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tv   Politics Public Policy Today  CSPAN  November 17, 2014 9:00am-11:01am EST

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do we have in this -- this comes from the gentleman from illinois, mr. foster, do we have the technology to sample oil that might be on sale in turkey and say we know what field that oil came from. that came from an isis-controlled field in syria. that came from northern iraq. is that technology available or is oil more or less fungible? >> your question is at the outer edges of my knowledge of oil. but i can tell you this mostly from my work on the iran sanctions, different oil has different properties.
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it is often possible to tell where oil comes from although i'm also told there are some similarities among fields. i can't tell you with great certainty we'll be able to do that but i believe so. >> we all want to go after isis. the policy issue is do we go after isis in a way that causes harm to the civilians under its control? as i said in my opening statement we didn't hesitate to bomb occupied europe. if a businessperson of good character and reputation in mosul wants to buy something from europe using the international banking system, a civilian item, do we try to stop that? >> well, congressman, it's -- we obviously would not try to stop a decent citizen in mosul -- >> well, we certainly did in
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world war ii, which we seem to have taken more seriously. you can't say i'm in occupied marseilles. are you saying if i want to buy a replacement part for my factory in mosul, i can just buy it online? >> no, i'm not saying that -- what -- >> do we prevent the honest business person in occupied mosul from conducting civilian transactions? >> well, what prevents most directly the citizen from conducting transactions is isil. and isil's efforts to control that territory. but the use of the banking system to make a transaction coming out of the area as i noted earlier is what we're attempting to prevent. >> okay. you have answered this question,
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but with two inconsistent answers. if you get an international banking transaction where a civilian business person, not affiliated with isis but located in mosul is moving his investments around on wall street or is trying to buy replacement parts for his factory, is that something where if a bank is involved in that transaction they will be sanctioned? >> it's not related to isil in any way? >> well, except the guy is located in mosul. >> well, there is obviously an intelligence question imbedded in there, do we know this person is or is not affiliated with isil? if he's not affiliated with isil, it is not a sanctionable transaction. >> when we get serious it will be, we did not conduct ourselves in world war ii and say every
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frenchman can conduct because just because he is french. >> could i just briefly -- our efforts to prevent isol from making use of the banking syste making use of the banking sysil making use of the banking syste making use of the banking sysil making use of the banking system would effectively prevent that transaction. but we're not targeting the civilian in mosul who is currently being dominated and jub gentleman subjugated by isil. those people are dominated as well. what we're trying to do is keep isis from making the transaction >> chair now recognizes the gentleman from new mexico, mr. pierce. thank you, mr. chairman, thank you. we -- i appreciate your efforts to create national security and diminish the terrorist threat. are you in the room -- you lay out a fairly complex strategy in this report.
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are you in the rooms where the strategy is being formulated? >> yes. >> on a scale of one to ten when you talk about depleting the resources say from oil production you would be familiar with the processes and the targets and things like that? >> in terms of the military targets? >> yeah, you're sitting there, you're fairly comprehensive in this report here, are you in that room is all i'm asking. >> we are linked up closely with the defense departments in terms of the overall level. but -- >> on a scale of one to ten how committed are you to stopping the oil revenues from coming in, the administration, one to ten. >> i would give that a ten, congressman? >> okay, so why didn't you stop it this afternoon? you really want to do it, you're in the room. you can stop it today. you can move 30,000 barrels of oil basically is what the report is saying. that sells anywhere from $25 to
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$60 a barrel, resulting in 3/4 of a million barrels of oil. to move 30,000 barrels of oil requires 250 trucks. now your report starts talking about insurance, choking off the funding for insurance if you start bombing the damn trucks, the insurers will cut the insurance off themselves. you don't have to track one insurance company down. it is trucks moving the oil to market. and you have access to that. every movement, every highway, every oil field. you know which oil fields are under the control. i wonder why you're not stopping the oil today, because you can do it. it is well within your grasp. you have the technology and the information. you don't have to sort through banking or track companies. you don't have to find out which people in marseilles are taking the oil. stop the flow of the oil. it is very simple. why don't you do it? >> congressman, as you know, the defense department has conducted
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air strikes. >> you're telling me it is not important, not a number ten on the list of the administration or they would have stopped it today. it doesn't matter what the department of defense says, the american people, you send your report that american interests are at stake. then stop the flow of the oil. every single drop of oil, sbeeking sbeek i speaking from someone who comes from a county who makes its entire living on oil, goes from a well into a tank. you can blow up the tank, the truck or the connection between the two. you don't just put oil in five-gallon cans into a tanker truck. you put it in through a delivery mechanism. you don't have to blow up the tanks. just blow up the delivery mechanism. that loads it on the trucks. this is a very simple operation and yet you all do not appear to have a number ten commitment to the process of stopping the oil today or you would do it. i mean, i really am curious because people in my state are extremely alarmed by the fact that the terrorists are funding themselves through oil revenues
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and they know how to stop -- they could stop it this afternoon. >> congressman, i'm not a military targeter. it doesn't -- >> it doesn't require a military target. i asked you what is your commitment from this administration to stop the flow of oil. you said it is a number ten. that is the highest on the scale, ten to ten, and if the commitment is there you don't have to be a military targeter, just stop the oil. we can shut it off today. it is a very simple process if you have the commitment. the other result i come up with the commitment is lacking to absolutely stop the funding for isis. >> if i had a switch that i could turn -- >> you told me you're in the room, sir. is anyone in the room talking about this? has anyone suggested we stop the flow of oil today, if it is a number ten item, if we have the desire as a number ten to stop
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the flow of oil, why hasn't somebody said let's stop the oil. let us quit looking around the corner, let's quit looking at insurance companies, let's quit looking at financing. who takes the oil. we don't have to know any of that. stop it in its tracks. it is very simple. >> okay, i understand your point, congressman. >> if you would take that message back, maybe someone would contact somebody in the oil field and they would find out what it takes to blow up a 120-barrel tanker. it's not very complex. i don't know that we got the technology in our county but i suspect it exists in the department of defense. but we just sit here and let them get $2 billion a day while the american people live in fear is irresponsible on the part of the administration. thank you, mr. chairman. >> time has expired. the chair now recognizes the gentleman from new york, mr. meeks. >> thank you, mr. chairman. >> mr. undersecretary, in your remarks at the carnegie endowment, i believe you stated
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that you're working to limit isil's ability to transact through iraq, syria and international banking systems. however, it is the howali systems, which is the informal value transfer system based on the performance and honor in the middle east with a huge network of money brokers and has been in place for centuries. and if the international community imposes sanctions on persons and institutions under isil control, there is a chance that the sanctions will not only be as effective as we like but it would push money into this informal hard to regulate network. so my question is, is the u.s. treasury looking into the brokers, according to written testimony we received here today who are able to move isil money through iraq and syria and abroad. what are we doing in that regard? >> well, absolutely, congressman. those networks are part of the financial system in iraq and
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syria as well as the more formal banking system. as we are working to exclude isil from the ability to use the formal financial system, we are very much focused on ensuring that they can't use and can't turn to the hawala system to a greater extent than they already use it. i will say we have had success in afghanistan and pakistan in particular, in targeting howala for sanctions and disrupting the activity. although they are an informal mechanism for value exchange, ultimately also have intersections with the formal financial system. these brokers need to at some point have accounts at banks and that's another means by which we can disrupt the use of informal financial networks to transact outside of the formal financial
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system. >> because the concern here is, from what i understand from using the system, that is the mechanism that isil uses also to send payments to its fighters and workers and regional leaders. that's what's enticing some folks to come. are we looking at ways to prevent them from getting money so that the payments are interrupted so they won't be able to entice folks to join them because of the revenue that they are able to generate. >> absolutely, we're looking to identify who the hawala brokers are and how those brokers intercept with the formal financial system. because at some point the -- essentially the payment message that goes through that system needs to get translated into actually cash or other -- being delivered to somebody on the other end. we do have, when we get insight as to who is involved there,
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have ways to disrupt activity. so that is one thing we're very much working on with our partners in the intelligence community. >> i know we have to try to weigh these lines. i'm trying to make sure that we don't have all of the folks over in the region against the successor. i was wondering what steps has treasury taken to close the financial systems that sponsor terrorist organizations such as isil, but at the same time keeping remittance channels open to legitimate actors, including the millions of -- because there is a lot of immigrants and immigrant families who provide critical financial lifeline to their family members back in their home countries. i have some back in my district, for example. we have a thin line working. i have some coming to my office to ask me, i would like to ask you how is treasury working on that. >> we are working on the remittance issue broadly to try to ensure that legitimate remittance is coming from the
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united states, going to communities around the world, are able to flow. we've had a number of conversations on this issue with the congressman. and i could go into more detail on sort of the variety of steps that we're taking, including providing guidance to the banking community. implementing legislation that congressman ellison sponsored that was signed into law over the summer to try to ensure that the money service businesses can continue to operate. with respect to remittances into iraq, our effort to cut off the banking activity in the area where isil operates will not prevent remittances going into, for instance, baghdad, but ought to prevent isil from getting access to funds in the areas where it is operating, which i think is very much in our interest. time of the gentleman is expired, the chair now
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recognizes the vice chairman of our oversight investigation subcommittee, mr. fitzpatrick. >> thank you, as i said, mr. secretary, before i traveled through the region last month i had a chance to meet with some of your analysts and employees of the treasury, found them to be very helpful and thorough in the information. i do want to follow up on some of the hawala systems, which are informal, they have been around for a long time and pose quite a challenge in terms of following the money and how it flows into terrorist organizations. does the department of treasury have a handle on how many there are, say in iraq or in qatar, and perhaps is a bigger percentage of the banking system there? >> congressman, first of all, i do want to commend you for your interest in this issue. i actually was in qatar just after you were there.
