Dismantling the Financial Infrastructure of Terrorists
WASHINGTON – House Financial Services Committee member Rep. James H. Maloney (R-5th) said Thursday that proposed legislation to track and obliterate the money trail that terrorists use would be a step in the right direction but would result in only “incremental improvements.”
“You don’t always know how much more you have to do with anything until you make the improvements at hand,” Maloney said. “What we can do is pass the best bill that we possibly can, see to its implementation, evaluate it and see if it’s working. And to the extent that it isn’t, find ways to strengthen it.”
After listening on Wednesday to Treasury Secretary Paul H.O’Neill, testimony, Committee chairman Michael G. Oxley (R-Ohio) and senior Democrat John J. LaFalce of New York proposed to allow enforcement agencies to eliminate the financing of terrorist organizations, track terrorist money funneled into secret offshore havens inside and outside the United States and facilitate increased foreign cooperation with U.S. efforts.
Their bill would make it a crime to smuggle currency in excess of $10,000 or to falsify a customer’s identity knowingly when making a transaction with a bank or other financial institution.
The aim of the bill, Oxley said at the hearing, was to “dismantle the financial infrastructure of terrorism and to starve terrorists of funding.” He acknowledged that current money-laundering laws were inadequate to deal with terrorist financing but said the bill would produce “effective, targeted solutions to the immediate problems we encounter following the events of Sept. 11.”
Congress had scuttled money-laundering bills several times in the past because of “concern in the financial community that they would have a great deal of additional bureaucratic requirements imposed upon them,” Maloney said. “What is different now is that they are acknowledging now that there is not really an alternative to this kind of legislation.”
Committee members said they were committed to updating the money-laundering laws and wanted the government to track down money that fuels narcotic-traffickers and large criminal organizations as well as international terrorists.
“The current money-laundering regime,” Oxley told committee members, “does not appear to be particularly well-suited to catch an unconventional terrorist operation. And this [legislation] will be the first important step on money laundering but it will by no means be our last.”
LaFalce said, “The bill will close the gap in O’Neill’s authority to respond to money laundering regimes.”
Maloney added the measure “attempts to get a stronger hand around transactions that aren’t known to be related to terrorists and that might be related to them.”
Spencer Bachus (R-AL), the chairman of the Subcommittee on Financial Institutions and Consumer Credit, said, “We must place a much higher priority on non-traditional or underground systems that fall largely outside the scope of the formal reporting and record-keeping requirements that have been the backbone of the government’s anti-money-laundering efforts for the last three decades.”
Maloney said that in advanced nations with formal banking systems, it is easier to monitor and regulate financial transactions and root out underground financial activity than in less-developed countries, where many of these arrangements are not only informal but sometimes also illegal.
“I think it’s very difficult,” Maloney said. “If you didn’t have a sophisticated tax system, accounting system and a legal system, it would not have been possible, even in the U.S., to curtail illegal activities. So in parts of the world where there are informal underground relationships for moving money, it is a major challenge. I would say it is one of the biggest difficulties facing any country who wants to work with us in clamping the financial resources of terrorist organizations.”
O’Neill, in his testimony, said, “Additional legislative tools to enhance the Treasury’s capability to track, block and seize those assets, to secure our borders and to freely share information about terrorist activity between law enforcement and U.S. intelligence services are what is needed.”
“Our goal is to drain the financial lifeblood that allows terrorists to finance and accomplish their deadly goals, and in doing so we aim to shackle their ability to strike again,” O’Neill said. He added that the Treasury Department had identified 27 accounts it wants frozen and that in the next few days, additional accounts would be added to the list.
President Bush said Wednesday that as of Oct. 1, $6 million had been blocked and 50 bank accounts frozen as other countries joined the American effort.
When Rep. Maxine Walters (D-CA.) expressed concern about banks in the United States that laundered money for terrorists, O’Neill replied: “Our banks have to stop taking money from bloody dictators, drug traffickers and terrorists. If we find evidence that banks are aiding terrorists, you have my reassurance that President Bush will shut it down.”
Maloney said he found it highly unlikely that any U.S. bank was knowingly or intentionally involved in money laundering but that there are already massive criminal sanctions on the books.
“There may be some inadvertent flow of money that may come from either terrorist organizations or go to them,” Maloney said, “and that’s precisely what the legislation attempts to deal with.”
Maloney concluded by saying, “The opposition that existed to tightening the money-laundering rules has very much dissipated because of Sept 11. I think as a result, we will see successful passage of this legislation.”
