"Fighting the Financing of Terrorism"
Wednesday, September 7, 2016
As prepared for delivery
Thank you to the Council on Foreign Relations for this opportunity, and thank you, Michael, for moderating our discussion.
This conversation is especially timely as we approach fifteen years since terrorists attacked our country on September 11, 2001. At that time, the United States had a fundamentally different understanding of terrorist groups, their ideologies, and their operations. Although we had seen terrorist attacks before, September 11th marked the beginning a new chapter in our nation's security.
In the years since, our national security apparatus has responded to evolving threats and has prioritized the fight against terrorism and violent extremism. We have invested in a cadre of professionals who track, analyze, and evaluate terrorist groups' operations, and we have developed our own strategies and tactics to prevent and respond to these operations.
By the time I joined the Senate in 2007, our country's response to terrorism had evolved dramatically. We had new bureaucratic structures, new domestic laws, and a new set of international norms and regulations dedicated to cracking down on terrorist groups operations. We invested in technology and research that profoundly changed the way we fight asymmetric threats: a good example of this is our response to the threat posed by improvised explosive devices (IEDs). We enacted tough, effective sanctions – asset freezes and visa bans – against terrorist financiers, as well as secondary sanctions against the banks that facilitated their transactions. We invested in programs that help keep nuclear and radiological materials secure, so that they do not end up in the hands of terrorist groups.
For example, prior to 9/11, the Department of Treasury was not as significant in our fight against terrorism as it is today. An act of Congress established the Treasury Office of Terrorism and Financial Intelligence and its Office of Intelligence and Analysis in 2004. Since then, this office has grown into an essential component of our counterterrorism work: they are charged with the task of cutting off the financial resources that terrorist groups need to survive.
I first began working on terrorism financing issues in the context of Hezbollah: the terrorist organization, army, and criminal syndicate that masquerades as a political party. They derive revenue from a variety of sources, and their wealth allowed them to establish operational cells in Europe as well as to build a sophisticated fighting force. I led an effort to urge the European Union to designate Hezbollah as a terrorist organization, so that sanctions could be applied to cut off their ability to use the European financial system. Of course, the EU did end up designating Hezbollah's military wing, and we again increased the pressure with the enactment of Senator Jeanne Shaheen's Hezbollah International Financing Prevention Act last year. This legislation levies tough sanctions against financial institutions that do business with Hezbollah and strengthens Congressional oversight of the Administration's efforts to stop the financing of this group.
The terrorist group ISIS presents a new set of challenges. Similar to Hezbollah, ISIS is part terrorist group, part army, and part criminal syndicate, fueled by a hateful ideology and controlling communities in Syria and Iraq. Early in its Iraq campaign, ISIS gained a huge windfall as it sacked banks in places like Mosul. We know that ISIS profits from the illicit sale of oil, antiquities, and other items through the black market while extorting the civilians under their control. ISIS uses this funding to conduct terror attacks and control territory in Iraq and Syria. They use it to buy more weapons, ammunition, and components for improvised explosive devices (IEDs). They use it to pay salaries for fighters and to develop propaganda materials to spread their hateful ideology.
In August 2014, I joined with Senator Marco Rubio to urge the Administration to prioritize stopping ISIS's financial support, and soon after, the President announced his comprehensive strategy to degrade and defeat ISIS. Already we have seen evidence that U.S. and coalition efforts against their financial networks, including airstrikes on oil trucks and cash storage sites, have had a meaningful impact on their finances. For example, ISIS has had to reduce the salaries they pay their fighters in recent months.
In recent weeks, the Administration has been reporting significant progress on rolling back ISIS control of territory. In April, Major General Peter Gersten, deputy commander of the Combined Joint Task Force – Operation Inherent Resolve reported on April 26, 2016: "ISIS's ability to finance their war through oil refineries has been destroyed." The President recently signed into law my bill, the Protect and Preserve International Cultural Property Act, which will help ensure the United States is not a market for antiquities looted from Syria.
Nonetheless, ISIS is re-writing the rule book on how terrorist groups work. Despite the loss of territory in Iraq and Syria, it continues to cultivate affiliates in northern and western Africa, central Asia and other parts of the Middle East. It continues to sow the seeds of terror in neighboring countries like Turkey and Saudi Arabia and further afield – in Europe, Africa and, of course, here in the United States. They've figured out how to operate outside the international financial system, lessening the impact of our banking sanctions. It has taken far too long for our own strategy to adapt and respond. We may be able to defeat ISIS, but the problem of terrorist financing will stay with us. I took a trip to Israel, Qatar, Saudi Arabia, and Turkey in February that confirmed this assessment.
That is why I believe a more robust, permanent international architecture for countering terrorist financing and facilitation networks is warranted. In June, I introduced the Stop Terrorist Operational Resources and Money (STORM) Act with Senator Isakson as a first step. The STORM Act is a new concept in stopping terrorism financing: that governments – not just banks – have an inherent responsibility to pull their weight. Thus far, we have not had a strong set of tools to compel greater cooperation from our partners.
We have to go farther than "naming and shaming." In 2014, Treasury Under Secretary David Cohen called out Qatar and Kuwait as "permissive jurisdictions for terrorism financing." That public shaming had an impact, but without penalties behind it, progress in these countries has still been slow. Perhaps this is because Republicans have failed to act to confirm Adam Szubin, the Treasury official now in charge of these efforts, sending a signal that partisan politics prevails over the national security imperative of rigorously enforcing existing sanctions and holding countries accountable for failure to pull their weight. There is no excuse for failing to act on Adam's nomination – he is eminently qualified.
The STORM Act authorizes a new designation, called "Jurisdiction of Terrorism Financing Concern," which can be triggered either by a lack of political will or a lack of capacity. Some countries have the capacity to make meaningful progress, but lack the political will or domestic consensus to do so. I believe we should levy tough penalties that prompt reconsideration of their willful ignorance or tacit acceptance of terrorist financiers carrying their countries' passports or operating in their territory. The most troubling scenario, from my perspective, is when corruption and politics hinder law enforcement and judicial proceedings. The penalties under the STORM Act include suspension of security or development assistance, blocking of arms sales, or blocking loans from the IMF or World Bank.
With some countries, though, the challenge is not political. It is a basic lack of capacity. In these situations, the United States is well-equipped to provide technical assistance and capacity building. We have done this before, with nuclear nonproliferation, where for decades now U.S. nuclear security and border security experts have provided training to other countries. We can and should do the same with countering terrorism financing. The STORM Act authorizes the Administration – Treasury, DHS, State Department – to do this work.
In the years since 9/11, terrorist groups have become more sophisticated in the way that they obtain money and finance their operations. We have to respond in kind, and it is right to expect all our allies and partners to do the same. This effort will require tough conversations with our partners and diplomatic leadership, analogous to the work I did with Secretary Clinton to stop the flow of IED materials into Afghanistan. The STORM Act sends a clear message: if you fail to pull your weight, there will be consequences. If you want to improve your record, the United States is here to help. This is the first step in building a more robust international system and legal architecture to stop terrorism financing in the long run, to undermine al Qaeda or ISIS today, or some future group that has not yet emerged.