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REMARKS OF WILLIAM J. FOX, DIRECTOR
THE FINANCIAL CRIMES ENFORCEMENT NETWORK
UNITED STATES DEPARTMENT OF THE TREASURY
THE 22ND CAMBRIDGE INTERNATIONAL SYMPOSIUM
ON ECONOMIC CRIME
THE FINANCIAL WAR ON TERROR AND ORGANIZED CRIME
MONDAY, SEPTEMBER 6, 2004
Let me say first how much I appreciate the opportunity to be part of the 22nd
annual Cambridge International Symposium on Economic Crime. I am honored to share
keynote responsibilities this morning with such a distinguished panel of luminaries. It is
also great to have the opportunity to interact with the many other participants of this
Symposium. It is often the case that the conversations that occur on the side at events
like this are as important as the formal presentations. True to the tradition of this great
University, this Symposium is known the world over for its depth of intellectual pursuit.
This Symposium has stood one of the most important tests of relevance in a global
environment where financial crime has become a “hot topic”; an environment where one
could attend a money laundering conference on any day of the week somewhere in the
world. That test is the test of time. I salute Professor Barry Rider, Saul Froomkin and
Jesus College for the foresight in establishing a symposium that has consistently brought
together the very best people to discuss the right issues at the right time.
I last walked the hallowed grounds of Jesus College as a staffer for David
Aufhauser, then General Counsel of the Treasury. On September 10, 2001, David
provided a Monday keynote address and after thoroughly enjoying our time here, David
and I hastily made our way back to Heathrow for a flight out the next morning . . .
September 11, 2001. While waiting for our gate to be called, I glanced up at the screen
and saw flights to the States methodically being cancelled – one by one. Thinking there
was a hurricane on the East Coast, we found a United Airlines ticket agent who looked up
at us – in tears – and told us that the United States was under attack. She told us the twin
towers in New York were down, and the Pentagon in Washington had been blown up.
You can only imagine the shock. After reaching our families, and confirming loved ones
were still alive and well, we hopped a cab for Central London to find a hotel room
somewhere close to the U.S. Embassy. On the way in, we tried to imagine how the world
and our lives would change. We had no clue.
As I am sure many of you know, the Commission chartered by the United States
Congress to review the events that led to the September 11th terrorist attacks has recently
finished its work of reviewing the systemic breakdowns in intelligence gathering and information sharing that prevented detection of both the plan to attack the World Trade
Center, as well as the on-the-ground activities of the terrorists in the United States in the
months leading up to the event. Much of the Commission’s report necessarily deals with
processes unique to the American political and governmental structure. Today, I would
like to focus on the financial aspects of that attack – a topic to which the Commission
gave less attention than almost any other. What have we learned from the financial
aspects of the attack? Specifically, what are we to do about funds that fueled a
monumental act of terrorism – especially when you consider that these funds were moved
and used by terrorists under our very noses without detection?
The 9/11 Commission’s principal recommendation relating to targeting terrorist
money is clear: “[v]igorous efforts to track terrorist financing must remain front and
center in U.S. counterterrorism efforts.” I, for one, enthusiastically and wholeheartedly
agree with this recommendation, and I agree with the Commission that the principal
value of focusing on terrorist financing is to use financial flows to identify, locate,
capture, and disrupt terrorists and their networks. That is not to diminish the efforts we
and others have taken to choke off the funding of terrorist organizations, or other efforts
to generally increase financial transparency to better protect the world’s financial system.
However, the Commission’s conclusion is based upon the simple fact that many of us
have known or suspected for some time – the fact that financial transactions remain an
Achilles heel for terrorists and their organizations. Money – albeit often in very modest
amounts – is needed to carry out terrorist operations, and money trails leave footprints.
These trails connect dots – establishing previously unknown connections – so that
organizations and networks can be defined and attacked. And most of the time, the
money trails do not lie. Information in financial transactions is, for obvious reasons,
generally reliable and, therefore, valuable to law enforcement and intelligence operatives.
As we have developed and shared financial information throughout our government and
between governments, we have learned that these trails are critical ways our law
enforcement and security services can identify, locate, and arrest or capture terrorists,
their networks and their supporters.