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and got a briefing on your meetings. i think they were very useful. i appreciate your interest in this issue. in terms of the hawala networks, let me get back to you with specific information on this. i can tell you that the hawala networks that cross the borders so from iraq or syria or whether it is into qatar or saudi arabia, into kuwait, you can work on both ends of this issue. both on what is happening in the area where isil is operating. but also on the other end where the funds may be being transmitted in the first instance. so part of our strategies to work on our partners in the gulf, to cut down on the financing, cut down on the ability to transfer money, whether through the formal system or through the informal hawala system some that the
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money doesn't flow into iraq and syria into isil. >> when you say cut down on the source you're talking about the source being the illicit gains from the oil? >> no, i mean principally collected from donations in the gulf. the oil sales are more of an issue going north into the kurdish region into iraq or into turkey. and as i answered an earlier question, what we're trying to get a good handle on is how those payments were made. whether through cash changing hands, through a hawala system or the formal financial system, whatever the mechanism may be. we're looking for the key there so that we can disrupt that financial activity. >> right, what makes isis unique is the ability to self-finance their terror interests. they use the oil -- this is different from other terror organizations to fund their recruitment, their training.
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they're equipping. and so while we're taking a look at this, why isis is unique and how to deal with that, i think you're correct that we can forget the more traditional forms, talking donations. one of the meetings i had with a ministers in ka far talking about a new law they have in qatar to crack down on funding that comes through what they call qatari charities that we have a concern some of it may ultimately find its way to radical islamists. does the treasury have faith that that law will work? >> the law that was adopted i think just in september in qatar is well designed. it can cut down on the misuse of charitable organizations to provide funding to terrorist organizations. what it requires is solid
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implementation. i had similar meetings to the ones you had. we had been pressing the qataris to move from a situation where they have the right structures in place, the right laws in place, the right institutions in place to being more effective in cutting down on funding that comes out of qatar for terrorist organizations. we've recently seen some very positive steps that qatar has taken after your trip. and some of the engagement that we have had. they have deported an individual who was involved in illicit charitable fundraising in qatar, it was not really charitable fundraising, it was fundraising for terrorist organizations. they have committed to implementing their charities law and other laws to cut down on terrorist financing. there is still work to be done there.
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but i think some of the recent steps are harbinger of some good things to come, but there is clearly work that needs to get done. >> are you able to identify regimes in the area that need to do more? >> i think we have not been shy about identifying qatar and kuwait as the two jurisdictions in the gulf where additional steps could be taken. >> time of the gentleman is expired. chair now recognizes the gentleman from massachusetts, mr. lynch. >> thank you, mr. chairman, again, mr. secretary, thanks for your willingness to testify. i just want to make one observation. i do share the frustration that some of my colleagues across the aisle have expressed about stan stanching the flow of oil and degrading some of the facilities that are currently under the control of isis. but i do want to point out that, for instance, the beiji oil
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refinery, i don't know, about 75, maybe 150 miles north of baghdad, i've been there a couple of times. it is not really -- it's low tech, but it's the largest refinery that they have there in that region. if we had destroyed that a month ago i think the iraq government -- you know, last week, two weeks ago, the iraqi forces retook that refinery. so now it is pumping oil for the iraqi government. it's a key asset, if we had gone in there and destroyed that refinery it would have been a huge setback for the iraqi government to retake and re-establish their oil flow. we have a similar situation in the kirkuk region, where it is
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in dispute right now between kurdish forces and isil. sure, we could go in there and destroy those oil wells, but there is a long-standing problem there. we had a similar problem with saddam hussein when we first went in there about whether to destroy these oil facilities or whether to allow them to continue to operate and then capture them. so that will be an ongoing challenge for us as we go forward. what i would like to talk to you about, mr. secretary, the actual shipment of what is going on right now over the turkish border. we have been largely unsuccessful in interrupting that oil flow. and i was in erbil in kurdistan recently and had a chance to talk to the foreign secretary in turkey. and i have to say between our
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intelligence and what we heard on the ground there, there is widespread abuse and sale of oil by isil forces over the turkish border. and we've got to get at that. we have to disrupt that. and i'm not confident that that is happening now. and i'm not at all confident that we're getting cooperation from the turkish government. the same situation is ongoing at -- in syria. there are smuggling routes there that have been in use for about a thousand years. we were not able to stop them back when we had the oil embargo against saddam hussein. after the fact, we found out that that was porous, that there were dozens of countries taking illicit oil. so there is two ways we can get at this. eventually this oil is going to find its way to a legitimate
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country and a legitimate company that you could apply sanctions to. but before it gets there, you know, we had -- back in 2006, 2008, in iraq we had threat finance cells. and we used this as well in afghanistan where we actually partnered up treasury folks and dod. we had military so it was a joint operation where they actually had boots on the ground. they could identify shipments that were going over the turkish border, like tle are righey are, and we were able to disrupt that. and i am just curious why we got away from that model where the military paired up with treasury folks and were actually doing a pretty good job of disrupting that oil flow. as commodity exchanges now cross border that is really financing about 75% of isis' revenue.
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just like to hear your thoughts about what we might do in the future if we could restock those threat finance cells and maybe re-establish some type of control. >> on the issue of the threat finance cells, as i noted earlier i think i would like to address that in a closed hearing. more broadly we are enhancing our efforts to collect intelligence, including intelligence on these smuggling networks which as you know have been in existence for thousands of years. that doesn't mean that we can't get better fidelity on who is involved, where it is going across the border and how we can stop it, including through financial actions that we can take to designate those who take the oil and are, in some respects, part of the formal economy. we can use financial tools against them. we're also engaging with the private sector to stop this.
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but there are other mechanisms that rely on intelligence, and i hope at some point we can get in to more detail on that. >> thank you, mr. chairman. >> the chair now recognizes the gentle lady from minnesota, ms. bachmann who also serves as a valuable member of the intelligence committee. >> thank you, secretary cohen, for being here. thank you, mr. chairman. the state i represent, minnesota has a tragic nexus to terrorism. we are the only state that has a convicted member of al qaeda from 9/11. that was massoui, my largest city in my district is st. cloud, minnesota. that was the site where he went to receive his instruction in how to fly a plane. he was interested in how you take off a plane, he was not so interested in how you land a plane. he became the only convicted terrorist from 9/11. since then, we have had more than 50 minnesotans go and fight on behalf of al shabab.
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we have the largest number of americans who left the united states to fight on behalf of the islamic state. the first two americans killed on behalf of the islamic state were both from the state of minnesota. we know that today there are those that are american citizens with american passports who have left the united states. who knowingly have gone to fight with the islamic estate. who have been involved with beheadings, shootings, raping of innocent women, killing of innocent children. burying alive in august innocent women and children in mass graves. we also know that these individuals are being allowed to transit out of syria and iraq back to western nations, whether it is europe or in the u.k. or whether it is in the united states of america. our country today is freely allowing the return of terrorists who have given allegiance to the islamic state,
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back to the united states, on the basis of their american citizen slp aand on their passp. that makes many people in america nervous, especially from my state of minnesota, wondering with the battlefield experience and with relationships and with perhaps directives from those who are giving the orders in the islamic state to come back and begin plots in the united states. i'm wondering what is being done to follow these individuals, whether it is through financial transactions or any other way. number one, i'm wondering why they're allowed, number one, back in the united states. i'm wondering why in the world we don't pull their passports and prevent them from coming to the united states in the first place. number two, why do we allow them in? number three, why are they allowed to resume their lives after they have joined a murderous band that is killing innocent women and children across the country.
