Posts Tagged ‘TFI’

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Gulf “allies” ignore us and pay Al Qaeda

October 24, 2013

Saudi Arabia, Qatar, and Kuwait refuse to listen to U.S. diplomatic entreaties to stop funding Al Qaeda affiliated rebels in Syria, according to reporting from the Washington Times.

Frequently since 9/11, officials from the Treasury Department’s Terrorism and Financial Intelligence (TFI) office have shuttled back and forth from the U.S. to the Persian Gulf to try to convince countries there to cooperate in blocking funds or making arrests of specific terrorist financiers.  TFI has usually trumpeted its own successes in the past, even to the point of exaggerating Gulf cooperativeness, but this time even TFI is admitting that no cooperation is to be found when it comes to financing Al Qaeda in Syria.

Officials quoted seem to be shrugging their shoulders and saying that all they can do is tell Gulf officials, “Look at what this person is doing.”  They claim interdicting the flow of money to jihadists is out of American control because the funds aren’t channeled through U.S. banks.

Forgive me, ladies and gentlemen, but the claim that we can’t do anything is a crock.  We could name the Saudi, Qatari, and Kuwaiti banks that serve as conduits between the fundraisers and the fighters as entities that support terrorism, just as we have done with Iranian banks that support Hezbollah or Iran’s nuclear program.

This is not a narrowly legalistic problem of the applicability of U.S. sanctioning authority.  This is a political and diplomatic failure of willingness to confront our so-called allies, and name them and shame them for spreading terrorism.

U.S. allies let funds flow to al Qaeda in Syria

By Guy Taylor

The Washington Times

Sunday, October 13, 2013

The United States has had limited success cutting off funding to the al Qaeda-linked fighters and foreign jihadists flowing into Syria — in part because of a lack of cooperation on the part of Middle Eastern allies, Intelligence and national security community sources say.

Officials say they are tracking the movements of funds from various wealthy individuals in the Persian Gulf, but the governments of key Gulf countries are reluctant to crack down.

“Unless the money is actually in the U.S. financial system, you have to point out to these governments where the money is going and try to work with them to make sure it goes to legitimate groups,” said one U.S. official who spoke with The Washington Times on the condition of anonymity because of the sensitivity of intelligence related to tracking such money.

“The U.S. can’t shut down bank accounts in Kuwait or Qatar,” the official said. “We can tell them, ‘Look at what this person is doing.’”

The approach has worked with variable success over the past decade, during which U.S. authorities have worked closely with counterparts in such nations as Kuwait, Qatar and Saudi Arabia to choke off streams of cash to al Qaeda’s core leadership in Pakistan and Afghanistan.

But when it comes to stemming the flow of aid to Salafist and al Qaeda-linked groups inside Syria, the strategy has been less successful — suggesting authorities in the Gulf now may see American pressure for such action as less worthy than previous calls to block cash to al Qaeda.

“In some nations where they have had success in clamping down on terrorist funding for al Qaeda’s core, this is a source of funding that has not really been clamped down on,” the official said.

The extent to which that money is aiding the rise of extremists in Syria seemed to burst open last month when 11 Syrian rebel groups, including the Nusra Front — an organization U.S. officials link to al Qaeda — banded together in a public rejection of the more secular political opposition groups outside the country that are receiving aid from Washington.

By calling for a new government in Syria to be ruled by Islamic law, the newly formed coalition dealt a major blow to U.S.-led efforts to support a democratic alternative to embattled Syrian President Bashar Assad.

Although the Islamic State of Iraq and the Levant (ISIS) — another rebel group with al Qaeda ties in Syria — was left out of the coalition, analysts say, it, too, is growing dangerously in the war zone. As the extremist foothold has deepened, so have reports of abuses and war crimes carried out by opposition fighters.

A report released last week by Human Rights Watch said members of the Nusra Front and ISIS were among rebel fighters who killed some 190 unarmed civilians during an August offensive on villages perceived to be supporting the Assad government. The report said 67 of the civilians were slain at close range while trying to flee.

The bottom line is that the landscape of extremist groups among the opposition has grown increasingly complex over the past year, said Mouaz Moustafa, executive director of the Syrian Emergency Task Force, an advocacy arm of Syria’s more secular political opposition that lobbies in Washington for a greater U.S. role in the conflict.

“The Islamic State of Iraq and the Levant has increasing power and influence in places like Aleppo and Raqqa Province,” said Mr. Mustafa. “But at the same time, other Islamist battalions have coalesced and improved their organizational structures while rejecting both the ISIS and the more secular outside political coalition.”

He said that “all of these groups are getting assistance” and that the task of pinning down the precise source of the money is difficult. “That’s the million-dollar question,” he said.

