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tv   Islamic State Financing  CSPAN  November 17, 2014 2:55am-6:01am EST

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our capabilities to starve the terrorists of the money they so desperately need to carry out their attacks. i will now recognize the ranking member for three minutes for an opening statement. >> thank you very much, mr. chairman, for scheduling today's hearing. i would like to thank undersecretary cohen and each of our other witnesses for being here today. i'm looking forward to hearing about the administration's efforts to degrade isil's financial capability and to review the effectiveness of our current legal framework in deteriorating terrorists and money laundering known as isil or isis is an incredibly violent organization that has shown a particularly callous disregard for human life for shocking and brutal tactics that include beheading, mass murder and rapes and more recently allegations of
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chemical weapons use. the group is tremendously destabilizing force across large swaths of iraq and syria and the brutal campaigns have approximately u drawn the condemnation appropriately drawn of the broader international community. in addition to the horrific massacres, kidnappings and decapitations, officials believe that isil is one of the richest terrorist groups to ever exist with estimated assets in access of $1 billion. unlike most other terrorist groups, which tend to rely heavily on foreign sponsors, isil generally raises funds internally limiting available to the treasury department to cut them off. from the formal financial system regardless. the ability to sanction and
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block assets remains vital to ensure that over the long run the united states and our allies can shut down any funds that are tied to elicit oil sales, extortion and kidnapping for ransom. as we make progress in curtailing isis's internal funding schemes, it may be forced to rely more heavily on types of funding that would most likely have to flow through the formal financial system. to guard against this and all other efforts to finance terrorist activities, treasury, our financial regulators, the department of justice as well as congress must work diligently to strengthen the enforcement and deterrent value by over o of our aipt money laundering laws. due to concerns that the department of justice and regulators have not met the tasks of holding banks and their executives sufficiently accountable for blatant violations of law designed to
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staunch the flow of funds to terrorist groups, i join with my democratic colleagues earlier this congress to introduce a legislation that would close loopholes, encourage the flow of information related to elicit activity and strengthen powers to hold bank executives accountable for their role in safeguarding our national security among other things. i hope that as part of this committee's discussion of the adequacy of international banking policy, we take a hard look at the proposal that democrats have put forth, but has yet to be considered by this committee. i yield back the balance of my time. >> the chair now recognizes the chairman of our capital market subcommittee, the gentleman from new jersey, mr. garrett for one minute. >> i thank the chairman for holding this hearing today. isis inherits the claim to the evil legacies of senseless brutality and inhumanity. if given the opportunity, isis
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would try to harm americans here in the homeland. as a member of congress, who represents a district across the river what once was the twin towers, i know we cannot be cavalier about security threats such assist partnerships our commander-in-chief hasn't appreciated this. i'm concerned how seriously president obama has taken this threat. so i look forward to the hearing and witnesses. i hope to get a better understanding of what has been done and what must be done to not only to degrade but actually to eliminate this terrorist threat. thank you, mr. chairman. >> the chair now recognizes mr. sherman for a minute and a a half. >> thank you, mr. chairman. i spent substantial amount of time on these issues at our terrorism subcommittee over on foreign affairs.
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we have learned that qatar is a major source of funds, both at the governmental level but also allowing citizens to donate to hamas and isis. isis is now much more internal. there are those that attack the president's who have an oversimplistic view of the situation. ist cyst evil, but many of isis's enemies are just as evil and more dangerous than isis. given this complicated circumstance, simplistic attacks on policy don't really further our situation i'm concerned that the electricity continues to be on in all the cities that isis controls. this means that either we are providing that electricity from dams under the control of the iraqi government or we're allowing isis to operate electric generation facilities. either way isis is able to sell
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electricity because we're unwilling to turn the lights off. we're in a difficult circumstance because the civilians that live under isis's rule are hostages and to some extent supporters of isis. but we did not hesitate to bomb targets that occupied europe and can't hesitate to bomb targets in isis-controlled northern iraq and eastern syria. finally, we have learned that the control of the new york fed and its ability to clear dollar transactions is perhaps the most powerful sanction that we have against terrorist states like iran and i'll be interested to see whether that would play a role. it has brought iran to the point they are willing to pretend o to negotiate with us. i yield back. >> the chair now recognizes the vice chairman of the subcommittee, the gentleman from pennsylvania, mr.
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mr. fitzpatrick for two minutes. >> i thank you, mr. chairman. this past month i had the opportunity to travel to the e region to investigate terror financing at meeting in qatar and turkey with the department of treasury officials to roubd out my understanding of terror financing and specifically the threat posed byist uist. i look forward to working with my colleagues on this committee to provide oversight over the government's response to isis and ensure that we have all the tools necessary to meet this unique challenge. isis is an enemy unlike any oh. they have their roots in al qaeda and iraq, they have not only learned from previous experiences, they have evolved and not just an organization committed to acts of terrorism but have designs on establish. ing their own state. the structure creates a unique challenge.
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for one of the means that we have traditionally employed to combat terrorist threat, which is go after their money and resources. this mission to degrade and defeat isis demands coordination. our national security transcends all other and i look forward how we can work together to protect the american people. i yield back. >> the chair recognizes mr. lynch for a minute and a half. >> thank you very much, mr. chairman. i want to thank the secretary and the other panelists for working with the committee and helping with our work. as co-chair of the task force on anti-terrorism financing along with my colleague mr. king from new york, we have done a lot of work in this area in the traditional sense where we're trying to block terrorist organizations from using legitimate financial system.
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this problem presents a different type of issue, where a lot of rev of knew are being generated internally by isis. and its totally different scale. we're talking $1 to $2 a day in terms of their revenue. i would be interested in hearing from the secretary on what we're doing in turkey along the northern border of syria there. i just came back from irbil and look at the situation in northern iraq as well as in turkey. we're concerned about the poorest nature of that border and how it elicits shipments are still being handled both through turkey and parts of syria. so will be interested in hearing the comments on that. i want to say thank you for the
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work you have done so far. i think it's been commendable in terms of the work you have done. >> the chair recognizes the gentleman from florida for one minute. >> thank you, mr. chairman and thank you for holding this hearing. i want to thank our panelists for their testimony today. as you pointed out, it costs the terrorists who murdered thousands of citizens on 9/11 $500,000 to plan and execute their attack. in a single day, isil is estimated to bring in more than double that amount through elicit business practices. we must dismantle and destroy this terrorist organization before more american lives are put at risk. from selling oil to taxing and extorting businesses to kidnapping, isil is a criminal organization with numerous resources that have perpetuated reign of terror across the
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middle east. i look forward to working with my colleagues to ensure the federal government uses every tool to prevent isil and all terrorist groups from acquireing the funds to reign their terror. i yield back. >> the chair recognizes the gentle lady from ohio for one minute. >> thank you, mr. chairman and undersecretary and the other panel ist panelists. today we're examining the important topic of terrorist financing in islamic state, specifically how the trigs group known as isil obtains financial resources to further their operations in iraq, syria and the middle east. each night my constituents turn on the news and they find reports of isil's acts and the brutality against women aid workers and journalists. this must stop. while the military is providing
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aid to moderate rebels and legitimate governments to defeat isil, we must also highlight the efforts of other agencies within the administration and how federal resources may be coordinated to erode and ultimately eradicate isil. the u.s. government is combatting terrorist financing, attempting to choke off sources of funding for isil and related organizations. mr. chairman and my other colleagues here, i look forward to working with you because the hearing on this topic not only protects our financial interests, but our national security interest as well. thank you, and i yield back. >> the chair recognizes the gentleman from indiana for one mant. >> thank you, mr. chairman and thank you for calling this important hearing. mr. chairman, islamic state is one of the most well armed and well financed organizations. they are the moegs bar baric as well. since 2013 they have recruited
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thousands of fighters from around the world, swept through iraq and syria and killed thousands of innocent people who do not conform to their ways. it's reported that islamic state controlled around 60% of the oil fields in syria, which are bringing in massive daily revenues to fund their operations. one of the most effective ways the u.s. has disrupted terrorists has been to cut off financing limiting their ability to plot and plan attacks. thwarting revenue streams may require new tactics. so today i'm looking forward to hearing exactly how we are identifying and blocking financial intermediaries to keep them in a strong position. is our current strategy working? are allies doing all they can? thank you to the witnesses for appearing today and i look forward to this conversation. i yield back. >> last the chair recognizes the gentleman from north carolina for one minute.