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why are we allowing that? why aren't we using our resources to thwart this? there has only been one serious terrorist investigation of terrorist financing since 2008. and that is the holy land foundation trial. it was a muslim charity in the state of texas. that happened in 2008 from the department of justice. i assume that you are working, mr. secretary, with the department of justice closely on this matter. and i am wondering what sort of prosecutions are going on. because i can tell you from my state of minnesota this has not receded. this has only gone up-tempo, why aren't their prosecutions? why is it that six years later there have been zero prosecutions coming out of the department of justice. number one, are you working with the department of justice? are you identifying individuals? there are over 40 known
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individuals who have returned to the united states who are terrorists and participated in terrorist activities who freely walking about. it seems they have more protections than the american people. this is concerning to us now. we also know that the department of justice has boxes and boxes and boxes of documentation, known documentation from the holy land foundation trial. have they allowed you to look through those boxes? this is material that identifies known terrorist networks for terrorist financing. we as members of congress have not had one bit of access to those boxes of documentation. i would ask you, mr. secretary, are you aware of these boxes of documentation regarding terrorist financing with the holy land foundation trial? have you requested those boxes? have you looked through those boxes? what do you know about that? and what are you doing to
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prevent terrorists from returning to a wonderful american life and putting innocent american citizens at risk from plots and attacks here in our homeland. >> well, in the time i have remaining let me try and address that. the effort to identify those individuals from the united states who are traveling to iraq and syria as foreign terrorist fighters and those who seek to return is one there is an enormous amount of energy and resources dedicated, including from the treasury department in trying to understand how to identify these people through tracing their financial transactions and my counterparts, in particular, the department of homeland security and the fbi, allow them to describe it in more detail. but you can rest assured that the threat of the foreign terrorist fighter flow, both going to syria and iraq and coming back, whether into europe or especially into the united states is something that this
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administration is highly -- >> secretary cohen, i don't rest very well because they are allowed free re-entry into the united states. >> the time of the gentle lady has expired. the chair now recognizes the gentleman from georgia, mr. scott. >> thank you very much, mr. chairman. i'm over here mr. cohen, over here in the corner, how are you? an area i think we're not putting enough attention to is on our arab and muslim nations who are over in the middle east. i don't believe for one minute that we're getting the level of cooperation, the level of ba backbone and insert into this issue as we should. we're never going to solve the middle east problem or the problem of terrorism and certainly not this problem of financing the terrorists if saudi arabia, if jordan, if egypt, if the united arabs, if
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turkey, if iran, if these countries and these nations do not come 100% and buy into this then they will look at it and look as if they're playing the american people for fools. and i for one am not going to stand for that. now, i believe one of the weak points within the administration's effort on this is a failure to come to congress and get the type of resolution with the backbone and the balls in it that will do some good. we give egypt, we give saudi arabia, $6, $7 billion every year. it is congress who controls the purse strings. and if we had the resolution, the administration would be much
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stronger now because in that resolution there is enough of us in congress who would demand that saudi arabia, that egypt, that turkey, that the united arab immigrants will all come in, or else they would feel the sting of our pulling back the billions of dollars that taxpayers' monies are going into it. now, money laundering, do you think they could launder this money without the cooperation of those nation states who have the banking system in place to do it? the oil that they're getting so much of their money from? do you think they could do that without turkey's cooperation? no. unless we get very serious about this, and if the administration has 62 nations in this coalition, this congress ought
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to know what in the hell are they doing to stop this financing. finally. we wouldn't have these terrorist groups if it weren't for saudi arabia. you think we would have al qaeda? osama bin laden comes right out of the royal family there. you think we would have isis if we did not have al qaeda in iraq? and if we did not, make sure we contain that area. so what i'm saying is that we need to send a message back to the world. that congress wants in on this. the people elected the congress of the united states not to just sit back and twiddle our thumbs. we need to reach out and give this president the backbone he needs if we're going to solve
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this financial situation and demand that these arab nations, these muslim nations not only put their boots on the ground to fight and take back their religion that has been hijacked, but put forth every effort they can, and to work cooperatively with us. to make sure that no way are they contributing to this. and if they are, we would look like fools in america to continue to give the taxpayers of our -- millions of our taxpayers' dollars to these nations while they on the one hand take other money and on the other hand support these terrorist groups as iran is doing. they got hezbollah and hamas. saudi arabia originated al qaeda. you got al shabab. egypt coming up with the brotherhood, the muslim brotherhood.
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come on. only a joint, strong resolution working with the president. then this nation will take the united states seriously on this. what do you say about that? >> congressman, let me just address your last point about a resolution coming out of congress. the administration has requested authorization for the effort against isil. the president and the administration has been very clear that we are stronger when congress, as you say, has its backbone into this. and i think the administration is looking to work with congress for authorization for this. >> time of the gentleman has expired. the chair now recognizes the gentleman from florida, mr. posey for five minutes. >> thank you, mr. chairman. mr. secretary, is isis engaged in any narco-trafficking?
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>> congressman, not that i am aware of sitting right here. but let me ensure that that -- this is not something i don't know about but i am not aware of any narco-trafficking by isil. >> i know they have given the taliban credit for almost 100% of the heroin trade, and the colombian rebels, farc, almost 100% of the cocaine trade. and you know, one way to go after terrorist funds is for americans who are terrorized or victims of terrorism to sue their attackers and go after their frozen assets under section 201 of the terrorism risk insurance act. known as tria. the plaintiffs cannot, however, currently seize the funds of terrorists related to narco-traffickers. and my question for you is going to be what you are doing, or what steps you're taking to help
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change that. but i guess until you can qualify your position on isis being involved in narco terrorism, that may not be the right time. >> congressman, i'm not aware that isil is involved in narco trafficking. i will follow up on that with you. on the broader issue of attacking terrorist organizations' use of narco-trafficking as a way to raise funds you mentioned the taliban. you mentioned the farc. we have been aggressive in the use of our authorities to try and prevent that, disrupt that, we use the kingpin act as a way to identify the major of narcotics traffickers and build out the networks to apply sanctions to those that are involved in that activity. i can assure you that if we see in the isil situation something
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akin to what we see in the taliban or with the farc, we won't hesitate to use those same authorities in this instance. >> again, the kingpin, there is a big hole there for narco-trafficking. and of course it has been the subject of one of the hearings we had previously. and some of us here really need to be blocking that up as much as we can. >> i'm not aware of the particular deficiency that you're identifying but i'm happy to follow up on that issue. >> okay. thank you, mr. chairman. >> chair now recognizes mr. green from texas, ranking member on the oversight investigation committee. >> thank you, mr. chairman, i thank the witness for appearing today. my feelings are ambivalent on this topic of kidnapping for
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ransom. it is my understanding that isil has received as much as $20 million. i also understand that this undercuts the goal of eliminating their access to funds if we -- if we don't take a strong position on these kidnappings. my feelings are ambivalent because i have a constituent who has a son who is being held captive. we're not sure who is holding her son captive. but i visited with this mother and father. and i know that they want their son returned home safely.
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and while i understand we can't pay ransomes, i have been with them. and while i don't feel their pain i have seen the evidence o them. and while i don't feel their pain i have seen the evidence of it. and you're in a tough position. but i want you to do all that you can, please, please do all that you can to try to get these people who are being held hostage returned home safely. it's a balancing act. it's contrary to what our policy is. and you understand that. i understand this.i understanu . but we've got to do everything that we can to prevent these dastards, that is with a d, not a b, to prevent these dastards
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from performing the dastardly deeds that have been shown worldwide. if you could, please, sir, kind sir, kindly give some indication as to the balancing act and what we're trying to do to make sure this mother gets her son returned home safely. >> congressman, i think you put it beautifully. and i think it is an incredibly difficult issue. i share your feelings that you described. i can't imagine the pain that a family goes through in the situation. our policy is one as you note, that it is intended to protect americans by removing the
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incentive to take hostages in the first place and to not provide another source of funding to these horrific organizations that take hostages, commit other terrorist acts. we have seen evidence that it in fact does protect americans as these terrorist organizations choose not to take americans hostage because they know that they will not get paid ransom. it obviously does not work in every instance as the situation you're citing identifies and reflects. but it protects our citizens over the long-term and as a whole. in terms of getting our citizens
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back who are held hostage, i'm sure you're aware over the summer there was a rescue attempt made to try and free james foley who was being held hostage by isil. it, unfortunately, was not successful. but the fact that we will not pay ransoms or make other concessions to terrorists does not mean that we are leaving our citizens in the hands of these dastardly people. we try everything we possibly can ourselves and working with partners to free our hostages, short of conceding to their demands for ransom payments or other concessions. it is as you say an emotionally fraught difficult issue. but it is a policy that i think we need to employ ourselves and
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frankly we need to get our partners around the world to because it is to the benefit of our citizens, ultimately. >> thank you, mr. chairman. the chair now recognizes the vice chairman of our housing and insurance subcommittee. >> thank you, mr. chairman. secretary cohen, i want to frame my remarks or questions this morning with regards to the united states banking system providing access and being complicit in financing terrorist activities. there are concerns going on between banking regulators and doj and how they're carrying out their duties. i think they're going a little too far with it, but i certainly support them going after bad actors. the remarks you made earlier this week with regard to de-risking. while i think it is essential we have laws in place to combat terrorist financing, our
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regulators have no -- i'm concerned that the broad derisking we've seen in financial institutions is having a negative situation. i know there was concern voiced also by the comptroller of currency recently about this. in your remarks, i have a copy of your speech you made at the enforcement conference earlier this week you talk about that. and i would just like for you to tell us how bank regulators should judge risk and how it should not be done on a case by case basis. >> well, congressman, the foundation of our anti-money laundering regulatory regime is a risk-based approach where we ask our financial institutions to assess the risks of the customers that they have on board or they're thinking of taking on board on a case by case basis and make a judgment whether the risk profile of that particular customer is one that
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the institution feels that it is in a position to manage. the concern that i was addressing in the speech earlier this week was that some institutions were acting in sort of a wholesale manner to just cut off entire categories of customers. entire jurisdictions from -- correspondent kind of relationships without an assessment of the actual risk posed by that particular customer. and what i was advocating was that institutions and those of us in governments who are responsible for overseeing the institutions adhere to the risk-based approach and to a case by case analysis, perfect in approaching that. >> thank you for that. you're an expert on terrorist financing.