But in order to track money, you need information. A great deal of this
information is obtained overtly, through laws promoting financial transparency, such as
the Bank Secrecy Act of 1970 in the United States. For over 30 years, the United States
Treasury Department has administered this Act to address very different problems other
than tracking terrorist financing. The Act is implemented to seek information to identify
and address money laundering – the efforts to take large sums of cash derived from illicit
activity and “clean” it through a set of financial transactions so that dirty money appears
legitimate. Tracking terrorist financing usually involves the movement of money – often
clean money and often money in relatively modest amounts – to support an evil criminal
purpose. Another way to put it – with money laundering, investigators look through a
telescope trying to watch the movement of big amounts of dirty cash. With terrorist
financing, investigators need a microscope, trying to watch the movement of often very
small amounts of cash to support evil people attempting to achieve an evil purpose.
Think of it – a little over $400,000 financed one of the most devastating terrorist
attacks ever. This amount financed everything from flight schools for the hijackers to the
first class plane tickets purchased for the flights on September 11th. The 19 hijackers
engaged in financial transactions every day – paying rent, renting cars, buying food, and
even sending small amounts of money back to the Persian Gulf just before the attacks –
without ever being detected. It should be very apparent why. Our system was simply not
created to catch those types of transactions. Our system was geared to a different
purpose.
It should be obvious to all that the question that currently sits squarely with
national policy makers in the United States is whether the systems we have built to
ensure financial transparency – most of which were aimed at money laundering stemming
from the illicit narcotics trade – are sufficient to provide the government with the
information needed to vigorously track terrorist financing. As policy makers address
these issues, allow me to state the obvious: it really is all about information.
Information is the lynchpin that holds together the ability to track terrorist
financing. Some of this information is very sensitive information, developed through
difficult and dangerous investigation or collection. So, if our systems are geared toward
collecting information for a different set of problems, how can we collect the information
needed to vigorously track terrorist financing? One tool provided by Title III of the
U.S.A. PATRIOT Act found in Section 314 carries the mandate from the Congress to
share information with the financial sector and to permit – through a safe harbor –
financial sector members to share information with each other. So far, we have
implemented this section by creating a “pointer” system for law enforcement. This
pointer system gives law enforcement, in the right circumstances, the ability to work with
FinCEN to transmit names of persons of interest to the financial sector to determine
whether those institutions have any relevant transaction or account information. The
industry reports back only when it has information, and then law enforcement follows-up
with the institution with appropriate process. While this system is considered a success,
and law enforcement has advised us it has been a valuable tool, I believe it is only an
initial step in implementing our Congressional mandate to share information on a twoway
basis with the financial industry. I believe the U.S. Congress was getting at
something more profound.
Sharing relevant sensitive information with the financial sector in a deeper and
richer way necessarily breaks several old and deeply entrenched paradigms. It brings the
financial sector into a more collaborative relationship with the government. The genius
of the mandate issued by the U.S. Congress is that it demonstrates that the old 20th
Century paradigm of governments alone protecting their citizens from outside threats is
no longer valid in a post-September 11th world. This paradigm, which has existed in one
form or another since Pax Romana, simply no longer applies when enemies can melt into
society and commandeer aircraft to use as missiles of devastation, or when a group of 28
thugs can take over a school and murder over 300 innocent souls with a brutality that has
been rarely seen in modern times.
Deeper sharing of sensitive information with the financial sector also breaks the
paradigm relating to the protection of information. We cannot enlist the help of the
financial sector unless we can overcome the secrecy that envelops much of this
information, whether it is information collected by the intelligence community or
information developed by law enforcement. Much of relevant and useful information we
would share typically comes from sources that have traditionally and automatically
restricted access to small subsets of governmental personnel with a “need to know”
rooted in Cold War perceptions of reality. These rules were created when “Spy vs. Spy”
was the game nation states were playing.
Now, let me be clear. I understand that law enforcement is correctly reticent
about sharing information critical to its investigations with anyone on the outside, just as
intelligence services understandably guard their information to protect their sources and
methods of obtaining the information. It is also true that some sharing of sensitive
information is occurring with the financial sector, but it is usually occurring in a manner
that is too ad hoc and generally occurring only when law enforcement or security services
have leads that bring them to particular financial institutions. If the goal of our efforts is
to vigorously track terrorist financing so we can identify, locate, and disrupt terrorists,
their networks and their operations, then we must be willing to share sensitive
information on a more systemic basis. This will not be easy. In addition to the real and
legitimate governmental concerns about the protection of information, there are real and
legitimate concerns about liberty and privacy. But I believe these concerns can be
overcome – indeed, these concerns must be overcome if we are truly going to fight to win
the “war” against terrorism. Our financial sector is more than eager to help. To be sure, I
have witnessed that sector’s willingness to help time and again since September 11th.
