10/22/2001 Treasury's Gurule on Strategy to Fight Money Laundering

The U.S. government must work closely with the private sector and international partners to "break the financial backbone of terrorist groups and their financiers", a senior Treasury Department official says.

In an October 22 speech to the American Bankers Association, Jimmy Gurule, Treasury under secretary for enforcement, outlined the U.S. strategy to fight terrorism financing as a composite of foreign terrorist asset tracking, public-private partnership and international cooperation.

Gurule said that the interagency foreign asset tracking center, a clearinghouse for information from multiple federal law enforcement, public, and intelligence sources, has been working to identify, disrupt and dismantle complex financial terrorist networks.

But terrorists and money launderers are constantly seeking new, creative ways to move money around the world, warned Gurule, so the success of a battle against them will also depend on a partnership between government and the financial industry.

Gurule also said the United States has been working closely with 144 countries to achieve concrete results in finding and freezing terrorist funds.

He identified the multilateral Financial Action Task Force on Money Laundering (FATF), comprised of 29 countries plus the European Commission and the Gulf Cooperation Council, as extremely effective in encouraging countries to strengthen their anti-money laundering regimes. In emergency meetings in Washington during the week of October 29, he said, FATF will consider adding to its list of recommendations, among others, ratifying the U.N. Terrorist Financing Convention, criminalizing terrorist financing and establishing measures to disrupt and prevent financial benefits and support to terrorists.

"We are at war against a faceless enemy that uses money to wreak havoc and pain on innocent civilians, Gurule said. It is only in unison and with innovative new strategies that we can stamp out the scourge of terrorism."

following are excerpts of Gurule's remarks:

October 22, 2001 UNDER SECRETARY JIMMY GURULE

SPEECH BEFORE THE ABA MONEY LAUNDERING CONFERENCE LUNCHEON

…I would like to outline for you today three principle components of our strategy to choke the flow of terrorist funds. First, we have established the inter-agency Foreign Terrorist Asset Tracking Center (FTAT) dedicated to identifying and disrupting the sources of terrorist financing. Second, we have created a strong, inter-active private-public partnership with the financial industry to crack down on those who criminally misuse and corrupt the international financial system. Third, we are working closely with our foreign partners on a bilateral and multilateral basis to effect concrete results in finding and freezing terrorist funds.

Along these lines, let me share the facts about our Foreign Terrorist Asset Tracking Center, a new proactive, preventative strategy for waging the financial war.

Foreign Terrorist Asset Tracking Center

-- Clearinghouse for analyzing information from federal law enforcement, BSA database, general sources or public sources, and the intelligence community.

-- Inter-agency cooperative venture consisting of Treasury assets, including OFAC [Office of Foreign Assets Control], FinCEN [Financial Crimes Enforcement Network], the various Bureaus, as well as the FBI [Federal Bureau of Investigation] and the intelligence community.

-- Purpose is to identify, disrupt and dismantle complex financial terrorist networks.

-- Proactive, preventative and strategic.

-- Endgame is blocking assets and prohibiting transactions with persons who commit, threaten to commit, or support terrorism.

We have directed the financial forensic expertise of our Treasury law enforcement agents (in particular from the Secret Service, Customs, and IRS-CI [Internal Revenue Service-Criminal Investigation]) to engage in the battle against terrorist financing. Our agents have contributed since September 11th to deciphering the financial puzzle of the attack and are now concentrating on disrupting financial flows to terrorists.

Public-Private Partnership:

Our victory will not solely emerge from law enforcement efforts, but will also depend upon public-private partnership. Public-private partnership is a principle that is of particular relevance to many of you here today and a theme that is stressed repeatedly in the Bush Administration's 2001 National Money Laundering Strategy. A strong, interactive private-public partnership between government and the financial industry is imperative to a successful crack down on money launderers and others attempting to misuse the international financial system. The terrorists and other wrongdoers are constantly seeking new, creative ways to move money around the world. This is a problem of global proportions and one that needs to be addressed jointly by both the private and public sectors for maximum effectiveness.