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can you tell us what types of activities lead to isis financing? you know, some of these regulators are going after folks with firearms sales, fireworks sales, petty lenders, tobacco sales, are these folks that engage in terrorist financing activities? have you run into any -- let me rephrase it. have you had any actions against any of these folks for terrorist financing activities? >> i'm not aware of any actions against these entities you described. certainly with respect to isil. >> very good. i know that the financial crimes enforcement network put out a paper earlier this week, in fact, with regards to money service businesses, laundering money for terrorists, and the same concern that you were talking about. how closely do you work with these folks? do you work with them every day? >> these folks work for me. >> they work for you, there you go.
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you're aware of this paper and statement and support their conclusions as well, i assume? >> yes, sir. >> very good. one last question, you mentioned our anti-money laundering capability stronger. one of those was a safe harbor from civil liability for financial institutions that file suspicious activities. i would heartily agree with that recommendation which is included in my bill that i offered hr-4986 the end operation choke point act. can you tell the committee why you believe the safe harbor is important and how this will help financial institutions in the fight against terrorist financing? >> this issue there is there is a difference of interpretation in some court decisions about when an institution files a suspicious activity report, whether they could be brought into court, subject to civil liability if they were not able to prove a good faith basis for filing a report. these reports, which are
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confidential, based on the suspicion of potential illegal activity that are filed with elements used by law enforcement to pursue cases not as the end point but as the opening point in cases are incredibly valuable. what we are looking to do is to ensure the institutions can comply with their obligation to file these reports without fear of civil liability. >> thank you, mr. chairman. >> time of the gentleman has expired. as a reminder to all members we are going to excuse our administration witness fairly close to 1:00 and impanel the second panel. which means that the chair plans to call upon ms. -- i'm sorry, noon. excuse me. noon. don't want our witness to panic. i will call upon mr. ellison, mr. pittinger, and mr. pearlmutter, and we'll welcome
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release our first witness, and we will welcome our second panel so that this time the gentleman from minnesota, mr. ellison is recognized. >> mr. cohen, thanks for your service to our country and your hard work to combat terrorist financing. earlier you mentioned the money remittance improvement act was the bipartisan piece of legislation passed through congress earlier this year. now we're in the phase where we want to see it implemented. i wonder if you might elaborate on how you see the bill being adopted, absorbed into the financial community so that we can stop bad people from getting money and allow the decent people to remit money. >> congressman, i think this is an important piece of legislation, i commend you pushing it through the house and getting -- >> i had help even from the other side -- >> exactly.
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the way that it will be used and be effective is it allows the federal regulators to rely on state examinations for purposes of overseeing compliance with anti-money laundering regulations. that will expand our ability to get insight into the quality of anti-money laundering efforts out in the -- across the country, particularly in the money services industry. and that will i think enhance the confidence that financial institutions have in taking on money service businesses as customers. so that you get back the de-risking question, what we are hoping to foster is environments where institutions do in fact engage in a -- continue really to engage in a case by case analysis of risk, and the better the information the better the foundation for that risk assessment, i think the better off we all are. >> thank you. now i want to
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just say i would like to work with you to help more financial institutions understand what is available under the act. let me ask you another question and then i'll pass it so we can have as many people as possible ask you a few questions. do you feel like our international partners -- we have enough cooperation with people in the middle east, european world, do you think we have enough international cooperation to freeze -- to identify and freeze off some of the sources. of terrorist financing in dealing with isil? >> that's a big question. i think the answer is, we have cooperation. it varies. as you might expect, from country to country. we have some partners that are 100% committed, and effective, other partners where i think there's work to be done. one of the things that we do at the treasury department is
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travel around the world to try and enhance the effectiveness of partners in cutting off terrorist financing. it's a big part of my job, big part of the job of the folks who i work with. we have made enormous progress over the last decade or so in improving international efforts to combat terrorist financing. but, you know, this is a -- this is a task that is never going to be complete, and there's still a lot of work to be done. >> thank you again. and i yield back. >> the gentleman has yielded back. the chair now recognizes gentleman from north carolina, mr. pittenger. >> thank you, mr. chairman. secretary cohen, following up on congressman pierce's questions, during operation desert storm we had an average of 1100 strikes a day. twelve years later against saddam hussein, iraqi freedom we had 800 strikes a day.
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now last two months, against isis, we've had a total of 412 strikes. seven average a day. is this limited amount of airstrikes as a result of not having the intel on the ground as a result of precipitously pulling out our forces several months ago? or is it a lack of the will by the administration to take out, particularly these transfer of oil out of country? >> congressman, i'm not sure it's either of those, but i'm really not in a position to comment on the military campaign. >> secretary cohen, are you in dialogue with dod? are you in conversation, are you in meetings with them regarding our approach and how we would seek to dismantle, disrupt and destroy these transports of all out of country, given that's the
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most significant manner in which isis has obtained their $1 million to $2 million revenue a day? >> absolutely. the conversations that i'm involved in, as you might expect, are conversations about policy and broad approach. i don't sit at -- i'm not doing targeting on the day in day out basis. in terms of the overall policy direction and the contribution that the defense department can make to efforts to undermine isil's financial strength, that's something that, as part of the overall integrated strategy, that general allen is leading, is part of the conversation. >> do you believe, number one, is it in our best interest and also the best strategy if we would seek to destroy all of the
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transports out of country? >> all of the illicit oil transport? >> illicit transport of all oil out of the country? >> it would seem to me to be -- one of the ways that we can impair the oil trade is to stop them from bringing it out of the country. what i'm not -- what i am not in a position to comment on is the practicality of doing that. it's just not my area. >> i appreciate that. please convey our continued concerns on the manner of the limited approach that we have had in terms of our commitment to air strikes in various capacities but particularly related to electric iing to disrupt the income flow back to isis. on another matter, i mentioned earlier, the availability of technology. you know, there's very robust
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analytic software programs. i have worked for a dozen years with major software companies originally related to medicaid fraud. in the discussions, we have transferred now on in talking about how we can dismantle the terrorist funding and the transfer of it outside the united states and inside the united states. as such, i wrote jennifer cavalry the director of financial crimes enforcement network on september the 4th, and requested a meeting to make sure that the department is utilizing every available possible analytic support software available. i would appreciate your help in response so i could meet with miss calvary. it would be most appreciated. >> certainly, congressman. i can tell you that vinsin, which director cavalry oversees has recently gone through an i.t. enhancement.
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it has some advanced analytical tools available to it. ey are using the tools to go through the reports that they receive from u.s. financial institutions to identify potential fund-raising for isil and to push that out on a very rapid basis to our law enforcement colleagues. that is happening. but i will convey your request. >> if you could bring about a meeting with her, i would very much appreciate it. i yield back. >> gentleman yields back. the chair recognizes the gentleman from colorado. >> mr. secretary, thanks for your testimony today. i want to compliment treasury and the administration, the stock markets are hitting new highs again today. from where we were six years ago. i want to follow up on the line of questioning we were just asking you. talking about one of your points was, we have revenue, we've got the flow of money and we have expense. get back to basics.