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>> thank you, mr. chairman, for calling this critical hearing. the threat seems to be growing and the summer we were told there were about 15,000 soldiers. now between 40,000 and 80,000 soldiers. our best hope and opportunity appears to me to be to intercept the transport of funds coming from the sale of oil. of course, there's extortion and other means. it does beg the question whether we have enough on the ground to make these interceptions. another area of real opportunity is with software that's available. i met with several times as chairman of the task force on terrorism. many national software companies and with the sophisticated available, i hope that the department is making every effort to utilize the software to engage these funds as they get into the international financial system. thank you.
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>> we now turn to our treasury department witness, the undersecretary for terrorism in financial intelligence, a position to which he was confirm ed in june of 2011. mr. cohen leads the department's policy enforce mentment rel toir and intelligence functions, aimed at identifying and disrupting the lines of financial support to international terrorist organizations. prior to his current service, he held other positions at treasury, practiced law in the private sector. we welcome you, mr. undersecretary, to the committee. without objection, your full written statement will be made a part of the record after your oral remarks. you're now recognized for five minute summary of your testimony. >> good morning, chairman, ranking member waters and -- >> could you pull the microphone a little closer? >> certainly. good morning, chairman, ranking
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member waters, distinguished members of the committee. i thank for the invitation to appear before you today to testify on this very important topic. i will focus my testimony this morning on the treasury department's efforts to undermine isil's financial strength as part of the administration comprehensive strategy to disrupt and defeat isil. we're determined to defeat isil not just because of its brazen atrocities, but also because it threatens core u.s. interests. isil threatens american personnel and facilities, it threatens our regional allies and if left unchecked, it could pose a direct threat to the u.s. homeland. that's why under the leadership of president obama, a broad coalition of more than 60 partners has come together to stop this threat. isil has been grabbed the world's attention for its brutality but also for its substantial wealth. so i'd like to outline how we are focused on undermining
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isil's foundation. our work is one of several complementary lines being taken by the coalition. these include military operations and training, additional humanitarian assistance, stemming the flow of foreign terrorist fighters into and out of syria and iraq and exposing the hypocrisy of propaganda. the military components are bolstering our work in the financial foundation. as would the rest of the campaign our efforts to combat the finance inging will take time, parks and extensive collaboration. but so long as isil terrorizes the people of iraq and syria and threatens u.s. interest, we will remain committed to degrading its financial strength. our strategy involves three elements. the first is working to cut off isil east main sources of funding.
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isil has raised a significant amount of money from selling oil it extracts from the fields in iraq and syria. from mid-june until recently, isil's daily oil revenue was $1 million. although it's now likely lower thanks to coalition airstrikes. to further disrupt this market, we are targeting for sanctions anyone who trades in isil east stolen oil. it is true that the oil moves in illicit networks that are largely outside of the formal economy. but at some point, that oil is acquired by someone who makes use of the financial system and is vulnerable to sanctions. we are working with our partners as well as with regional companies to clamp down on the cross border smuggling. next, isil like other terrorist organizations, kidnaps civilians to profit from ransoms paid to obtain their release.
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isil has taken in at least $20 million from ransoms this year. to address this, we are redoubling our engagement with foreign partners as we urge them to subscribe to a no ransoms policy. refusing to pay ransoms not only makes it less likely that innocent civilians will be kidnapped, it deprives terrorists of funding critical to deadly aspirations. isil also takes in some funds from financial supporters and we'll continue to target them for sanctions. we intend to make sure that donations do not become a more significant to isil as we squeeze its other revenues. as the revenue that isil generates from crime and extortion by demanding cash at gunpoint, shutting down this source of funding ultimately will require breaking but treasury has a crucial role to play and that brings me to the second element of our strategy.
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restricting access to th international financial system in order to impair its ability to collect funds from abroad and to store, move and use the funds it acquires locally. the ability to use money or fund external operations depends on its access to the banking system. so we are working with iraqi authorities, iraqi banks and international banks and regulators to prevent isil from using bank branches located in territories where it operates. the third element of our strategy aims to dismantle the financial foundation through targeted sanctions on its leadership and financial facilitators. this will make it harder for isil to conduct commercial activity and also clearly identify who stands behind this evil organization. before concluding i'd like to make one final point. we should not confuse funding with financial strength. while isil is well funded,
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a terrorist group's financial strength turns not just on its income but also on its expenses and ability to spend money freely. in that regard, isil faces significant financial burdens. paying its fighters and attempting to govern sprawling territory is expensive. and isil does not have the money to meet its costs. as we make progress in diminishing revenue, we will further exploit this vulnerability. thank you and i look forward to addressing your questions. >> the chair recognizes himself for five minutes. my understanding is that the ability to block terrorism funds derived from executive order 13224 issued by president bush
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shortly after 9/11, part of that executive order certain entities and individuals can be designated as specially designated global terrorists. i think the initial list has grown from 27 to now 800, which is important because it means that funds in the u.s. can be blocked, u.s. persons and entities are no longer permitted to do business with those on the list. it is my understanding that so far only four members of isis have been designated global terrorists by treasury and it is my understanding that these four are not involved with major funding sources of the elicit petroleum trade to the black market. so it strikes me as a little bit of a -- well it does strike me as a low number. can you describe briefly some of the challenges here and what should be the expectation of this committee and the american people going forward? >> absolutely, mr. chairman. as you know, the authority to
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impose sanctions on terrorists and terrorist financiers, it's authority we have used in attack attacking the financial foundations of a wide variety of terrorist organizations including al qaeda and isil's predecessor al qaeda in iraq. so we have over the years used this authority to designate in more than two dozen individuals and entities, some of whom are in the current manifestation of isil, some of whom are part of isil's antecedent al qaeda and iraq. we are continuing to look for opportunities to use this tool to designate these individuals. as you note, it freezes their assets. it prevents their use of the u.s. financial system.
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but equally importantly, it also has ramifications overseas. >> i understand what it does, but we only have four people on the list. so is this an intelligence challenge? is it a priority challenge? again, what should be our expectation here? >> specifically with regard to your question on the oil trade, there is work that needs to be done to get better insight into precisely who is involved in that oil trade. our intel agencies are working day and night to develop that intelligence. we're working with partners in the region as well to help us gain better insight into that. as we identify the individuals who are involved in that oil trade, they are vulnerable under this authority. as i noted in my remarks, what we are particularly eager to identify are the individuals who have some foothold in the formal financial system. because we can designate people who are in syria and iraq who have no -- >> if i could, my time is running out. i'm going to attempt to set a
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good example here. besides the question of priorities, we have mentioned the executive order. is there any other legal authority that the administration is depositing that it needs on a go-forward basis to deal with financing? >> mr. chairman, i think we have the legal authorities that we need. mostly the executive order, we have a host of other authorities that are potentially available to us to address terrorist financing and the financial activity related to it. one of the keys to our ability to designate, which is just one aspect of our plan of attack. >> i understand. >> is to develop better insight, better intel. i can tell you that that work is underway.