In the past, the public and private sectors have worked well together; as seen with the increased utilization of SARs - Suspicious Activity Reports - filed routinely by the banks. In fact, since September 11th, FinCEN has taken steps to streamline SAR reporting requirements. For instance, FinCEN has set up a toll free number, 1-866-556-3974, to enable banks to file SARs over the phone. We are also in the process of exploring new technologies that would expedite the SAR filing process.

I also hope to forge a public-private partnership on the topic of Currency Transaction Report exemptions. Currently, FinCEN receives roughly thirteen million CTRs [Currency Transaction Reports] a year. It is estimated that approximately 30 percent of those do not need to be filed under existing exemption regulations. In the coming months I will be working closely with the financial industry to better utilize the exemption rules. Proper use of the exemptions would provide law enforcement with data purged of meaningless reports. This would be extremely helpful in an age when law enforcement is inundated by more information than they can sometimes process.

The Treasury Department has also supported new anti-money laundering legislation intended to address current deficiencies in our nation's anti-money laundering laws.

The new legislation grants the Secretary of the Treasury an array of options (special measures) to deal with jurisdictions, entities, or systems that pose a primary money laundering concern. This new authority fills a gap in what steps the Treasury can take to deal with targeted money laundering concerns. For instance, the legislation designates foreign corruption as a specified unlawful activity (but limited to offenses that are defined as crimes within the United States).

The new law also addresses bulk cash smuggling.

I have already met with leaders from the financial industry to discuss some of these proposals and I anticipate further dialogue with the industry in the weeks and months to come. However, as we all know, the public-private relationship can become even stronger. Success in this war depends on both of our sectors working together. To this end, I envision a close working relationship between the financial industry and law enforcement with respect to typologies and patterns that are indicative of money laundering activities. Over the next few weeks, we will develop these typologies and share them with you to assist you in identifying money launders.

International Cooperation:

As I stated earlier, money laundering is a problem of global proportions. President Bush signed an Executive Order on September 24 providing the Secretary of the Treasury with the tools to build an international coalition to disrupt terrorist financing. Under the Executive Order, 66 individuals, entities, organizations have been designated as terrorist financing sources. Banks in the United States are required to block their accounts. Under the Executive Order, foreign banks that do not cooperate may also have their US assets blocked, causing them to lose their access to US capital markets.

144 countries have committed to joining the international effort to disrupt terrorist's assets. The civilized world has spoken with one voice - individuals and organizations that infuse these terrorist organizations with money are no better than the terrorists perpetrating these acts.

In addition, Secretary O'Neill met personally with his G-7 counterparts two weeks ago to discuss a joint plan of attack and to coordinate ongoing efforts. Specifically, the G-7 called on all countries to establish functional Financial Investigative Units [FIUs] as soon as possible. In addition all of the G-7 countries will join the Egmont Group, which promotes cooperation between national FIUs with particular emphasis on the sharing of information between FIUs.

Immediately following the September 11th attacks, we began engaging the multilateral Financial Action Task Force on Money Laundering, comprised of 29 countries and two regional bodies, in the international battle against terrorism. FATF has been extremely effective in encouraging and cajoling countries to make dramatic changes in their anti-money laundering regimes. The G-7 followed our lead and called on FATF to take action. FATF provides a unique opportunity for us to work internationally with other member countries to require that countries in good standing with FATF have rules or regulations in place to address the issue of terrorist fundraising within their borders. The FATF is convening an emergency plenary meeting here in Washington next week to discuss specific proposals to be incorporated into the FATF's Forty Recommendations. The purpose of the plenary meeting is to refocus the FATF process to address terrorist financing. It is here that we will develop money-laundering typologies that will be shared with you.

Among the proposals under consideration are:

-- Ratification of the U.N. Terrorist Financing Convention.

-- Criminalizing terrorist financing.

-- International assistance relating to terrorist financing.