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so in the revenue side of this, you've got the production piece, which is what he was talking about. can we eliminate or destroy the production? i would rather focus on the price. we have had a 30% reduction in price of oil in the last five months. west texas intermediate has gone from 103 down to 75. basic economics would say to me, that's got to hurt these guys somehow. that they have less money for any barrel of oil that they have. can you tell us kind of what you guys see the drop in oil prices doing to isis and its revenue stream? then i will get to expenses in a second. >> congressman, the price at which isil is selling the oil
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that it is stealing has never been at the open market price. i'm sure you understand. whether the drop in oil price has also forced a decline in the discount that isil is taking off the oil that it is selling, i don't know the answer to that question. let me see if there's something that i can -- >> what price in the black market, if you will, do you think they are selling it at? >> can i get back to you on that in a different setting? >> so let me move to the expense side. on the expense side, there's some cost to extract oil from the ground and then refine. do we have any sense of what it costs them to produce this oil? >> i think not a lot. because this is not a
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sophisticated operation. we have seen them take over wells, but also sort of in some respects destroy the wells and have the oil pool and are taking it that way. so i can't give you a dollar figure on what it costs for them to produce a barrel of oil or to then refine it in one of their mobile refineries. there's obviously some expense involved there. >> i'm not trying to stump you on this. >> you did. >> this is basic stuff i'm trying to understand. everybody else has gone into monologue about what's going on in the middle east. basic price, production, expense of producing this. let me change it just a little bit. so on the revenue side, we've got oil. and there's some revenue stream that's coming from oil. and i'd like a little more
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specificity from you on how the price of oil affects that. what other pieces of revenue does this get? does it -- you mentioned charity from some other countries. does it have other earnings? what other kinds of revenue do they have? >> just on the price of oil, i can provide you more detail on that. i would like to do it in a different setting. the other sources of funding for isil are ransom from kidnapping, extortion and crime from within the territory where they are operating, forcing people to hand over cash at gun point and to some extent donations from external sources, from wealthy donors overseas. those are the four most significant sources of funding for isil. >> so now moving to their total expense, obviously they've got to be paying their soldiers or whatever they're called, their fighters, their terrorist group, they've got to be paying somebody something.
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and your point was at some point, whatever revenue they have is going to outstrip those expenses. can you elaborate on that? >> yeah. particularly as we make progress in squeezing down their revenue stream, their expenses for paying fighters for attempting to deliver social services of some sort in the territory where they are operating will outstrip their revenue. just in terms of the fighters, if you assume that they have 30,000 fighters, give or take, we have information that they pay their fighters about $1,000 a month. that comes to $360 million a year in just the expenses for fighters. now, that figure is obviously a soft number. i don't know if that's exactly right. but it gives you an idea of the magnitude of the expenses.
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if you look at what the iraqi government budgeted -- had budgeted this year for the territories where isil is currently operating for delivery of social services, it was well over $2 billion. nobody expects isil to deliver social services to the same extent as the iraqi government was planning to. but isil does try to portray itself as if it were a government that can deliver social services. that's going to be quite a substantial expense. >> thank you, mr. chairman. >> undersecretary cohen, we appreciate your testimony. we will release you at this time and invite the witnesses for the second panel to please come to the witness table as quickly as possible. >> thank you, mr. chairman. >> thank you.
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>> we will now turn to our second panel of witnesses. i will introduce briefly. we first welcome the honorable jimmy gurlea, a law professor at notre dame law school. professor has notable experience in the field of terrorism and finance. ten years at both treasury and the department of justice. next we will welcome dr. matthew levitt, the director on the stein program of counterterrorism and intelligence at the washington institution for near-east policy. dr. leavitt previously served as deputy assistant for the secretary for intelligence and analysis at treasury. last but not least, dr. patrick johnson is an associate political scientist at the rand corporation where he specializes
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in counterinsurgency and counterterrorism, especially in afghanistan, and the philippines. without objection, your full written statements will be made a part of the record after your oral remarks. i'm not sure who has testified before congress before. but like the traffic light system, we have the green, yellow, red lighting system. yellow will go off when you have one minute to go. i ask you each observe the five-minute time allocation. professor gurle you are now recommended for summary of your testimony. >> thank you chairman hensarling, members of the house committee on financial services. permit me to begin by thanking you for inviting me to testify before the committee on the topic of primary sources of funding for the islamic state of iraq and syria known as isis. to enhance the u.s. government's counter terrorist financing strategy against isis, i would like to make several
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recommendations. first recommendation, targeted blocking actions. the centerpiece of the government's counter terrorist strategy is to freeze the assets of the terrorist entime is, deep pocket donors and other financial supporters and facilitators of terrorism and prohibit such individuals and entities from doing business in the united states. the strategy is pre-emptive strategy intending to prevent the financing of terrorist attacks, and the killing of innocent civilians. the more specifically, the authority to block isis related funds derive from executive order 13224 that was actually issued after the terrorist attacks of september 11, 2001 by president george w. bush. unfortunately, the treasury department has not yet gained its footing with respect to isis related designations. the isis related designations by the treasury department raise
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two primary concerns. first, few individuals associated with isis have been designated for asset freeze under executive order. 13224. this year, there have been only four. two of the designations did not involve individuals involved in any way with terrorist financing. a third individual was a relatively lower level facilitator with respect to moving money from kuwait to syria and the fourth was involved in raising money from deep pocket donors and external funding. none, unfortunately, of the treasury designations include individuals engaged in any the major sources of internal funding for isis. absolutely none. i have a very basic fundamental question. that is, who is the finance minister for isis? who is he? and why is that individual not
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on the treasury list under executive order 13224? it seems to me that there needs to be a direct nexus between the treasury's department's designations and the principle sources of internal funding for isis. whether we're talking about illicit oil trade, ransom payments, trafficking, trading in stolen artifacts in iraq, and syria, extortion payments, those are the individuals that the treasury department should be focusing on for designating blocking their ack sets, if any, in the united states. it seems to me -- i don't know if this is the case. but it would seem to me, and it would seem to make good sense, that there should be financial intelligence teams focused on each of the principle sources of internal fund-raising for isis.
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there should be a financial intelligence team dealing with the payment of hostage payments and where those moneys go. there should be an intelligence team dealing with oil, the illicit oil trade and how that's happening, who's involved in that, and designating individuals involved in the illicit oil trade. second recommendation, enhance terrorist financing prosecutions. there has been some discussion of this. i will keep my remarks on this front very brief. the bottom line is that the department of justice has a mixed record on prosecuting terrorist financing cases. since september 11, 2001 attacks there have been very few major terrorist financing cases. i'm aware of one which there has been reference to, the holy land foundation case. it was a charity. by the way, a charity that was involved in raising money for hamas. i'm not aware of any significant terrorist financing prosecutions dealing with terrorist finance
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of al qaeda and certainly none dealing with terrorist financeers of isis. to increase the number of terrorist financing prosecutions, my recommendation is that the treasury department should intensify and accelerate its efforts in sharing financial intelligence information with the doj so that doj has the evidence that it needs to bring criminal indictments against terrorist financiers and take the indictments to successful prosecution. the last point has to do with recommendation with the bsa bank secrecy act. i would add that under the bsa there have been over the last ten years only two enforcement actions where fines have been imposed on banks for non-compliance with the bsa dealing with terrorist financing. i think that effort needs to be enhanced. thank you very much. >> dr. levitt, you are now
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recognized for a summary of your testimony. >> thank you, chairman, members of the committee. it's an honor to be here. to discuss this timely and important issue. u.s. government effort to counterislamic state or isis is focused on five mutually enforcing lines of effort. one of which aims to stop isis financing and funding. that may prove to be a difficult task in large part due to the differences between the funding models employed by isis and other al qaeda affiliates but not one beyond the international community's capabilities. combatting isis's financing is an important component of the international campaign against the only group to be too extreme even for al qaeda. counterfinance stools have been proven uniquely effective both as a means to stem the fund of terrorist groups but also as sources for actionable financial intelligence. stipes you let the money flow so you can watch it and tag it. there's no doubt that where it crosses international borders, leverages international financial system, especially the formal financial sector, but banks, but even alternative transfer mechanism,
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in those cases the traditional tool set developed will continue to be effective means of countering isis financing. this includes oil smuggling, donations from those few deep pocket donors we know about in the gulf and elsewhere, kidnap and ransom payments efforts to access antiquities black markets sell looted ancient artifacts and more. but this is an unlikely to be enough to fully dismantle isis. unlike al qaeda and other groups, isis was financially self-sufficient for eight years as a terrorist and insurgent group before committing itself to running a peroto state. remember that before it named itself the islamic state, it was isis. before that the islamic state of iraq, al qaeda in iraq, it went through many iterations. aqi, now isis, was financially end pentd for years by virtue of engaging in tremendously successful criminal activity enterprises domestically within iraq.