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we have -- >> the remaining time i have let me get this last question in dealing with intel. my search of the record seems to indicate that there has been really only one significant terrorist finance prosecution by the justice department and as a texan it received a lot of press in my hometown of dallas. but i'm unaware of any other major terrorist finance prosecution. you're representing treasury and not justice here, but can you at least describe the intel sharing between treasury and justice? because again, one significant prosecution seems to be a dearth. >> mr. chairman, i'm not sure there's only been one terrorist financing prosecution. i think, in fact, there have been many -- >> well significant may be a term of art, so proceed.
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>> defer to my colleagues at the department of justice, who i understand file an annual report with congress about their activities in prosecuting terrorist financing. in terms of information sharing between treasury and justice, we are very, very closely linked up with justice on a policy level and also on an information sharing level. i think probably the best but by no means the only is our relationship between our financial intelligence unit and the justice department in sharing information that they obtain regarding financial activity that could potentially be used for a whole host of financial prosecutions. >> i have run past my time. the chair recognizes the ranking member for five minutes. >> thank you very much, mr. chairman. the questions that i have
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perhaps are questions that should only be asked in a classified briefing. and so rather than delving into some of the questions that i have about what we have not been able to do, i will simply say this. many of us were shocked and surprised that we appear to know so little about isis when the information finally reached public view. it is inconceivable that we have what we think is one of the best intelligence agencies in the world that isis could have developed this far with sophisticated operations for selling oil and other kinds of things that it's doing without us knowing what they were doing. so without asking the questions
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that i would ask in a classified briefing, i would simply ask you, have you been engaged -- treasury been engaged with the cia and other who is have the responsibility for intelligence in ways that we can catch up with how far they have developed and what they are doing? i heard what you said about their inability to spend the money and they are short of the money because of the payouts they have to do, et cetera. but how can we have confidence in that kind of representation without knowing what you have done to fix the system or to mend the lack of communications that got us to the point. that we are with too little information about isis. >> i don't want to understate
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our insight into isil financing on a whole host of areas because i do think we have good information. we need better information, but we are not by any means completely blind to how isil is raising its funds. on the oil transactions in particular, the situation there is that this oil smuggling that isil is now taking advantage of had been going on for quite some period of time. you had people who were stealing oil from iraqi and syrian wells, selling it through the black market that has existed in that part of the world for a long time, but what changed is when isil came in and took over the fields. it became isil that was the beneficiary of this preexisting smuggling network. in years past, when it was not a terrorist organization that was
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involved in this smuggling network, it frankly wasn't a high priority for our intelligence community to understand who was involved in the smuggling of iraqi or syrian oil. it's now an enormously high priority to identify these individuals, but what has changed is you now have isil as the beneficiary because they have control of the oil coming out of the ground. the work to identify external funding networks for isil is something that we have been very much involved in for many years to understand and to take action against the funding networks coming out of the gulf. congressman sherman referenced qatar earlier. we have been engaged over the years to both better understand the financing networks in the
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gulf and to take action to cut those funding networks off. so we are working very closely with the intelligence community and other members of the intelligence community so we have the information we need in order to execute the policy. >> i don't want to cut you off, by my time is running out. let me just say that to date, many of us are uncomfortable with the fact that isis has gotten as far as it's gotten, raised as much money as it has raised and is wreaking havoc without us having known r more about them. we invest a lot of money in our intelligence operation here many this country and we don't expect to be this far behind because of it. i yield back the balance of my time. >> as ae reminder to state the
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obvious, this is an open hearing. a side bar conversation between myself and the ranking member, we anticipate a classified hearing very early in the next congress. the chair recognizes the gentleman from new jersey, subcommittee mr. garrett. >> thanks, mr. chairman. i have had a number of concerns with this administration's approach to comebatting isis from the very beginning. the administration including the president has underestimated the threat that isis poses to the region and to the united states. his early on characterization of isis, the jv team, suggests that the president was not informed of the threat. so it's also concerning that the reports that the president missed more than half of his security briefings at the beginning of the administration. so looking to you from your perspective within the department of treasury, do you believe the necessary information is now being communicated to the president
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and do you think the information was always being communicated to the president and other senior administration officials over the last year and a half? >> congressman, i don't accept the premise of your question. the president and the national security team as a whole has been focused on the terrorist threat that we see coming out. >> the premise of the question was that the president saw this as not a significant terrorist threat. the president said this was the jv team, meaning there were other more looming issues. that's from the president's comments. so you're saying the president misspoke when he said that it wasn't a problem before and now it's a problem? >> i will always allow the president to speak for himself, but i'm telling you the national security team from the president on down has been focused like a laser on the threat of terrorism
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coming from this part of the world and elsewhere as well. >> that's really the question. >> i can tell you that because i have been part of this team from the outset. we have been working day and night to degrade al qaeda, degrade al qaeda affiliates and as well as the terrorism organizations that have grown up in the turmoil in syria, we are working hard to ensure that we have both the information we need in order to address the financing threats in the way that these organizations are financed. >> just as a semantic because you used the term to degrade and then eliminate.
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has our attention been simply to degrade al qaeda and now isis? or is our intention has been to eliminate them? >> i think i said degrade, disrupt and defeat isil. and -- >> during other military engagements, veterans day, we talked about world war ii. we never said we're going to degrade our enemies there. we said we were going to defeat them. both the president and now you as well say our intentions seem to be to degrade them for a period of time and then take that step. >> the objective is to defeat isil and al qaeda. there's a process involved here that particularly on the financing side officially what we're looking to do is to
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degrade their access to funding ultimately to lead to the defeat of this terrorist organization. >> i would hope. >> there's no misunderstanding. >> i assume you consult and coordinate with dod as well. it's my understanding that the u.s. employs threat finance cells to track financial transactions in the middle east. you're nodding yes. it's my understanding these units have been pulled out of iraq as a result of the troop withdrawal. can you explain how the lack of resources hasn't impacted our fight against financing and also within the time we are here, i think the administration is talking about removing them from afghanistan as well. will that have an impact upon your intelligence gathering if that goes forward? >> picking up on the classified supplement to the hearing, i can
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give you an expansive answer in that setting. i can tell you that the iraq finance cell that had had existed a decade ago was dismantled when the activity, the fighting on the ground was ramping down but i would like to leave the answer to a cls if ied setting. what we're doing to enhance our intel collection. >> time of the gentleman has expired. the chair recognizes the gentle lady from new york. >> thank you, mr. cohen. isis is the richest terrorist organization on earth and financially sophisticated unlike the other terrorist organizations we have dealt with that raise their money from outside sources.
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they basically raise it and spend it internally in iraq and syria. and one way to crack down on them is to crack down on the companies that are financing terrorism. the ranking lady waters and introduced a bill called the incorporation law enforcement assistance act which would require the disclosure of very basic information from corporations of who their benefit owners are. i was pleased in august when treasury proposed a rule to implement many parts of my bill. i would like to know what is the update on this. what is happening with the rule that you put into place? >> congresswoman, you highlight an important issue with the issue of shell companies. the rule that you are referring to we proposed a final rule in august.
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the comment period on that final rule -- actually i think the comment period expired in august. we are in the process of reviewing the comments that i think we received over 120 comments on that proposed rule. i should probably not get into any more detail on where we are in terms of issuing the rule, but we are deeply committed and have been as a number of years to getting better transparency into the beneficial owner. in the president's budget this year, there was a proposal for legislation that would enhance our insight into the beneficial owners of legal entities at the time they are formed so we would be able to address this in two ways.
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both when they open a bank account and also when a company is formed better insight into who the beneficial owner is of a company that's formed. so we are continuing to pursue this very vigorously and -- >> it just seems like common sense to me and something we should have implemented yesterday. and i think that's something we could jointly work on is requiring this and helping you move forward with your rule making more quickly bypassing it in a bipartisan way in congress. secondly, you testified that they are making money off extortion and their territorial gains as they took over the bank and so forth. one of the ways that we can contain them is to obviously go after their territory. but go after how they can hold on to that territory, which is huge cars, tanks, infrastructure equipment.
