimes to those who plan and support it—some people refer to this as “following the money.” Second, the patterns through which illicit organizations use the financial system can reveal those organizations’ structure, thereby allowing us to identify, disrupt, and dismantle the very networks that provide the backbone of support for these organizations.
I am proud to say the U.S. Treasury Department has been in the lead in the international community in recognizing the opportunities this presents to governments and the international community. In 2004, Treasury established the Office of Terrorism and Financial Intelligence, the purpose of which is to marshal the authorities, expertise, information, and contacts unique to finance ministries to make it costlier, riskier, and less efficient for illicit actors to access and benefit from the international financial system. Put another way, whereas finance ministries were previously focused solely on the safety and soundness of the international financial system, we are now be focused on the safety, soundness, and security of the system.
In focusing on the security aspect, we take a two pronged approach. First we identify vulnerabilities within the financial system and close them. You could think of this as playing “defense.” Second, we identify, disrupt and dismantle the financial networks supporting illicit activity. You could think of this as playing “offense.” This is a theme I will return to later.
Over time we have become increasingly sophisticated in our approach to this two prong effort and have applied it to a variety of international security matters. Financial pressure has been at the center of international efforts to address the proliferation threats posed by Iran and North Korea. However, nowhere has it been more prominent that in international efforts to combat terrorism.
Like nearly everyone in the world, terrorists require financial support to survive and much more than is commonly thought. This support goes far beyond funding attacks. Operating a global terrorist network is not cheap. Money is needed for recruitment, indoctrination, command and control, training, travel, weapons and other materiel. In many ways, it is not an exaggeration to say that the primary activity of many terrorist groups is raising and moving funds. The importance cannot be overstated. Take this quote from a 2007 interview with a high-ranking al Qaida official, Mustafa Abu-al Yazid:
"As for the needs of the Jihad in Afghanistan, the first of them is financial. The Mujahideen of the Taliban number in the thousands, but they lack funds. And there are hundreds wishing to carry out martyrdom-seeking operations, but they can't find the funds to equip themselves. Funding, therefore, is the mainstay of Jihad."
This quote illustrates the importance of funding and financial networks in supporting terrorism. As India reexamines and reenergizes its counterterrorism efforts in the wake of 26/11, building up a robust capacity to counter the financing of terrorism will be crucial.
I will now take a few minutes to highlight some of the many areas where I think these counter financing of terrorism efforts will be focused, both in India and in other nations. Let’s return to the two pronged approach I laid out and the first prong: identifying and closing vulnerabilities, or “defense.” The key theme underlying all aspects of this prong is transparency. Indeed, AML/CFT efforts have even been underscored in the G20’s response to the global financial crisis as being crucial to efforts to improve market integrity.
The challenges in area go beyond the formal sector, to include a wide range of other activities that make use of the international financial system. The first area to examine is charities. It is important to note at the outset that the vast majority of charities are admirable organizations providing important services to communities that might otherwise go without. We must make sure that the actions we take to combat terrorist financing do not dampen the charitable impulse. That said, it is beyond dispute that charities are a primary means by which terrorists raise, move, and utilize funds. Indeed, more charities have been designated for supporting terrorists than any other type of organization. This is no surprise, as most terrorist organizations openly advertise themselves as charities. Charities represent a uniquely ideal vehicle not just to raise and move funds, but to provide material support to violent extremist movements in the form of radicalization, indoctrination and logistical cover and support.
Our primary challenge is to strike the right balance among three imperatives. First, we need to shut down charities that are complicit with terrorist groups. Second, we also need to provide adequate oversight of charities to promote appropriate transparency. Third, we need to ensure that there are safe alternative channels to provide charitable giving to areas that have a critical need for humanitarian services, but that are particularly vulnerable to terrorist exploitation. The international community is working together to strike the right balance in applying these measures. It is worth noting here that India is playing an active role in issue, to include hosting an upcoming regional conference next month on the abuse of charities that will be attended by officials from neighboring countries in South Asia.
Hawala, or informal remittance systems, are popular in many parts of the world, including here in India. They are used by a wide segment of society and are a key mechanism for those who live in communities without easy or affordable access to formal financial institutions. However, a lack of appropriate oversight and regulation of hawala leads to a lack of transparency, which in turn makes it an ideal tool for terrorist financiers. As with charities, the response should be threefold:
- Ensuring Alternatives: in this case expanding the provisions of formal and affordable financial services to all communities.
- Oversight: conducting outreach, education and regulation of hawalas in order to introduce some transparency into the system.
- Enforcement: targeting and closing the service providers who are unwilling to operate within the system.
This is a big issue for India, as hawala are estimated to account for 30-40% of the formal financial sector here, and it will be an important challenge moving forward.
The last vulnerability I want to touch upon is more modern, new, or emerging technologies such as internet-based payment services, credit cards, or prepaid cards. Some of these were reportedly involved in the Mumbai attacks of 26/11. Here, we need to make sure that our financial regulatory framework keeps pace with innovations in the financial sector so that new vulnerabilities are not created. India clearly understands this. The Indian parliament just last week enacted a major amendment to the existing law on money laundering, which, among other things, requires credit card operators to report transaction information to India’s financial intelligence unit in the same manner as banks and other financial institutions.
Now I’ll turn to the second half of that strategy, which is offense – identifying, disrupting and dismantling terrorist networks. Just as transparency is the key to “defense” prong, the key to this prong is international cooperation.
United Nations Security Council Resolution 1267 provides the framework for global action against Al Qaeda and its affiliates. Under UNSCR 1267, more than 170 countries have implemented blocking orders to freeze the assets of the more than 500 individuals and organizations that are currently listed under the resolution. Importantly, following the recent terrorist attacks in Mumbai, the United Nations Security Council designated the charity Jamaat ud-Dawa (JUD) as a front organization for Lashkar-e Tayyiba. Along with JUD, the Security Council designated four key senior figures within Lashkar-e Tayyiba, including its chief of finance and chief of operations.
Moving forward, the key challenges in this area are maximizing the number of countries that avail themselves of the international cooperation and support of the UN by proposing designations under 1267. Equally as important, much work needs to be done around the world to improve the ability of governments to effectively implement 1267’s financial components. India has already taken steps in this area. Following the recent terrorist attacks in Mumbai, the Indian parliament passed an amendment to the Unlawful Activities Prevention Act that provides for strengthened enforcement of UNSCR 1267 and more robust measures to criminalize terrorism finance within this country.
One final area of international cooperation worth mentioning is the FATF. As I noted earlier, FATF is made up of the major financial centers throughout the world and is the premier international body for articulating international standards for combating money laundering and terrorist financing, assessing countries for compliance with those standards, and taking collective action against countries that represent particular threats. For example, just last week, FATF called upon its members to implement countermeasures to protect the international financial system from terrorist financing risks emanating from Iran. India recognizes the importance of this group and is actively taking steps to become a full member, thereby giving it a seat at the table for some of the most important international discussions on terrorist financing.
In conclusion, India is beginning to recognize the importance of counter terrorist financing as a central component to the fight against terrorism. It has already taken important steps and more will come in the future. I look forward to these efforts and to continuing our close cooperation with India as we jointly combat this threat.