March 29,2004

Grassley, Baucus Call for ''Fundamental Reform'' in War on Terrorist Financing

Senators Urge Creation of Coordinated Financial Crimes Enforcement Agency

(WASHINGTON, D.C.) With the one-year anniversary of the war in Iraq having just passed, U.S.Senators Chuck Grassley and Max Baucus today voiced their concerns about inadequate resourcesand lack of direction in the new, special office created to crack down on terrorist financing.On March 8, 2004, the Administration announced that it intends to create a new Office ofTerrorism and Financial Intelligence (TFI) at the Department of the Treasury. The new office wouldhave one under-secretary and two assistant secretaries to oversee the Financial Crimes EnforcementNetwork and the Office of Foreign Assets Control. Baucus and Grassley view this level of staffingto be insufficient to effectively put a stop to terrorists' access to financial resources.

"The restructuring appears to be heavy on generals and light on soldiers," FinanceCommittee Chairman Grassley and Ranking Member Baucus said today in a letter to the President."While the Administration's announcement that it intends to create a new Office of Terrorism andFinancial Intelligence at the Department of the Treasury is a step in the right direction, it is nosubstitute for an agency empowered with significant legal authorities and law enforcementresources to combat financial crimes."

They added that despite the creation of the TFI, multiple government agencies remaininvolved in gathering information related to illegal financial activities. What the government lackshowever, they stated, is a central venue to coordinate and analyze the information and mostimportantly, the capacity to respond effectively.

Grassley said, "The terrorists aren't waiting for us to get our enforcement act together. Whilewe struggle over how to restructure our agencies, they're squirreling away money to fund theirattacks. Shutting down terrorism financing must be an urgent and high priority. I look forward tocontinuing to work with the administration to ramp up this area."

Baucus added, "Today we are asking the Administration to create an organized, centralagency focused on shutting down terrorist's money pipeline. By centralizing the government'sknowledge of terrorist financial activity, we will be in a strong position to respond. I alsoencourage the Administration to provide more funding and resources if we're to fully wage -- andwin -- our war on financial terrorism."

U.S. Sens. Chuck Grassley and Max Baucus’s letter to President Bush follows:

March 29, 2004

The Honorable George W. Bush
The White House
1600 Pennsylvania Avenue, NW
Washington, DC 20500

Dear Mr. President:

It has been over a year since you signed into law the Homeland Security Act of 2002. Thisrestructuring brought together agencies from other departments to create a new, centralizeddepartment focused on protecting our country from acts of terrorism. However, this samerestructuring has disassembled and scattered the Government’s apparatus to detect, investigate, andprevent financial crimes. This is particularly disturbing because the government’s capacity tocombat financial crimes is essential to eliminating the terrorist threats that the Homeland SecurityAct hoped to protect us against.

While the Administration’s announcement on March 8, 2004 that it intends to create a newOffice of Terrorism and Financial Intelligence (TFI) at the Department of the Treasury is a step inthe right direction, it is no substitute for an agency empowered with significant legal authorities andlaw enforcement resources to combat financial crimes. The proposed new office contemplates onenew Undersecretary and two Assistant Secretaries to oversee approximately 320 people within theFinancial Crimes Enforcement Network and the Office of Foreign Assets Control. Therestructuring appears to be heavy on generals and light on soldiers. There is a lack of directauthority and resources to ensure that policy initiatives for which Treasury is held accountable areput into practice.

The Senate has heard testimony from experts underscoring the need for more enforcementcapacity within the Department of Treasury. In a statement provided to the Senate, Former GeneralCounsel David Aufhauser explained, “Treasury no longer has a police force to investigatecounterfeiting. It does not have auditors to ensure compliance with the Patriot Act. It does not haveinvestigators to pursue the priorities of the National Money Laundering Strategy. And Treasurydoes not have an intelligence office that is fully integrated into the national intelligencecommunity.” Similarly, the former National Coordinator for Security and Counter-terrorismstressed the critical importance of organizing the government to coordinate efforts against terroristfinancing and of giving Treasury more resources for enforcement.

The Federal government’s system to prosecute the war on terrorist financing is in need offundamental reform. The transfer of Treasury’s major law enforcement agencies to otherdepartments for the purpose of enhancing homeland security has created a gap inthe government’s ability to successfully fight the financial war on terror and all aspects of financialcrimes. The Secret Service and the Customs Service have moved to the newHomeland Security Department, while the Office of Foreign Asset Control, the Financial CrimesEnforcement Network, and the investigative resources of the IRS have been left behind. This taxesTreasury’s enforcement capability at the risk of jeopardizing its many important national securitymissions, including investigating and thwarting terrorist financing, money laundering andcounterfeiting; coordinating, imposing and monitoring economic sanctions; and developing secureand resilient critical financial infrastructures.

This is clearly a complex matter, and there are multiple problems that must be addressed.While the coordination of financial intelligence is important, the more pressing problem is gettingTreasury the investigation and enforcement resources it needs to fight financial crime. Thetestimony we have seen before the Senate and our own research on the issue leads to the conclusionthat the creation of a coordinated financial crimes agency at Treasury, perhaps within the Office ofthe Undersecretary for Enforcement, is the best step we can take to address this problem. Indeveloping such an agency, it is important to restore the enforcement personnel that Treasury needsto effectively carry out its missions.

The Finance Committee’s interest in this matter is ensuring that the Department of Treasury,and the Government overall, maximize the available resources in the campaign against terroristfinancing. We now have multiple agencies in several different departments who are tasked withgathering information related to illegal financial activities. What the government lacks, however, isa central venue to coordinate and analyze the information and, most importantly, the capacity torespond effectively. While it is plain that there must be shared responsibilities between Treasury,Homeland Security and other departments in the borderless war on terror, there must be one hand atthe helm empowered to deny terror of its currency. The lack of strategic direction, coupled with theunnecessary duplication of effort and the potential squandering of valuable government resources,hinders the government’s effectiveness in pursuing a variety of financial crimes.

As we continue to examine this problem and consider legislative solutions, we arerequesting the Administration’s views on the feasibility of creating a coordinated financial crimesenforcement agency at Treasury. We look forward to working with the Administration and toreceiving your response.

Sincerely Yours,

Charles Grassley 
Chairman

Max Baucus
Ranking Member