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today criminal enterprise accounts for significant isis financing compliments their other sources of income, the sale of oil. but on its own, criminal enterprise is an insufficient source of funding for a group committed not just to terrorist and insurgent activity, but to capturing, holding and administering territory which involves significant expenditures and therefore requires much more significant revenue streams. therefore, while it's true isis criminal enterprises within iraq are currently beyond the reach of traditional law ebb forcement and regulatory action we do not have an -- on the ground like we once did focusing even on those areas vulnerable to current tool sets will effectively deny isis the money it needs to hold and administer the islamic state. meanwhile military tools under other circumstances would be the last thing one would think one might think of as a logical means of combatting crime the fact is that air strikes against isis have already significantly undermined some of the group's
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criminal enterprises and further such strikes should continue that trend. they don't hold territory, they can't tax people in the territory, they can't abuse domestic resources. et cetera. while the prospects of real political reform in iraq are bleak today, should the iraqi government at some point reprioritize governance and the rule of law over sectarianism and corruption perhaps local iraqi law enforcement could at some future point investigate and prosecute isis criminal enterprises in their country as the domestic criminal activities they are. treasury's isis focuses on imposing financial sanctions on anyone who trades in isis' stolen oil, indecembering our foreign partners to put an end to kidnap and ransom payments, targeting external donor networks for sanctions, restricted isis' access to the national financial system and employing targeted sanctions against isis' leadership and facilitators. i think those should be done in those places where it will make the most difference not where we'll feel good about ourselves in the morning if, in fact, most of those things are happening
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domestically in iraq, targeting treasury designations actually doesn't do a thing. it's a wise strategy using these tools that we have but i encourage people to look beyond these tools as i'm sure treasury already is, to envision the kind of tools treasury and its partners might need to adapt and deal with an evolving illicit financial threat. i submit there is no agency that does this better thinking outside the box to develop strategies needed to deal with tomorrow's threats. treasury's terrorism financial and terrorism grants did that after nine when to deal with the threat of al qaeda. it did it in a more substantial way in 2005 and 2006 when it developed tools and strategies to contend with iran's ill his it financial conduct and support for terrorism and nuclear proliferation it came up with the iraq finance in iraq et cetera and i expect that we will see similarly created tools coming up soon. a few policy prescriptions. i will say this, this is no silver bullet to dismantle isis financing. let alone to ultimately defeat the organization. isis presents a unique set of circumstances and treasury should continue do what it does best, assess the situation,
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develop new tools to deal with an evolving threat. but there is circumstantial evidence that the full-court press is already working far and away from iraq's borders. consider a jihadist in trial in germany for joining a group in syria allied to the islamic state who has struggled to send funds to the middle east largely because of measures treasury and others have put in place. the court proceedings in germany and local media reports describe a picture of jihadist forced to send a member to europe for supplies because it had become too hard for them to transfer money without being traced. that's not all. the extremists used a wire transfer service of western union to send money around the world but had become so nervous of transactions being monitored they're afraid to pick up the money. so just a couple of -- >> if you could summarize quickly, please. >> absolutely. we have to use the military to disrupt the oil. no question. also to move isis back from control of territory so it cannot engage in criminal activity in those areas. even though today major donors are not a big part of isis
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financing, as soon as we have more success in cracking down on existing streams, that will increase. as i get into my written statement, we need to focus on qatar. in particular but also kuwait. the fact they passed a new law does not mean anything. they need to enforce the law. we need to isolate isis from the national financial system to be sure. in the long run, at the end of the day, the only way to stop criminal enterprise within iraq is for law enforcement within iraq to be able to do the job. thank you very much. >> dr. johnson, you are recognized for a summary of your testimony. >> mr. chairman, ranking member and distinguished committee members, thank you for allowing me to testify. today i will discuss how isil accumulated the wealth that made it the richest terrorist group in the world, how isil's money amplifies the threat that opposes -- >> i'm sorry. could you bring the microphone closer to your mouth. we're having trouble hearing you. >> better? challenges and opportunities. for degrading its finances. before i begin
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i want to note countering isil's funding is difficult and important. the methods isil uses to raise and move money make it a hard target for traditional counter financial. nonetheless money is a critical component of all of isil's activities and failing to degrade isil financially would increase the threat it poses both in the region and to europe as well as the u.s. homeland. so in my testimony, i want to make three main points. my written testimony contains fuller discussion of each. my first point is that isil raises almost all of its money within the territory it controls. this has been discussed by other members. i will be brief. the funding scheme differs from a lot of the terrorist organizations that some of these tools and instruments the treasury uses now were developed for. and this is challenging given the way that isil makes its money internally which i will discuss in turn. but i have had a chance to look
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behind the curtain to a degree through some historical documents that were captured during the second iraq war between 2005 and 2010 that were captured from the islamic state of iraq before it became the islamic state of iraq. and these documents show with meticulous detail how the group raised money during this period and how it -- the group spent money. they were fairly comprehensive over certain time periods in 2005 and 2006 and 2009 and 2010. what these documents show i think really importantly are two different things. one is that this group has been making money at least in mosul in the same ways for at least the last six years and probably longer. so this is nothing new despite the change in the group's name and it creeping up on the united
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states and the world after the u.s. withdrawal. but the group has been there and using a lot of the same kinds of methods that it is using now. the main difference in really what's going on in mosul and with isil is the scale at which it raises funds. so what we're able to see through looking at the group's captured financial ledgers is that in 2008 and 2009, the group known then as the islamic state of iraq was making $1 million total per month on average. now as we know from oil revenue alone, revenues have been estimated between $1 million and $3 million per day. so it's an enormous increase and one that i think needs to be appreciated when you think about how threatening we viewed al
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qaeda and iraq and the islamic state of iraq and with the additional finances that the group has now. what that might mean for their capabilities and then also for their ability to sustain a long-term protracted fight against various enemies. the real challenges in disrupting finances and restricting access to the international financial system, i think that undersecretary cohen is correct that key individuals should be targeted for sanctions and that isil ben -- it does benefit from access to the international financial system. but the facts don't negate another fact which is that a large share of isil's revenues made internally, it's moved through informal challenges in cash by networks of intermediaries among other methods.
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all of these methods make is difficult to collect the precise financial intelligence that's necessary to effectively apply targeted sanctions. absence of such intelligence we're left with a blunt set of financial instruments at our disposal that are unlikely to cut off isil from key revenue sources that could sustain the organization for the next several years or longer. my third point covers a few things that could be done to disrupt and degrade isil's internal financing. this refers to extortion and various types of crime. robust partnerships with local regional and u.s. government interagency partners will be necessary to collect the high quality intelligence. on funding sources and methods. several steps could be taken including enhancing intelligence cooperation with kurdistan and iraqi partners to identify oil facilitators, prioritizing collection on the quantities and prices of oil over time that facilitators and intermediaries
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are smuggling to maintain basic situational awareness of isil's financial capabilities. as an early warning of sorts. and identifying and monitoring all external contracts for areas in and around the territory that isil controls allowing action to be taken to reduce isil extortion, revenue by stopping these contracts if they are not absolutely necessary for the population's well-being. to recap, the three main points is the importance of isil's internal funding scheme, the challenges associated with targeted financial sajss and efforts to cut off a group like isil's access to the international economy and to use this as sort of the primary tool kit to degrade the specific threats, financial capabilities and improved financial intelligence as a way to
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understand the threat better and to conduct targeted operations, whether by treasury, dod or other agencies. thank you. >> i want to thank each of the gentleman for their testimony. the chair recognizes the gentleman from pennsylvania. mr. rothfus. >> thank you, mr. chairman. professor, you talked about the specially designated global terrorists, and that we've only had four identified, i think, with isis. you made a good point about who is the finance minister for isis. can you give us a historical context going back to the early 2000s when you were in public service and individuals we would have been identifying within al qaeda to compare and contrast? >> thank you for the question. first of all, we have to keep in mind that the method of raising money by al qaeda is different than the method isis uses to raise money. al qaeda relied on external sources of funding.
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so, for example, we focused on corruption charities that were raising money for al qaeda and related affiliated terrorist groups. when i was undersecretary, we designated specially designated global terrorists, over 20. maybe actually higher than that. probably closer to 40 charities for that purpose. again, the focus was on external sources. isis is very different. it's principally a self-funded organization. so what treasury has to do is they have to pivot. they have to refocus. they have to recalibrate their efforts to the dynamic that they're currently facing with respect to isis funding. my point is, i think they are struggling to make that change to make that adjustment. it is born out by the fact that we only have -- there's only four designations. >> do you believe there would be individuals that treasury would be aware of today that could be designated?
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>> i would certainly hope so. because if they are not, then the situation is even more dire than it appears. >> we have talked with the undersecretary and other panelists have mentioned some of the countries in the area. i wonder if each of the members of the panel can address this? the undersecretary talked about there is work to be done with qatar and what they are doing. we talked about the charity law that they have in place. i think the undersecretary had previously made statements about qatar and kuwait being permissive jurisdictions for terrorist financing. what kind of things could they do now that they are not doing today? >> a lot. mostly, these are countries that
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have passed fantastic laws on the books when you look at them black on paper. i have gone to the middle east, sat with some of these individuals. they have given me copies. i could wallpaper my house with them. when you get them privately and you ask them, this is a great law, have you implemented it, no? ever used this? no. there's very few cases, especially in kuwait and qatar of any type of implementation. even the case the under secretary was able to point to, where qatar did deport someone. they didn't prosecute the individual, didn't hold the individual accountable. the individual is deported and is continuing that activity from some place else. the concern of the financial action task force, international monetary fund and other, including people that have gone to qatar with their ability to implement. similar concerns about kuwait. if i could just add on the question of the sgdts, what we should not be asking treasury is
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to deg it nature as many people as possible. what we want treasury do is to designate as many people as possible who designating them would have an impact. there's innumerable number of people around the world related to isis and other groups, you could -- if the threshold, you could designate them. but think don't have assets here, they don't have assets around the world. in this case, done in iraq it would not make a difference. what we want do is to make a difference. what we need to be doing in particular is not just focusing on the guy who today has the title of finance minister and is in iraq, doing things only within iraq. but those middle men who are facilitating oil payments or anything that crosses borders, that's where these designations have teeth. >> are there leverage points that treasury or anywhere in the administration, that we could use to encourage whether it's kuwait, qatar or turkey or other countries in region to follow through?