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have we moved to block their ability to purchase this, sanction companies, the materials that they immediate to hold on to geographic areas? >> clearly, one important line of effort to address isil's hold on geographic territory is the defense department's line of activity working with the iraqi security forces -- >> obviously, we support the military, but they also have a procurement system. can we cut off their ability to purchase cars, tanks -- >> absolutely. >> and are we moving to do that? >> part of our strategy is to deprive isil of access to the financial system. because one way they can try to procure vehicles. >> we could cut off their banks and territories. have we looked at that? >> we have.
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and we have worked closely with the iraqi central bank and with the iraqi banks that have branches in the territory where isil operates to ensure that isil does not have the opportunity to use those banks to make payments for whatever reason including the reasons that you cite. >> and then, of course, the third area is to cut off their revenue from the illegal oil sale sales that they are controlling. and they can't all be in cash. it's too much money. you were saying it was like a million a day. now it's down to a million or two a week. what are we doing to cut off the transactions that are not in cash? it's got to be through banks. >> we are working to understand exactly how those transactions occur whether it is in cash or through banks. through banks, we will be able to address that. >> which means we don't know.
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>> the chair recognizes the gentleman from texas. >> thank you, mr. chairman. thank you for being here. as you were kind of laying out the plan that treasury has for the counterterrorism financing, i think one of the things that came to my mind was two things. one, how long do you think it will take to get into this plan to the point where we see some diminishing amount of resources go into isil? >> it's a very good question. it's a hard question to answer. we have begun to see some diminishment in revenue from the oil sales. as i noted, they were earning, on average, about $1 million a day over the summer. in particularly because of the airstrikes, the mobile
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refineries as well as other military activity, we have seen a decrease in the -- in what we estimate to be the revenue sales from about a million dollars a day to several million a week. there is some progress there. the history of our counterterrorism financing work has been more generally that it is small steps that you can see over time having a real impact. so i don't expect i'm going to be able to come back to this committee a month from now and be able to give you a balance sheet that says ok, this is exactly what isol has today and then a month later show a decrease. i do think that the strategy we're employing will impair isil's access to funding. it will impair their ability to use the funding that they have. and we'll see a real impact on isis, but it will take a
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dedicated effort over some period of time. >> now one of the things that came to mind was we almost sounded like we were ramping up this anti-terrorism infrastructure. we have been fighting these terrorists for a long time. so are we now really taking it seriously, or is this a different situation -- i'm not clear as to where we have been and why we are just now i think you know maybe taking this more serious. >> well, we have been working for years on degrading the access of terrorist organizations to funding. whether it is al qaeda, al qaeda affiliate, hezbollah, hamas, you name it, we are working on this including al nusra fronts and al
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qaeda in iraq and fronts as well as isl. what we are doing is talking more about the integrated strategy we have to defeat isol and go after its financing. but this is a reflection of a lot of work that has been done over many years. >> now, recently in september isil released 46 hostages like you said -- from turkey. and the turkish president said no ransom was paid. the president of the united states said no ransom was paid. but there are a lot of different ways to compensate for someone. and i think it is kind of outside of isil's pattern here of releasing hostages even though you state they're using hostages to raise money. are you absolutely sure that there was no quid pro quo to
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releasing those hostages and isil? >> congressman, recognizing these are open hearings, i think this topic may be better addressed in a closed session. i can tell you it is the u.s. policy not to make a concession or ransom to any type of concession to hostage-shaking terrorist organizations. we are very aggressive in our efforts to ensure that others around the world adhere to a similar policy. we believe that is the best way to protect all of our citizens is for everyone to adhere to no ransom policy. >> final question before my time runs out. what are the metrics that you use to -- in other words you have this plan you use. what are the metrics that indicates ok, we're being successful? >> well, most importantly is we
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will continue to get insight into how isil is raising its funds and the ability to use the funds. and we can get extensions on how they feel they're using the financial stress. we do get information on the financial wherewithal of these organizations and we'll be able to track it that way. >> the time of the gentleman has expired. chair now recognizes the gentleman from california, mr. sherman. >> some of my colleagues have talked about the surprising strength of isis. i think instead it is the incredible and surprising weakness of the iraqi government and military, which easily conceded territory, handed over weapons, left the bank vault open in mosul and elsewhere. the problem is the government in
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baghdad, we under a previous administration installed mr. nouri maliki, a man whose evil is only exceeded by his incompetence. a man who refused to enter a status of force agreement not only with this administration but refused to enter a long-term agreement with the prior administration that had installed him. and instead, wanted and succeeded in getting american troops out so that he could further oppress the sunnis in the middle of his country. secondly, we talked about how powerful isis is. let's keep in mind, the hezbollah, assad, iran alliance or axis has par more money and greater ability to carry out terrorist agendas outside the area. we have had discussions of their export and the smuggling of oil.
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do we have -- and 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. 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
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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 europe, you can't say i want to occupy this area, let's buy food from argentina and ship it over, use the banking system. but you're saying if i need a replacement part for my factory in mosul i can just buy it on line?
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>> 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 transportations 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. >> ok. you have answered this question, 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 its investments around on wall
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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 is 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, we noticed it was nazi territory. i yield back. >> could i just briefly -- our efforts to prevent isil from making use of the banking system would effectively prevent that transaction. but we're not targeting the civilian in mosul who is
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currently being dominated and subjugated by isis. 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 rooms where you lay out a fairly complex strategy in this report. are you in the rooms where the strategy is being formulated? >> yes. >> on a scale of one to ten when you talk about depleteing the resources say from oil production you would be familiar with the processes and the targets and things like that?
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>> 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 of ten? >> i would give that a ten, congressman. >> ok, 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 $60 a barrel, resulting in 3/4 of a million barrels of oil. now the report talks about choking off the funding for insurance.
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the insurance could cut the insurance off themselves, you don't have to truck one insurance company down. it is the trucks moving 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 tracking the oil. why don't you do it? >> as you know the defense department has conducted airstrikes. >> 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 reports, the american interests are at stake then stop the flow of oil.
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every single drop of 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 in a tanker truck, you put it in a delivery mechanism. then you don't have to blow up the tank. just blow up the delivery mechanism. 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 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
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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 the flow of oil, why hasn't somebody said let's quit looking at insurance companies and financing. who takes the oil. we don't have to know any of that. stop it in its tracks. it is very simple. >> ok, i understand your point, congressman.
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>> 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. i expect the technology 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, chairman. >> the chairman 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 that you're working to limit isil's ability to transact through iraq and the banking system. it is the system based on the performance and honor in the middle east with a huge network
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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 the isol money through iraq and syria and abroad, what are we doing in that regard? >> well, absolutely, congressman. the networks are part of the financial system in iraq and syria as well as the more formal banking system. and as we are moving to exclude isil from the financial system, we are very much focused on
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ensuring that they cannot use and can't turn to the howala system to a greater extent than they really use it. i will say we have had success in afghanistan and pakistan in particular, in targeting howala for sanctions and disrupting the activity. these brokers need to at some point have accounts. that is another means by which we can disrupt the use of informal financial networks to transact outside of the financial formal system. >> because the concern heres, i i also understand using the hawala system, that is the mechanism isol uses to send payment to its fighters and workers in the region, that is what is enticing people to come
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there. 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 generate? >> absolutely, we're looking to identify who the hawala brokers are and how it intercepts with the financial system. essentially, it needs to translate to actually cash or being delivered to somebody else on the end. when we get insight to who is involved there there are ways to disrupt the activities. 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.