It is also important to remember that the movement of money in the 21st Century
knows no borders. Terrorism – particularly the type of terrorism we are dealing with
since September 11th – has global reach as proven by the gruesome facts unfolding in
Ossetia this past week. I would like to spend a minute or two to discuss the issue of
information sharing, but in the context of the upcoming 10th anniversary in 2005 of what
began as a small international meeting in Brussels that evolved into the Egmont Group of
Financial Intelligence Units. In 1994, there were only a handful of operational units
established pursuant to the Financial Action Task Force recommendation that nations set
up a centralized entity to receive, review and make available to appropriate authorities
financial transaction reports required by regulation and filed by financial institutions.
The goals of that first meeting were to “start finding practical ways for information
sharing and practicable solutions for eliminating barriers to such exchanges” among
Financial Intelligence Units.
The Egmont Group has collectively accomplished much toward those goals, in a
pretty spectacular fashion. Right now that original handful of “FIUs,” as they are known,
has expanded to 94 nations that have made a commitment to put the resources in place to
accomplish what FATF envisioned. The fact that 94 nations have done so is impressive
in its own right, but consistent with my message to you today, what is even more
important is that each FIU makes a commitment to sharing the information they collect with other FIUs. I know it works. I have seen it in action. My organization, the
Financial Crimes Enforcement Network, is the United States “Financial Intelligence
Unit.” We have been a participant in the Egmont Group from the beginning and we host
the Group’s secure website. My point is that when it comes to “breaking down barriers”
to information sharing, the Egmont Group provides a model for how things can get done
when there is an understanding that information becomes exponentially more valuable
when it moves quickly to those who need it and can use it. I was heartened and enthused
to hear the commitment to even greater information sharing that was made at the most
recent plenary of the Egmont Group on the Isle of Guernsey this past summer. In my
mind, that type of commitment is the type of commitment we need from policy makers to
law enforcement to security services to regulators to break out of the old paradigms and
address the threat we are all facing. We need to find ways of creating greater
transparency in information flows among other governmental authorities and with the
private sector to improve the odds that we will not be left in the dark when it comes to
tracking terrorist financing.
Finally, if I may summarize, increasing financial transparency, both in the United
States and the rest of the world is a key aspect to the global response to terrorism. It is
absolutely imperative that we develop rules guaranteeing a certain level of financial
transparency if we are to be effective at tracking terrorist financing. We all should
applaud the good work of the FATF and the International Monetary Fund and World
Bank on these efforts. Those institutions are making a very real difference in developing
these rules. While multilateral consistency is essential in adapting international standards
to the reality of tracking terrorist financing over the long term, we intend to use whatever
tools we have available in situations where entities outside the U.S. are found to be
knowingly supporting terrorism. One such tool is found in Section 311 of Title III of the
USA PATRIOT Act. This provision provides the authority to protect the U.S. financial
system from jurisdictions, institutions and types of financial transactions found to be of
primary money laundering concern. In May of this year, the U.S. Treasury Department
designated the Commercial Bank of Syria (CBS) as a financial institution of “primary
money laundering concern” based on concerns that related to financial transparency, and
problems we observed with that institution, including terrorist financing. While the use
of Section 311 is meant to be a prophylactic measure – not a sanction – we believe that
use of this tool will help convince jurisdictions and institutions to adopt real reforms that
permit an acceptable degree of financial transparency. With appropriate restraint, we
have applied this measure when we have reason to believe that our financial system is
being threatened by terrorist financing or other criminal networks and we will continue to
apply it. It is our hope that this measure will lead to greater financial transparency
around the world.
I very much appreciate your kind attention this morning. I look forward to
discussing with many of you these important issues and the other important issues that
will be raised this week. Again, thanks to Professor Ryder, Mr. Froomkin and to Jesus
College and Cambridge University for creating this terrific forum to discuss these
critically important issues.
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