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>> i think there are. one of the concerns that have i is whether or not these vast sums of money that are being generated internally by isis are entering banks in qatar. we should work very closely to ensure that those banks are applying the relevant anti money laundering terrorist financing regulations that they should. if not, perhaps their banking licenses, if they have u.s. branchs in the united states, perhaps those banking licenses should be revoked other other restrictions on their ability to do business in the united states. >> time of the gentleman is expired. the chair recognizes the gentleman from massachusetts, mr. lynch. >> thank you, mr. chairman. i have want to thank the panel. thank you very much. you've all helped us today. dr. johnson, i had a chance to read some of your earlier stuff back in august.
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then your testimony today. you indicate today that you believe there might be a surplus that isis might have a surplus of about $2 billion. how do you think they are holding that? from a custodial sense, how do you think they hold that reserve of $2 billion? >> so this is purely speculation. but i think the easiest way to hold it would be in the banks that it overran when it overran mosul and to be able to store the money securely in a facility that is intended to store money of a high quantity i think is a reasonable guess. but there could be wide distribution, it could be in other countries. so i suspect it's some of each of those. >> one vulnerability they have now that they traditionally
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terrorist organizations have not had is that they have to defend their turf. i know that your report -- i think all of you have hit on this. that our response to the traditional financing of al qaeda as the professor outlined, our response was sanctions and restrictions on proper banking practices and things like that, anti money laundering statutes. but the way that isis is operating now, they are internally generating this revenue. so they're not relying on principally on qatar and saudi arabia. as al qaeda did in the past. so we really have to get at the oil revenue. i understand, professor, in your report that you indicate the second largest source of revenue for isis is the selling of
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antiquities. but that's -- i think they will exhaust that at some point. it's the oil that is going to be -- if they are going to have a sustainable system here, an organization, it's going to be the oil. how do we get at that, dr. johnson, in terms of our strategy? i know that we're doing targeted missile strikes and bombings. but to really take away the capacity to produce oil, you've got to occupy the ground. i'm just curious if you think that our current strategy that looks at population centers like mosul, is the right strategy? would it not be better for us to encourage the iraqis and the
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kurds to really focus on the oil production areas and try to take them away from isis control? >> thanks for the question. i think that the appropriate way to do this is pretty much what's being done right now, actually. and that's using air strikes to limit the freedom of movement and ability to move oil and smuggle it as easily as isil was able to before the air strikes started. meanwhile, buying time for an advice and assist effort and capacity building effort to try to stand up in some cases local security forces or the iraqi army to conduct effective operations essentially to push isil back from the territory that it's controlling. >> i appreciate that. i don't mean to cut you off.
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from 2003 to 2011, we spent $24 billion, the united states taxpayer, we spent $24 billion training 938,000 iraqis how to fight. to equip them, train them. here we have 30,000 sunni that they are overrunning the country and syria. in the race against time, as isis gets stronger and stronger, we're back again with this training operation. i just -- i just have some misgivings about, you know -- what's that saying that the definition of insanity is doing the same thing over and over again and hoping for a different result? i'm just a little -- i think the training piece in kurdistan, where we did not train before, is probably money well spent. i'm skeptical about what we are doing with the folks we trained already. >> time of the gentleman is
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expired. chair now recognizes the gentleman from kentucky, mr. barr for five minutes. >> thank you, mr. chairman. would you all assess -- let me direct this first question to dr. levitt. would you assess that the primary source of revenue for isil is the oil revenue? >> by far. >> okay. and so how effective has u.s. effort -- u.s. efforts been so far, the coalition's efforts been so far at targeting the middle men in iraqi -- the iraqi kurds or the turkey -- to the turkish elements that constitute the middle men. how effective have we been at identifying those middle men that are delivering the oil to other parties?
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>> there's very little in the open source about it. when i talk to people privately, my understanding is there has been some progress in identifying these people. then take time to put together packages and fully get to the point where you can actually designate somebody. i expect that those designations will be forthcoming. we have seen more success in working with partners in places like turkey and in the kurdish areas in the north of iraq where the problem isn't so much criminal middle men but corrupt politicians who are involved in this as well. keep in mind, these are oil smuggling routes and individuals have been involved in this for years since the oil for food program. so combating something that has that kind of traction is difficult. >> what about air strikes with these mobile refineries, how effective has that been? >> military says they have been very, very effective. if you look at the numbers, we at one point were saying that isis was making as much as $3 million a day. and now most say about $1
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million, maybe a little less. i would say that's about two-thirds reduction. that's tremendously successful. nowhere near where we need to be yet, but very much headed in the right direction. >> to follow-up, mr. lynch's line of questioning, is there any way, even if we have had some modest success with respect to these mobile refineries in the air strikes, is there any way that we can truly combat or is is it practical to believe that we can combat the source of oil revenue without retaking identifiable oil fields from isil control? >> to fully deal with the problem, you are going to have to retake the oil fields, even short of that, if you can deny your adversary the ability to extract, to move, to refine that oil, if they are sitting on it but not making money on it or only making as much money as they can make domestically, which is happening in some
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cases, then you can further degrade their capabilities. >> how well do we know whether or not the assad regime is a primary purchaser or a small purchaser of some of this illicit oil trade? >> my understanding is there is no question that the assad regime purchases isis oil, has been doing so for some time. we are talking about oil fields in both sides of the border. one of the points i didn't get to in my oral remarks is to make sure we are doing things, including combatting their financing not only in iraq, but also within syria. but the extent of that fluctuates, i don't know exactly. >> but what about turkish cooperation with respect to the oil trade? >> i understand that turkish cooperation has increased significantly. it's going to be difficult, though. this is something that's been going on for years and years. the price of oil in southern turkey is very expensive per liter. more expensive than if you've ever rented a car in europe. that says something. there's a built in supply and demand, even at the sharp discounts that people are selling the oil at in southern turkey, you can still make a
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profit because the market will bear it. because market oil is so high. >> quick final shifting gears to the issue of kidnapping for ransom. undersecretary cohen's testimony was it's been u.s. policy for many years to refuse the payments of ransoms or make other concessions to hostage takers. can you assess how the release of the five taliban war criminals from guantanamo in exchange for sergeant bergdahl impacted the u.s. position with respect to sending that signal to partner nations? >> the response is it wasn't helpful. i think it's inconsistent. i think it's sending a mixed message to our european allies, who were being critical of, the french, and spain, for making ransom payments to -- for the release of isis hostages. i think it is, again, was
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counterproductive, and it undermines our effort. at the end of the day, this is a significant -- may not be the most significant source of isis funding, but if isis is making $20 million a year or up to this point, this year, $20 million, that's significant. we need to undercut that ability and when we are engaging in this type of conduct, i think it's counterproductive. >> thank you. yield back. >> time of the gentleman has expired. chair recognizes the gentleman from wisconsin, mr. duffy, for five minutes. >> thank you, mr. chairman. a lot of topics have been covered today. but my concern with the administration is its initial designation as isis as being a j.v. team. i looked at the strategy of the administration in regard to its mission to disrupt, degrade and defeat isis. i take issue with the way they lay that out. i wish they would say we are going to defeat isis. spending $500 million and trying to train 500 quote moderate unquote rebels to take on 40 to 80,000 jihadists doesn't seem
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like a sound strategy to defeat this group of radicals. then as i think, on average, mr. rothfus indicated on average seven bombing missions a day compared to what we had previously done in prior engagements seems far too little, and somewhat too late. my concern is -- has been with the administration's strategy and i'm concerned that the lackluster approach that i have just referenced is taking place on the finance side. does the panel think treasury has been adequately engaged on the terror finance side of disrupting the money that flows to isis? mr. gurule? >> as i stated in my opening statement, i think they're struggling. i think certainly they have good intentions and they -- >> treasury is struggling? >> i think they are struggling with gaining their traction, gaining their footing. >> that's reflected in the low
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number of designations? >> right. >> isis isn't struggling. treasury is struggling. >> treasury, yes. >> to the panel, i think mr. pierce asked this but i'm confused. moving oil is not like moving nuggets of gold or diamonds? right? it's a pretty -- there's a large quantity of oil that has to be moved from the oil fields and/or the refineries, is that correct? >> we're talking about 20,000 to 30,000 barrels a day. that may -- there may be some -- it's not an exact figure but it's a significant amount of oil that's being transported every single day. >> once it's sold, it can be more difficult to identify those who are participating in the finance side and the purchase side and the middle man side of oil. but does it seem impossible that we couldn't bomb tankers of oil as they leave the refinery or leave the wells? why aren't we engaging in military action to destroy the oil as it leaves? is there -- i just want somebody
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to answer that question. why aren't we doing that? to anyone on the panel. mr. levitt? >> i don't have the answer to that. it's more of a military question than not. my guess is that if it were that simple, we would be doing it. because there's no one who disagrees with the premise of what you're saying. sometimes they're small trucks. i think people watch too much tv and think that we have complete aerial coverage of everything that's happening at all times. i don't have the perfect answer to your question. i would say that i am absolutely certain that the approach at treasury is not lackluster in the least. people are working very, very hard on these issues. it's the nature of the problem that they are facing. if what congress really wanted them do is designate 40 people, we could do that tomorrow. >> i'm not saying that. we're moving large quantities of oil. we have drones in the air. we have air superiority. that we can't take that out is somewhat of concern. we're not dealing with a small terror network.