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i was wondering what steps were taken regarding the situation such as isol, but at the same time leaving it open to legitimate actors. because there are a lot of immigrants and immigrant families who provide the critical 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 they are working on that. >> we are working on the remittance issue to try to ensure the legitimate remittance coming through, to the united states and the world, i see congressman we have had a number of conversations on this issue. and i could go into more detail on sort of the variety of steps
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and i could go into more detail that was signed into law over the summer to try to ensure area where isol operates will not prevent remittances going into, for instance, baghdad, but ought to prevent isis from getting access to funds in the
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areas where it is operating, which i think is very much in our interest. time of the gentleman is expired, the chair now recognizes 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 and qatar, and perhaps there is a percentage of the bigger banking system
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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. 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 isol is operating. but also on the other end where the funds may be transferred within the systems. so part of our strategies to work on our partners in the gulf, to cut down on the financing, transferring money whether through a formal system or the informal hawala system so that the money doesn't flow into iraq and syria.
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>> when you say cut down on the source you're talking about the source being the illicit gain from hiss from the oil? >> no, i mean the initial gains, the oil sales are more of an issue going north into the kurdish region or iraq and 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. 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. 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 minister there talking about a new law that they have in
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qatar to crack down on funding that comes through what they call qatari charities, that we have a concern that some of them 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 implementation. i had similar meetings g sings than the ones you had. we had been pressing the qataris to move from a situation where they had the right structures and laws and institutions in place to being more effective in cutting down
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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 of the there. but i think some of the recent steps are harbingers of what is to come. >> 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 uwait as the two jurisdictions
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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 staunching 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 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
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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 reestablish their oil flow. we have a similar situation in the kirkuk region, where it is in a dispute between the urdish forces and isol, we had a similar problem with saddam ussein when we first went in there about whether to destroy
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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 secretary in turkey. and i have to say between our intelligence and what we heard on the ground there there is widespread abuse and sale of oil by isol forces over the turkish border. and we've got to get at that. we have to disrupt that.
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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 elicit oil. there are two ways to get at this. eventually this oil is going to find its way to a legitimate country and a legitimate company that you could apply sanctions to. but before it gets there, you now, we had -- back in 2006, 2008, in iraq we finance cells.
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and we used this as well in afghanistan where we actually partnered up treasury folks and dod. you know, we had military. so it was a joint operation where they actually had had boots on the ground and could identify shipments going over the turkish border like they are right now. 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 we're actually doing a pretty good job of disrupting that oil flow. it is commodity exchanges now across the border that is really financing about 75% of sis revenue. and maybe we could establish some type of control. >> on the issue of the threat finance cells, as i noted
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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 and what is going across the border and how we can stop it. including the 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. but there are other mechanisms that rely on intelligence, and i hope at some point we can get in some 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.
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>> thank you mr. secretary cohen for being here, thank you, mr. chairman. the state i represent, minnesota has a tragic connection to terrorism. we are the only state that has a convicted member of al qaeda from 9/11. that was massoui, my largest district is minnesota, that was the site where he went to receive his instructions on 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 people from minnesota to go and fight under al shabab. 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 from minnesota. we know that today there are those that are american
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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 nation, 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, on the basis of american citizenshibased on their passport. that makes many people in america nervous, especially from my state of minnesota, wondering with the battlefield experience and relationship and with perhaps directives from
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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 transportations 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. 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.
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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 re -- receded. this has only gone up-tempo, why aren't their prosecutions? six years later there are zero prosecutions going on in the department of justice. are you working with the department of justice. are you identifying individuals? there are over 40 known individuals who have returned to the united states who are terrorists and participated in terrorist activities who freely walk 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
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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 prevent terrorists from returning to a wonderful american life and putting innocent american citizens at risk from plots and attacks ere in our homeland. >> well, in the time i have remaining let me try and address that.
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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 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.
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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 nations over in the middle east. i do not believe for one minute we're getting the level of operation and cooperation and back bone inserted 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 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.
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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 back bone 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. nd if we had the resolution, the administration would be much 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 immigrant all would come in, or else they would feel the sting of our pulling back the billions of dollars that taxpayers' monies are
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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 no. unless they're serious about this and if the administration has 62 nations in this coalition this congress ought to know what in the hell are they doing to stop this financing. finally. we wouldn't have these terrorist groups if it were not for saudi arabia. you think we would have al qaeda?
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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 back bone he needs if we're going to solve 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
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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 of 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. come on, the united states would take them seriously on his. what do you say about that? >> congressman, let me just address your last point about a resolution coming out of
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congress. the administration has requested authorization for the effort against isol. the president and the administration has been very clear that we are stronger when congress as you say has its back bone 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? >> 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 isol? >> i know they have given the taliban credit for almost 100% of the heroin trade, and the
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colombian rebels, almost 100% f the cocaine trade. and you know, one way to go after terrorist funds is for americans who are victims of terrorism to see their attackers and go after their frozen assets under section 201 of the terrorism risk insurance act. 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 elp change that. but -- i guess until you can qualify your position on isis being narco-terrorism, that may not be the right time. >> congressman, i'm not aware
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that isis 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. 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 n the isol situation something akin to what we see in the taliban organization, we wouldn't hesitate to use these instances. >> again, the kingpin, there is a big hole there for narco-trafficking. and of course it has been the
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subject of one of the hearings we had previously. and some say we really need to be locking that up as much as e can. >> i'm not aware of the particular deficiency that you're referring but i'm happy to follow up on that. >> chair now recognizes mr. green from texas, on the versight subcommittee. >> thank you, mr. chairman, i thank the witness for appearing today. my feelings are ambivalent on this topic of kidnapping for ransom. it is my understanding that isol has received as much as $20 million. i also understand that this undercuts the goal of
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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 nd father. and i know that they want their son returned home safely. and while i understand we can't pay ransom, i have been with them. and while i don't feel their pain i have seen the evidence of it.
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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. 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 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
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her son returned home safely. >> congressman, i think you put t 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 incentive to take hostages in the first place and to not rovide another source of funding to these horrific organizations that take hostages, commit other errorist acts.
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we have seen evidence that it in fact does protect americans as these terrorist organizations choose not to take americans hostages. 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 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 isol. it unfortunately, was not uccessful.
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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 frankly we need to get our partners around the world to employ. because it is the the benefit of our citizens, ultimately. >> thank you, mr. chairman. the chair now recognizes the vice chairman of our housing and subcommittee.
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>> 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. i think it is essential we have laws to combat financing. i am concerned the broad de-risking we've seen in financial institutions will have a negative situation. in your remarks, i have a copy of your speech you made at the enforcement conference earlier
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this week you talk about that. and i would just like for you to tell us how bank regulators should judge risks 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 will follow that particular customer is one that the institution feels that it's in a position to manage. the concern that i was addressing in the speech earlier this week was that some institutions were acting in
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sort of a wholesale manner to just cut off entire categories f customers. entire jurisdictions from -- correspondent kind of relationships without an assessment of the actual risk posed by that particular ustomer. 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 financing. 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 -- let me rephrase it.
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have you had any actions against these folks for terrorist financing activities? >> i'm not aware of any actions against these entities you described. certainly with respect to isol. >> very good. i know that the financial crimes enforcement network put out a paper earlier this week, in fact, with regards as to money service businesses, laundering money for terrorists, and the same concern that you're 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. you're aware of this paper and statement and support what -- their conclusions as well, i assume? >> yes, sir. >> very good. one last question, you mentioned the reforms that we need to make our anti-laundering money stronger,
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one of them is the safe harbor, i agree with that recommendation which is included in my bill that i offered, hr 46. the operation choke point act. which you tell the committee why you believe the safe harbor is important and how it 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 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.
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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 p.m. and impanel the second panel. which means that the chair plans to call upon ms. -- i'm sorry, noon. noon, don't want our witness to panic. i will call upon mr. ellison, mr. pittinger, and mr. pearlmutter, and we'll welcome our next member, mr. ellison is ecognized. >> mr. cohen, thanks for your service to our country and your hard work to combat terrorist financing. earlier you mentioned the money
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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 putting it through the house -- >> i had help even from the other side -- >> exactly. 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
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et 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 derisking question, what we are hoping to foster is environments where institutions do in fact engage -- continue, really, to engage in a case by case evaluation risk assessment, i think the better off we all are. >> thank you, now, i want to 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 ask it so we can have as many people as possible ask you a few questions. do you feel like our
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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 this -- in dealing with isil? >> that's a big question. 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 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.