-- SAR requirements for terrorist financing: If a financial institution knows, or suspects or has reason to suspect that funds are involved in, generated or held for, directed to, used by, used to support or represent the proceeds of acts of, terrorists or their organizations, it should be required to report promptly relevant information to the competent authorities.

-- Alternate remittance systems -- Senders of money and their subagents, or any other person who engages as a business in the transmission of funds, including through informal value transfer systems or facilitation or the transfer of value outside of conventional financial institutions, should register with competent authorities, and should comply with FATF Recommendations 12.

-- Freezing/Seizing/Confiscating Terrorist Assets -- Each country should immediately implement U.N. resolutions relating to the prevention and suppression of the financing of terrorist acts, including U.N. Security Council Resolutions 1267, 1333, and 1373. Countries shall have measures to disrupt and prevent financial benefits and support to terrorists, including the ability to freeze assets of individuals and organizations with terrorist links.

-- International Wire Transfers -- Countries should take measures to require financial institutions and money remitters to include originator information (name, address and account number) on funds transfers and related messages sent to and from their country and the information should remain with the transfer or related message through the point of disbursement…

10/25/2001Congress Approves Anti-Money Laundering Measures(Lawmakers target terrorist financing networks)

Washington -- Both the Senate and House of Representatives have cleared anti-money laundering legislation that aims to cut off financing channels for terrorist networks.

The legislation is attached to a broader anti-terrorism bill, and was approved in the House October 24 by a vote of 357-66. The Senate followed suit the next day, with a 98-1 vote.

"I look forward to signing this strong bipartisan plan into law so that we can combat terrorism and prevent future attacks," President Bush said in a statement following the House vote.

Money laundering involves moving funds through financial institutions or accounts to disguise their origin or purpose.

The money-laundering provisions of the terrorism bill include new rules barring U.S. banks from most dealings with overseas "shell" banks that have no physical presence anywhere.

They impose new requirements on so-called "correspondent accounts," which allow foreign banks to use U.S. banks' services, thus giving them direct access to the U.S. financial system.

Provisions also require financial institutions that establish or administer correspondent accounts to establish appropriate "due diligence" policies for detecting and reporting instances of money laundering through those accounts.

The bill gives the U.S. Treasury new powers to target foreign countries and banks believed to present a money-laundering threat. It requires U.S. banks to keep detailed records of dealings with those institutions or jurisdictions.

The bill also makes it illegal to smuggle more than $10,000 in cash in or out of the United States.

In an effort to keep the U.S. securities industry from acting as a conduit for illicit money, the legislation gives the Treasury until the end of the year to issue rules requiring securities brokers to file reports with regulators on large, suspicious currency transactions. U.S. banks already function under such requirements.

The measure also increases the monetary penalties for financial institutions that violate international money-laundering laws. The penalties must be worth at least two times the amount of the transaction, but may not exceed $1,000,000.

Money laundering is estimated by the International Monetary Fund to amount to between 2 and 5 percent of global gross domestic product, which is at least $600,000 million annually.

10/25/2001 Customs Service Fact Sheets on Financial Crime Initiatives(Existing programs modeled for anti-terrorist operation)

As the U.S. Treasury and Justice departments launch a multi-agency initiative aimed at disrupting terrorist groups' financial networks, they will model their work on successful existing operations.

Following are the texts of U.S. Customs Service fact sheets released October 25 on its El Dorado Task Force on money laundering in New York and on some of Customs' investigations into global financial crime:

THE EL DORADO TASK FORCE

The El Dorado Task Force, operating out of the U.S. Customs Special Agent-in-Charge Office in New York, is recognized as one of the nation's most successful money laundering task forces and has been repeatedly cited as a model for other task forces.

Led by the Customs Service and the Internal Revenue Service, the task force was created in 1992 to address the prolific money laundering threat in New York. The El Dorado Task Force is today comprised of 185 individuals from 29 federal, state, and local agencies, including the FBI, the New York Police Department, and the New York State Banking Department.