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we're dealing with large amounts of money. i would imagine it's easier to trace large amounts of money than a few million dollars here and there in different terror networks. we're talking about hundreds of millions of dollars, right? >> correct. while you're -- i would just challenge the idea that we have complete coverage at all times. it's better asked to a military person. >> fair enough. i want to switch to another topic. the united states and turkey are co-leading an initiative within the financial action task force. you are aware of that? is it fair to say that turkey was just removed from the gray list from that task -- from that task force? >> that's right. that was a lot of treasury and other work to get them listed and then to get them to the point where they can be delisted. at the end of the day, though, we don't have a choice as to who sits on the borders of syria and iraq. if you can get turkey not only to get off that list but now to be helpful on this, which by the way is a favor to us. this is on their border, not
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ours, then that's a good thing. you're absolutely right to expect we need to sit on them very, very carefully. >> so looking at turkey, kuwait, iraq, qatar, are we applying adequate pressure to those questions to get them to engage with us on the finance side of isis? >> i think there's always more that can be done. one of the points that i made in my written testimony is i think that there has been ineffective or inadequate use of the bsa enforcement actions. they can impose civil fines on banks not complying with the regulations. with respect to counter terrorist financing, treasury has done a good job on anti money laundering side. with respect to designating or i should say finding banks that are not in come compliance with the terrorist financing regulations, i've only identified two banks. the last ten years. those include the arab bank and the doha bank from qatar.
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i think we can be doing a much better job in that area. >> thank you. >> time of the gentleman has expired. the chair recognizes the gentleman from california, mr. sherman. >> isis rules territory and extracts money from the territory that's probably the biggest source of revenue. the lights are on in mosul, but okay not all the time. but electric -- electricity continuity is shoddy in much of iraq. before this outbreak, a lot of the electricity for mosul came from the mosul dam. is that dam still providing electricity to those living under isis? does anyone have an answer? is isis collecting money from the people who receive that electricity? >> my understanding is that the dam is not under their control.
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they're not -- from any of it. >> they don't control the dam. but how are they getting the electricity from mosul? >> the government that controls the dam is allowing electricity to go into the city because there are citizens who live there. isis collects for that electricity. >> i don't know that that last part is true. >> well, we do know that they are in a position to collect for the electricity. >> we know they're able to tax for anything they want. for the air they breathe or anything else. >> when we were serious about world war ii, we didn't provide electricity or food or anything else to the people of france when they lived under nazi occupation. yet you are saying the iraqi government is providing electricity to mosul. is the iraqi government being paid for that? >> i don't know. >> it supports the economy of mosul and other areas under isis control. isis taxes those people.
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it's very hard to wage war if you supply strategic assets to the -- to areas under enemy control. i have never seen that done in a war in the past. >> i hear your point. i say we are short of world war right now. if you want one sure way for the central government in iraq to go even further to losing the support of more of their constituencies, deny electricity to iraqi citizens who -- >> let me get this. you supply the economy under isis' control. isis then taxes that economy and that's -- did we lose the hearts and minds of those who are resisting nazis because we not only did not provide free food or electricity to the people of france, obviously electricity wouldn't have worked but food, but in fact, we prevented food
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imports in france? didn't we retain the support of the civilian population under nazi occupation? is there any other war you can point to where free electricity goes from one side to the other? >> again, unless you have information -- i don't know it's free electricity. i don't know if they're taxing electricity. this is a deeply secretary yn war more than anything else. so the further you make divisions between the sectarian communities in iraq, the worse it's going to be. >> so you think -- you are for a policy of supporting the strategic elements of the economy under isis control? that's certainly -- >> i think you know that's not what i said. >> what? >> i think you know that's not what i said. >> you can clarify for the record in writing what your position is. now, i guess that would also
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apply to petroleum. if you are in favor of the lights being on in mosul, then people ought to be able to drive. we are preventing them from exporting oil. have we done everything possible to prevent them from producing enough oil for the civilians under their control? professor? >> again, i think this is -- as we have discussed, a very important source of income for -- >> i'm not talking about exporting. i'm talking about providing for the millions of civilians under their control. >> i don't think it has been a priority. i don't think it has been a focus. >> turning off -- we did not hesitate to bomb oil fields during world war ii. we did not think that making sure that the people of france could drive around paris was essential to retaining the support of those civilians. the idea that there would be people driving civilian cars in
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mosul that somehow the tanks captured by isis would not have -- obviously, a lot of this hearing is focused on the oil exported by isis. but isis has no shortage of oil for its own military operations and even for the civilians under its control. i yield back. >> gentleman yields back. the chair wishes to now announce that we will clear the remaining three members who are in the hearing room and then we will adjourn the hearing. >> i want to thank the witnesses for providing testimony today. i can tell you that most of the people that i represent have concerns about the way this administration has approached
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this crisis in syria and iraq. i think there is a lot of concern the administration either didn't know or ignored critical information that could have prevented us from being in the situation that we find ourselves. with that said i was interested in the testimony of each of you as it relates to the hard work that goes into identifying those who should be subject to the sanctions that are allowed by u.s. law and law of other countries. and it strikes me that that information has to be gathered really on the ground and has to come to treasury through, again, department of defense and intelligence agencies who are in the business.
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and so i guess my question is after listening to under secretary cohen for two hours i came away with a little concern that maybe he is not and treasury is not at the table as much as he indicated that it was. i wanted to start with you, dr. johnson, and then maybe get comments from the other two witnesses. my question is this. secretary cohen indicated that he was at the table. there were a lot of questions he couldn't answer and perhaps that's the nature of an open meeting like this in an unclassified setting. i do wonder whether or not he is getting the precise information about these targets from intelligence agencies and from the defense department. is he getting -- is treasury getting what it needs to make
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these decisions and impose these sanctions? if not what can be done to make sure that treasury is at the table? i think we all agree those of us sitting here today that stopping the financing is extremely important. so dr. johnson, if i can start with you? >> on the first part of the question i think it is hard to say the extent to which he is at the table for any given decision. my sense is that the treasury has done extremely well in the working with interagency partners to include the department of defense and various parts of the intelligence community to get the capabilities that it needs to make the impact that is desired for policy. >> why do you say that, though? can you explain that? >> so since 9/11 and the
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realization that terrorist financing really matters and that to disrupt terrorist networks from terrorist attacks going after their financing is really a use ft instrument to have. treasury couldn't do it alone. it didn't have the capacity and it's worked successfully with interagency partners in iraq among other places during the second war. i think for the purposes of the current treasury effort it is still a young effort. i think that their programs and approach is kind of still developing. i think that we will see more as the policy becomes clearer and kind of the overall posture and footprint that the
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administration wants to have becomes clearer. treasury's role. >> briefly, we only have a few seconds. the question is, are they getting enough information? are they at the table? if not what can we do as congress to help that out? >> i think the portion where he is saying he is at the table and couldn't answer sth question was on military strikes. not only are they at the meeting at the senior level but treasury now has its own office of inteliance and analysis which i once helped run. because of that they are not only getting information from but are part of the intelligence community in every way. part of the problem is not that there is not enough effort or enough people at the table but developing the intelligence takes time. it is an excellent question as to why we are only developing intelligence now.
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the structure and the way people are located means they are at the table. >> time of the gentleman is expired. chair recognizes gentleman from pennsylvania. thank you, chairman. i have a question for dr. levt or perhaps witnesses about the mobile refineries. what do they look like? more importantly, where are they coming from? who is manufacturing them and how are they delivered to the regions where the oilfields exist? >> i would love to know that, too. i'm not an oil expert so i can't answer this in detail. it is quite clear these were there already. it is not something imported into iraq. apparently they are relatively low tech. it is a small refinery you put in the back of a truck. >> do you believe they are manufactured in that region or being imported from somewhere


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