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we have made enormous progress over the last decade or so in improving international efforts to combat terrorist financing. but this is a task that is never going to be complete. and there's still obviously work to be done. >> thank you again. i yield back. >> the gentleman yielded ack. the chair recognizes the gentleman from north carolina. >> thank you, mr. chairman. secretary cohen, following up on the questions. during operation desert storm, we had an average of 1,100 strikes a day. 12 years later against hussein, iraqi freedom, we had 800 strikes a day. in the last two months, against isis, we have had a total of 412 strikes, seven average a day. is this limited amount of air strikes as a result of not having the intel on the ground
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as a result of pulling out our forces several months ago? or is it lack of the will by the administration to take out particularly these transfer of all 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 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
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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 transports oust country? >> all of the illicit oil transport? >> illicit transport of all out of country. >> it would seem to me to be -- ne of the ways that we can impair the oil trade is to stop
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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 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
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transfer of it outside the united states and inside the united states. as such, i wrote jennifer calvary on september 4 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. >> i can tell you that the department director calvary oversees has gone through an i.t. enhancement. it has some advanced analytical tools available to it. they 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 be aasis to our law
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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 question inging we were just asking you. we have revenue, we got the flow of money and we have expense. back to basics. 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
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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 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
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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 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
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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 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?
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>> 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 tote am expense, obviously, they've got to be paying their soldiers or whatever they are called, their fighters, terrorist group, they have to be paying somebody something. 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
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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 fight berzers 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. 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
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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. will introduce briefly. we first welcome the honorable jimmy gurlea, a law professor at notre dame. he has experience in the field of terrorism and finance. next we will welcome dr. atthew levitt, the director on counterterrorism for the near east policy. dr. levitt was deputy assistant 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 in counterterrorism, especially in afghanistan and the philippines. without objection, your full written statements will be made a part of the statement after your oral remarks. i'm not sure who has testified before congress before. but like the traffic light
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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 gurlea, you are recognized for a summary of your testimony. >> thank you, chairman, 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 recommendations. first recommendation, targeted blocking actions. the centerpiece of the government's counter terrorist is to freeze the assets of the financial supporters and facilitators of terrorism and prohibit such individuals and
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entities from doing business in the united states. the strategy is pre-emptive intending to prevent financing the terrorist attacks and the i canning 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 two primary concerns. first, few individuals associated with isis have been designated for asset freeze under executive order. this year, there have been only four. two of the designations did not
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involve individuals involved in any way with terrorist financing. a third individual was a relatively lower level facilitator with respect to moving money from can a wait to syria and the fourth was involved in raising money from deep pocket donors and external funding. none of the 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? why is that individual not on the treasury list under executive order 13224? it seems to me that there needs to be a direct next us between the treasury's department's designation and the internal funding for isis. whether we're talking about
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elicit oil trade, ransom, trafficking in stolen artifacts, extortion payments, those are the individuals the treasury department should focus on for blocking assets if any in the united states. it seems to me -- i don't know if this is the case. it would seem to many and it would seem to make good sense that there should be financial intelligence teams focused on each of the principal sources of internal fund-raising for isis. there should be a financial intelligence team dealing with the payment of hostage payments and where those monies. an intelligence team dealing with oil, the illicit oil trade and how that's happening, who is involved in that and designating individuals
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involved in the oil trade. second recommendation, enhance terrorist 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 of al qaeda and none dealing with terrorist finance of isis. to increase the number of terrorist prosecutions, my. >> my position is that the treasury should intensify and accelerate its efforts in sharing financial intelligence
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information with 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 ctions where fines have been imposed on banks for non-compliance with the bsa dealing with terrorist financing. that effort needs to be enhanced. thank you very much. >> dr. levitt, you are now recognized. >> thank you, chairman, members of the committee. it's an honor to be here. u.s. government effort to counter isis is focused on five enforcing lines of effort. one of which aims to stop isis financing.
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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 capabilities. it's an important component against the group too extreme for al qaeda. they have been effective as a means to stem the flow of funds but also as sources of financial intelligence that can be leveraged. sometimes you let the money flow to watch it and tag it. there's no doubt that where it crosses international borders, especially the formal financial sector, but banks, but even alternative transfer mechanism, in those cases the traditional tool set developed will continue to be effective moves of countering isis financing. this includes oil smuggling, donation from deep pocket, kidnap payments, selling looted ancient artifacts and more.
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isis was financially elf-sufficient for eight years as a group before committing itself to running a protoestate. before it renamed itself, it was isis, before that the islamic state of iraq, it went through many iterations. aqi, now isis was financially independent for years by engaging in successful criminal activity enterprises domestically within iraq. 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 committed to capture, holding and administering territory, which involves
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significant expenditure and requires more significant revenue streams. therefore, while it's true isis within iraq is -- focusing even only on those areas that are ulnerable to current tool sets will deny isis the money it needs to hold and administer the islamic state. military tools under other circumstances would be the last thing one would think of as a logical means of combating crime, the fact is that air strikes against isis have already significantly under mined some of the group's criminal epter prices 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. while the prospects of real political reform in iraq are bleak today, should the iraqi government re repry or advertise government, perhaps
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they could investigate and rosecute isis in their country as the domestic criminal activities they are. treasury's isis focuses on anyone who trades in stolen oil inducing our foreign partners to put an end to kidnap, targeting external donor networks, restricting isis to the financial system and employing targeted sanctions. i think those should be done in those places where it will make most of a different not where we will feel good about ourselves if those things are happening domestically in iraq, targeting them with treasury designations doesn't do a thing. it's a wise strategy using these treasury tools that we have. but i encourage people to look beyond the tools as i'm sure treasury is, to envision the tools treasury and its partners might need to adapt and deal with a financial threat. i submit there is no agency
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that does this better thinking outside the box to develop strategies needed to deal with tomorrow's threats. treasury financial intelligence did that after 9/11. it did it in a more substantial way in 2005 and 2006 when it developed tools to contend with iran's financial couldn't duct support for terrorism. it came up with the iraq threat financial cell in iraq. i suspect we will see similar tools coming soon. a few policy prescriptions. i will say this, this is no silver bullet to dismantle isis financing. isis presents a unique set of circumstances and treasury should continue do what it does best, assess the situation, development new tools with deal with an evolving threat. there's evidence that treasury's full court press is working away from iraq's borders. consider a jihadist in trial in germany for joining a group in syria who has struggled to send funds to the middle east because of measures treasury
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have put in place. the court proceedings describe a picture of jihadists forced to send a member to europe because it had become too hard 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 became so nervous of transactions being monitored, they are afraid to pick up the money. a couple of -- >> if you could summarize quickly. >> 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 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. the fact they passed a new law does not mean anything. they need to enforce the law.
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in the long run, at the end of the day, the only way to stop criminal enterprise within iraq is for law enforcement within raq 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. i want to note countering isil's funding is difficult and important. the methods isil uses to race and move money make it a hard target for traditional counter financial. money is critical and failing to degrade isil financially.
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o 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 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 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.
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nd 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 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
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with isil is the scale at which it raises funds. so what we're able to see through looking at the group's 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 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
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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. 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
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things that could be done to disrupt and degrade isil's internal financing. this refers to extortion and various types of crime. rebust partnerships with local regional and u.s. government interagency partners will be necessary to collect the high quality intelligence. several steps could be taken including enhancing intelligence cooperation with kurd stan and iraqi partners to identify oil facilitators, prioritizing collection on the quantities and prices of oil over time that facilitators 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
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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 se this as sort of the primary tool kit to degrade the pecific threats, financial capabilities and improved financial intelligence as a way to understand the threat and 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.