The El Dorado Task Force targets money laundering systems and financial crimes through undercover investigations, outbound operations, regulatory interventions, and other innovative techniques. The task force is segmented into different investigative programs that focus on areas such as money services business, the Black Market Peso Exchange, financial institutions, bulk cash smuggling and intelligence. Since its inception, this approach has resulted in the arrest of 1,500 individuals and the seizure of $425 million.

One of El Dorado's most successful initiatives was Operation Wire Drill, which targeted money laundering through the New York wire remitter industry. It began after an analysis showed that a small number of local remitters had wired nearly $800 million to Colombia in one year. To attack the problem, agents combined undercover investigations with little-used regulatory measures known as Geographic Targeting Orders (GTO).

These GTOs imposed enhanced reporting requirements on certain remitters and their 1,200 agents. The result was a major reduction in the flow of drug funds through remitters. To avoid the strict reporting requirements of the GTOs, money launderers resorted to cash smuggling to move funds abroad. Anticipating this response, El Dorado agents had coordinated with Customs officers on the East Coast and were ready. In the first six months after the imposition of the GTOs, outbound cash seizures on the East Coast jumped by 400 percent.

As the GTOs pressured money launderers on one front, investigations pressured them on another. These El Dorado cases resulted in more than 130 arrests and the seizure of $50 million. Ultimately, by combining investigative and regulatory approaches, Operation Wire Drill forced much of the New York remitting industry to be abandoned by money launderers.

In August 2000, the El Dorado Task Force was recognized as the action team for the New York/New Jersey HIFCA (High Risk Money Laundering and Financial Crime Area). Since that time, the El Dorado Task Force has created a financial intelligence center that includes 40 individuals from various law enforcement and regulatory agencies.

U.S. CUSTOMS SERVICE FINANCIAL INVESTIGATIONS

The U.S. Customs Service has a long history of combating global financial crime. Customs jurisdiction is triggered by the movement of illicit funds, services, or merchandise across U.S. borders and is applied pursuant to the authority under the Bank Secrecy Act, the Money Laundering Control Act, and other laws. Customs efforts are designed to dismantle specific money laundering systems as well as international criminal organizations. To achieve this objective, Customs uses undercover investigations, outbound currency operations, regulatory interventions, industry outreach, multi-agency operations, and global partnerships. Customs financial probes focus on the proceeds of all crimes, including drug trafficking, terrorism, fraud, and pornography. Listed below are a few significant Customs financial cases:

OPERATION CASABLANCA - This undercover Customs case is recognized as the largest drug money laundering investigation in U.S. history, resulting in 167 arrests and the seizure of more than $100 million. Three prominent Mexican banks were indicted on criminal money laundering charges, two of which pleaded guilty. The third forfeited $12 million. Of the 44 individuals arrested in the May 1998 final takedown, 41 pleaded guilty or were convicted.

OPERATION WIRE DRILL - Conducted by the Customs-led El Dorado Task Force from 1995 to 1998, this case targeted suspect remitters in the Northeast that were moving nearly $800 million to Latin America annually. The probe brought Geographic Targeting Orders against the remitters and their 1,200 agents, resulting in a dramatic reduction in the flow of drug proceeds through New York remitters. There were 137 arrests and $50 million seized.

OPERATION RISKY BUSINESS - This case ranks as the largest non-drug money laundering investigation conducted by Customs. It targeted a massive "advanced fee" scam that victimized at least 400 people around the globe of at least $60 million through the use of offshore banks and shell corporations. As of May 2001, the case had resulted in 19 convictions and guilty pleas, as well as the closure of specific banks in Antigua.

OPERATION CHOZA RICA - This Customs probe disclosed a massive money laundering operation involving Mexico's most powerful drug boss and officials at American Express Bank International (AEBI). The case resulted in convictions of two senior AEBI executives and several other U.S. bankers. In 1994, AEBI forfeited some $40 million to the government.

OPERATION C-CHASE/BCCI - This Customs probe, which concluded in 1988, was the first to expose criminal activities at the Bank of Credit and Commerce International (BCCI). The case resulted in the indictment of more than 60 individuals, including 5 BCCI bankers who were later convicted. BCCI ultimately closed in a global, multi-billion dollar collapse.

10/29/2001 Treasury's O'Neill Urges Global Money Laundering Standards (Action plans and self-assessment also needed,

U.S. Treasury Secretary Paul O'Neill is asking the Financial Action Task Force (FATF) to adopt new anti-money laundering recommendations that will set the international standard for combating terrorist financing.

The FATF, an independent international body devoted to fighting money laundering, called a special emergency session October 29-31 in Washington specifically to address the financing of terrorism.

Following is the text of O'Neill's remarks to the FATF as prepared for delivery:

October 29, 2001 Remarks by Paul H. O'Neill United States Secretary of the Treasury

Before the Extraordinary Plenary Meeting of the Financial Action Task Force

Madame President, members of the secretariat, distinguished delegates to this extraordinary plenary meeting of the Financial Action Task Force (FATF), good morning and welcome to our Nation's capitol. I thank you for affording me this opportunity to speak with you today.

For a dozen years, the membership of the Financial Action Task Force has worked to safeguard the integrity of the international financial system. You have made impressive progress countering the threats posed by money laundering. Without the force of law or treaty, this organization has convinced other nations to adopt laws and implement enforcement regimes to bar the access of criminals to the international banking system. Today, I ask you to devote your considerable experience to disrupt the misuse of the international financial system by terrorists and those who channel funds to them. The threat that terrorism poses to the world financial system demands from us an expanded effort to combat the financing of terrorism and terrorist acts. I am confident that FATF is up to this challenge.

In fact, FATF is uniquely positioned to take up the challenge of terrorist financing. Our goal must be nothing less than the disruption and elimination of the financial frameworks that support terrorism and its abhorrent acts. To achieve this end, we must commit to employing every influence both within FATF membership and throughout the world.

Among your goals for this plenary should be:

-- Adopting special recommendations that will set the international standard for combating terrorist financing;

-- Ensuring that not only all FATF members, but indeed all countries swiftly come into compliance with these standards. I urge this group by the next plenary to have in hand self-assessments and action plans for every country in the world.

-- Regular public reports on our successes in identifying and taking action against terrorist financing. Taking action, in and of itself, is not a measure of success. It's the results we achieve that will prevent future acts of terrorism.

Financing terrorism is an abuse of the international financial system and is repugnant to the international community. Terrorism is a deliberate intent to cause senseless injury and death, to intimidate populations, and to cause governments to act from fear. We must make every effort to eradicate this menace.

Since the tragic events of September 11th, I am pleased that over 150 countries have expressed their support in the fight against terrorist financing. Over 80 countries have blocking orders in place to freeze terrorist assets, including many nations represented here. I thank those countries who have helped us and I look forward to continued cooperation.

Money knows no boundaries, and no nation can combat terrorist financing alone. We must all cooperate. Similarly, this effort will extend far beyond FATF and its membership. The process must include the FATF-style regional bodies as well as all responsible members of the international community.

As this extraordinary plenary meeting of the FATF turns its attention to the serious threat posed by the financing of terrorism, I have every confidence in the success of these deliberations and the actions that will follow. We ground our resolve for this task in the goodwill and cooperation of the FATF membership, and in the conscience of the greater world community.

”

2002 National Money Laundering Strategy

U.S. Dept. of the Treasury and U.S. Dept. of Justice, Report. July 2002.

http://www.treas.gov/press/releases/docs/monlaund.pdf

This 2002 Strategy reports on the progress that has been made to implement the Goals and Objectives of the 2001STRATEGY… Since September 11, 2001, our mission has changed in important ways. The 2002 Strategy breaks important new ground, and, for the first time, describes a coordinated, government-wide strategy to combat terrorist financing. We will apply the lessons we have learned from the Federal government's efforts against money laundering to attack the scourge of terrorism and to deny terrorist groups the ability to finance their acts of cold-blooded murder.”

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