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>> thank you, mr. chairman. professor, you talked about the global terrorists and that we have only had four identified, i think, with isis. you made a good point about who s 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 race money. al qaeda relied on external sources of funding. 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 global terrorist
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over 20, actually high than that, closer to 40 charities for that purpose. again, the focus was on external sources. isis is very different. its it a self-funded organization. so what treasury has to do is they have to pivot. they have to refocus. we have to recalibrate their efforts to the dynamic that they are 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 -- there's only four designations. >> do you believe there would be individual tlaz treasury would be aware of today that could be designated? >> i would 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.
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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 at thethey are doing. we talked about the charity law they have in place. i think the undersecretary had ade statements about qatar and kuwait being permissive for tear are terrorist financing. what kind of things could they do now that they are not doing today? > a lot. mostly, these are countries that 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,
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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 add, we lose -- what we should not be asking treasury is to designate 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 people you could -- hit the threshold, you could designate them.
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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. we need to not focus on the guy who has the title of finance minister and is in iraq doing things 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? >> 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 bafrngs inging banks in qatar. we should work very closely to ensure that those banks are applying the relevant anti money laundering terrorist
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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. 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 olding that? from a custodial sense, how do you think they hold that
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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 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 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
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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. so we 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 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
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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 apacity 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 bet are for us o encourage the iraqis and the 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,
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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 rmy 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. 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
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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 isgivings 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 kurdi sstan is money well spent. i'm skeptical about what we are doing with the folks we trained already. >> time of the gentleman is expired. chair now recognizes the gentleman from kentucky, mr. bar, for five minutes. >> thank you, mr. chairman. would you all assess -- let me irect this first question to
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dr. levitt. would you assess that the primary source of revenue for isil is the oil revenue? >> by far. >> ok. nd 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 tur turkish elements -- >> how afekhow effective have e been in identifying middle en that are delivering the oil to other parties? >> there's very little in the open source about it. when i talk to people, my understanding is there has been some progress in identifying these people. then take time to put together packages and get to the point where you can designate somebody. i expect that those designations will be forthcoming. we have seen more success in
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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 oliticians 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 were saying that isis was making $3 million a day. and now most say about $1 million, maybe a little less. i would say that's about two-third reduction. that's successful, but in the right direction. >> to follow-up on mr. lynch's line of questioning, is there any way even if we have had
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modest success with the respect to the mobile refineries and 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 n it but not making money on it or only making as much money as they can make domestically, which is happening in some 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 oil trade? >> my understanding is there is no question that the assad regime purchases isis oil, has been doing so. we are talking about oil fields in both sides of the
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border. one of the points i didn't get to in my oral remarks is to make sure we do things, combating the financing not only in iraq but also within syria but the extent of that which fluctuates. >> but what about turkish cooperation with respect to the oil trade in. >> it's increasing. it's difficult though. this is something that's been going on for years and years. the price of oil in southern tir i can turkey. 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 profit because the market will bear it. >> quick final shifting gears to the issue of kidnapping for ransom. undersecretary cohen's testimony was it's u.s. policy to refuse payment of ransom or
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make other concessions to hostage takers. can you assess how the release of the five taliban war criminals in exchange for sergeant bergdahl impacted the u.s. position with respect to sending that signal to partner nations? >> it wasn't helpful. i think it's inconsistent. it's sending a mixed message to our european allies who were being critical of, the french and spain for making ransom payments for the release of ostages. it was counterproductive and it undermines our effort. this is a significant -- may not be the most significant source of isis fund, but if isis 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
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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 - mr. duffy. >> my concern is the initial designation as isis being a jv team. 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 like a sound strategy to defeat this group of radicals. then as i think, on average, seven bombing missions compared to what we had done before seems too little and too
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late. my concern is -- has been with the administration's strategy and i'm concerned that the and the lackluster response is taking place. >> as i stated in my opening statement, i think they are struggling. they have good intentions, but they are struggling with gaining their traction and footing. >> isis is not struggling? treasury is struggling. >> treasury. movingng oil is not like
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nuggets of gold or diamonds. the large quantity of oil has to be moved from the refineries and the oilfields. >> 20,000-30,000 barrels per day. it is not an exact figure, but it isn't -- but it is a significant amount of oil and transported every single day. beonce it is sold, it can more difficult to them to defy who is participating. does it seem impossible that we could bomb tankers of oil as they leave the refinery? why are we engaging in military action to destroy the oil as it leaves? i don't have the answer to that. it is more of a military question then not. it were that simple, we would be
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doing it. no one disagrees with the premise of what you are saying. people watch too much tv and think we have complete aerial coverage. i do not have the perfect answer to your question. i am absolutely certain the approach of treasury is not lackluster. people are working very hard on these issues. it is the nature of the problem they're facing. >> we are moving large quantities of oil and we have nes in in the air -- dro the air. we are dealing with large amounts of money. it is easier to trace large amounts of money than a few million dollars here and there to a few different terror networks. >> i would challenge the idea
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that we have complete coverage everywhere at all times. >> fair enough. the united states and turkey are coal eating an initiative -- co-leading an initiative. is it fair to say that turkey was just removed from the gray list from that task force? >> that was a lot of treasury and work to get them listed and to get them to the point where they could be delisted. as tonot have a choice who sits on the borders of syria and iraq. it is not a favor to us. you are right to expect when he to sit on them carefully. -- we need to sit on them carefully. >> are we applying adequate measure to those countries to engage with us on the finance
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side of isis? >> there is always more that can be done. one of the points i made in my written testimony is there has been ineffective or inadequate use of the enforcement actions. as impose -- impose significant fines on banks. counterterrorist financing, treasury has done a good job on the anti-money laundering side. , i have onlyanks identified to banks in the last two years. those include the air a bank and the doha bank. treasury could doing a much better job in that area. >> the chair recognizes the gentleman from california, mr. sherman. andsis rules territory
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extracts money from that territory. the lights are on in mosul. not all the time, but electric -- electricity continuity is shoddy in most of iraq. outbreak, a lot of the electricity from ozone came from -- moz will came from -- sul came from the mosul dam. is isis collecting money from the people receiving electricity? dam,don't control the but how are they getting the electricity? >> the government is allowing electricity to go into the city because there are citizens that live there.
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>> that is the point. l.e electricity goes into mosuk when we were serious about world war ii, we did not 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. if the government thing paid for that? >> i don't know. >> it supports the economy of mosul. isis taxes those people. war ifery hard to wage you supply strategic assets to
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areas under enemy control. i have never seen not done in the past. >> i hear your point. we are short of world war. 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, denied electricity to iraqi citizens. >> you supply the economy under isis's control. isis taxes the economy. did we lose the hearts and minds of those resisting nazis because we did not provide free food or electricity to the people of france? in fact, we prevented food imports to france? didn't we retain the support of the civilian occupation? is there any other war you could point to where free electricity
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goes from one side to the other? >> i do not know that it is free electricity. this is a deeply sectarian war. the further you make divisions between the sectarian communities in iraq, the worse it will be. policy ofr a supporting the strategic elements of economy. that is certainly -- >> i think you know that is not what i said. >> you can clarify for the record in writing what your position is. i guess that would also apply to petroleum. if you are in favor of the lights being on, people ought to be able to drive from north to south, but we are preventing
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them from exporting oil. have we done everything possible preventing from producing enough oil for the civilians under their control? professor? >> as we have discussed, a very important source of income. >> i am not talking about exporting the oil. dividing for the millions of -- dividing for the millions of civilians under their control -- providing for the millions of civilians under their control. >> we did not hesitate to bomb oilfields in world war ii. the idea that there would be people driving civilian cars in mosul, but the tanks would not have petroleum. this hearing is focused on the oil exported by isis.
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for has no shortage of oil its own military operations and even for the civilians under its control. i yield back. ask the chair wishes to announce -- >> the chair wishes to announce that we will clear the remaining three members who are in the hearing room and then we will adjourn the hearing. the chair recognizes the derailment from virginia -- the gentleman from virginia. >> i represent virginia's fifth district and i can tell you most of the people that i represent have concerns about the way this administration has approached iraq.risis in syria, a lot of concern the administration either did not know or ignored critical information that could have prevented us from being in the
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situation we find ourselves. 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 the u.s. law and law of other countries. it strikes me that that information has to be gathered come toround and has to treasury through department of defense and intelligence agencies in the business. i guess my question is, after listening to undersecretary co hen for two hours, i came away with concern that maybe he is not -- treasury is not at the table as much as he indicated
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that it was. i wanted to start with you, dr. johnson, and then get comments from the other two witnesses. indicated that he was at the table. a lot of questions he could not answer. perhaps that is the nature of an open meeting. not he isr whether or getting the cooperation and 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 these decisions and impose the sanctions? if not, what can be done to make sure the treasury is at the table? stopping thethat financing is extremely
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important. dr. johnson? >> on the first part of the question, it is hard to say the extent to which he is at the table for any given decision. treasury has done extremely well in working with partners to include the department of defense and various parts of the intelligence community to get the capabilities it needs to make the impact desired for policy outcome. >> can you explain that? since 9/11 and the financingn that matters and to disrupt terrorist networks and attacks, going after their financing is useful instrument to have among the various tools that we have,
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treasury could not do it alone. it could -- it does work successfully with interagency partners. purposes of the current treasury effort, it is still a young effort and the really -- their programs and stillch is kind of developing. we will see more as the policy becomes clearer and the overall posture and footprint the administration wants to have becomes clear. >> we only have a few seconds. is, are they getting enough information? if not, what can we do as
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congress to help that out? it was on military strikes. they are not at the meeting where specific targets are being selected. treasury has its own office of intelligence analysis. because of that, they are not only getting information from, a are part of the intelligence community in every way. part of the problem is developing the intelligence takes time. an excellent question as to why we are only developing the intelligence now. the interagency structure means there at the table. >> the chair recognizes the gentleman from pennsylvania. question for dr.
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levitt. about the mobile refineries. what do they look like? where are they coming from? who is manufacturing them? >> i would love to know that, too. i am not an oil expert. it is quite clear that these were there already. had.apability they have low-tech.tively >> do you believe they are manufactured in that region? >> my understanding is this is something that is slapped together. it is being put together by people right there. i do not get the sense that this is something that is being imported. to the extent that i am wrong, my sense is that this happened
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some time ago. >> once the oil is refined, you -- some of it is being smuggled into the southern regions of turkey. the price of gasoline is higher than we would expect or that you would see in europe. if you are purchasing barrels of barrel, this so a might be elicited oil. are we doing enough -- elicits oil. are we doing enough? >> that is exactly what treasury and others are doing, identifying those middlemen. it is what i discussed more specifically in my testimony. there is a significantly more dramatic was to get the turks to do more in southern turkey.
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people know that this is illicit oil and they do not care. lots of ingenious ways that this is being moved and there is a market for it. >> one of the concerns i have or the banks helping move the profits from the sale of the oil, if isis is making between one million and $2 million a day, that money is not being transported in shoeboxes. it has to be entering and to the financial system -- entering into the financial system at some point. >> where are the gaps in the
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system? >> some of that money may be going to iraqi banks. the u.s. lack of control over , that is the difficulty. those banks have u.s. branches in the united states, we do have control over those. there would be an opportunity where we could exert greater leverage with respect to the u.s. branches to ensure the foreign banks are not being used to move isis oil money. >> nothing further, thank you. the last member to be recognized will be the gentleman from north carolina. testimony,r, in your you stated that there were only thebanks who had violated
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act. over the last 10 years. is that as a result of our lack of capacity to track these folks? are the rather's who are complicit -- are there others who are complicit yet that -- are there others who are complicit? >> that is the question. defense has done a fairly good job in terms of sanctioning banks. with respect to counterterrorist financing, it does not seem to be a priority. i wonder, is that because of a lack of resources, personnel? maybe not enough bodies to be engaged in oversight with respect to whether these banks
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pose a high risk for terrorist financing or perhaps the weak spot maybe with the other federal regulators. the other federal regulators are not focusing and emphasizing on whether or not these banks are in compliance with the counterterrorist finance regulations. it seems to me that is not acceptable that we could only have two banks, the only two banks with references in those orders to threats regarding terrorist financing. >> we look at our partners throughout the world. we have relationships with them, many of them we give hundreds of millions of dollars of foreign aid. it is always of concern to me how we are not honored by our relationships with our partners.
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situation, critical for national security. to what extent -- what would you advise us as a congress and going forward and how we could put greater pressure on these respective countries and their banks to be in compliance? >> 1.i have not made in my test thene point has to do with anti-terrorism act. actionsrizes civil tort against individuals who commit acts of international terrorism. that statute could be enhanced to make it a more effective remedy for victims of terrorism, including entities that aid and abet terrorists. for example, banks and knowingly
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provide financial services and transferred money to suspected terrorists. several problems with the current legislation as it stands. it does not authorize aiding and abetting. the plaintiffs are left with the dilemma of having to prove the bank is primarily responsible through secondary actions by being an aid or in a better -- a better. we could unleash an army of litigants to go after banks and charities and other entities that are facilitating the financing of terrorism. from inequitable standpoint, -- from an equitable standpoint, this is the right thing to do. >> thank you. i yield back.
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>> there are no other members in the queue. i want to thank our witnesses. you will have five legislative days in which to submit additional written questions for the witnesses to the chair. all members will have five legislative days within which to submit extraneous materials to the chair. this hearing stands adjourned. >> next, q&a with nonie darwish.
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live at 7:00, your calls and comments on washington journal. report on how it can lead to wrongful convictions. we will hear from a former deputy attorney general. that is live at 12:30 p.m. eastern on c-span 3. >> thank you for your comments about our programming.
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>> i would like to make a suggestion that instead of dividing the country between democrats, republicans, askpendents, c-span should the question and have callers either call and agree or disagree. this would save a lot of partisanship. the ideas get out there, not the political divisions. >> thank you, thank you, thank you. the best show i have seen. that is what we need. shows like youe had today. this was a great show. we need to have them explain what the policies are and how they differ.
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>> this week on "q&a," nonie darwish. founder and president of former muslims united and arabs for israel.
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she talks about her life story, growing up in egypt and gaza. life under sharia law and why she broke with islam. she addresses the consequences of leaving the religion. the current state of muslim countries ruled by sharia law in their relationships with the u.s. as the war on terror continues. >> nonie darwish, where were you on 9/11 and what was your reaction? >> i had just arrived from a trip to egypt on september 10 at night. i had arrived late at night on the september 11 morning.
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i arrived at my home in los angeles. i woke up at 6:00 a.m. and had time to see it live. i was traumatized because that was when i knew that this is terrorism. so i rented a phone and called many people in egypt. i wanted them to comfort me, especially because the leader of the 19 terrorists was from cairo. i called about eight people and they all said the same thing even though some of them do not know the other. they told me, how dare you say that this was done by arabs or muslims? don't you know this is a new
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conspiracy? i hung up the phone and suddenly felt i cannot relate to my culture of origin anymore. this is a very hard feeling. when you cannot relate to how the people you love and you were brought up with for many years of your life and they do not see the reality as it should be. >> why do you think they said those things? >> because we were all brought up with lots of propaganda and indoctrination. from the minute you are born in the muslim world, especially in the 1950's and 1960's, when i was growing up, a whole generation was brought up with an ideology of blaming the outside world.


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