When it comes to ISIS, said Mr. Moustafa, “you’re talking about al Qaeda’s network, and I would assume most of the aid and resources they’re getting comes directly from Iraq, where the system was already in place to raise money going back to the rise of al Qaeda in Iraq several years ago.”

Kuwait-Turkey connection

U.S. officials say that system has relied heavily on the activities of an Iran-based al Qaeda “facilitator” named Muhsin al-Fadhli.

A little-reported press release circulated by the U.S. Treasury Department last October described al-Fadhli as “a veteran al Qaeda operative” who provided “financial and material support” to al Qaeda in Iraq leader Abu Musab Zarqawi.

Zarqawi was known for orchestrating a series of gruesome bombings and beheadings in Iraq before U.S. forces killed him in 2006. But the activities of al-Fadhli’s network supposedly have carried forth — and have evolved toward tapping a reserve of Kuwait-based sympathizers to fund extremist groups fighting in Syria.

“In addition to providing funding for al Qaeda activities in Afghanistan and Pakistan, this network is working to move fighters and money through Turkey to support al Qaeda-affiliated elements in Syria,” according to the Treasury Department press release. “Al-Fadhli also is leveraging his extensive network of Kuwaiti jihadist donors to send money to Syria via Turkey.”

That extremist elements of Syria’s opposition are gaining strength appears to expose the limitations of the U.S. government to block the flow of such money — or at least to persuade partners in Kuwait and other Persian Gulf nations to do so.

Officials at the Kuwaiti Embassy in Washington did not respond to a request by The Times to comment for this article.

But an article published last month by Foreign Policy shed some light on the situation. In the article, William McCants, a former senior adviser in the State Department’s office of the coordinator for counterterrorism, wrote that “the Gulf monarchies have not been able or willing to stem the tide of private money their citizens are sending to the Salafi charities and popular committees.”

“Kuwait in particular has done little to stop it because it lacks an effective terror financing law and because it cannot afford politically to infuriate its already angry Salafi members of parliament,” wrote Mr. McCants. “Qatar and Saudi Arabia have tried to crack down on fundraising for the Salafi militias but their citizens just send their money to Kuwait.”

Political storm in Turkey

The rise of extremists among Syria’s rebels, meanwhile, has set off a political storm in Turkey, where the leadership of the nation’s main opposition party is accusing the government of Turkish Prime Minister Recep Tayyip Erdogan of supporting al Qaeda-linked groups in the nearby war zone.

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Treasury: We don’t expect full legal compliance

January 22, 2012

When the last banks in Minnesota stopped processing money transfers to Somalia in an effort to prevent funding of terrorism, the Minnesota politicians like Sen. Al Franken and Rep. Keith Ellison criticized the banks.

That was bad enough, but Tim Geithner’s Treasury Department (specifically, David Cohen’s Terrorism and Financial Intelligence office [TFI]) has made an even broader statement than Franken in a mostly unnoticed Treasury blog post in late-December.

In a very craftily written post, TFI policy advisor Scott Rembrandt wrote, “The Treasury Department expects financial institutions, in their compliance with the Bank Secrecy Act, to reasonably discharge their due diligence obligations — not that they be infallible in doing so.”

What Mr. Rembrandt is saying is that Treasury expects banks to do a decent job of enforcing BSA provisions, and not to implement its provisions too strictly.

It is not too far to extrapolate that the suggestion here is that banks should not adhere strictly to counterterror finance laws if such adherence could limit Somali-Americans’ ability to transfer money as they please, and that Treasury would not seek legal action or fines against banks that loosen compliance standards on international money transfers.  This position taken by TFI is troubling on several levels.

Let’s leave aside the possibility that the Muslims in Minnesota would intentionally fund terrorism (even though Amina Farah Ali and Hawo Mohamed Hassan were recently convicted of doing exactly that).

Let’s also leave aside the possibility that Muslim Somali-Americans are not trying to fund terrorism, but the relatives that they are sending money to could support al-Shabaab in Somalia.

The fact remains that many of the Muslim-Americans’ relatives in Somalia live in territory subject to forced taxation by al-Shabaab.  Al-Shabaab receives its revenues by the aggressive, coercive theft through Islamic taxes on ordinary Somali commerce along trade routes and harbors.  Whether local Somalis want it or not, and whether Muslim-Americans like it or not, the money that is remitted to Somalia stands an unacceptable risk of being given to or stolen by Al-Shaabab.

Any plain reading of the Bank Secrecy Act, the Patriot Act, and other modern know-your-customer provisions would convince even the most hard-nosed, profit-driven bank president that it simply is not legally (never mind morally or financially) acceptable to facilitate such money transfers.

Granted, modern anti-money laundering laws are onerous and often ineffective.  But for the Treasury Department to make a public statement that banks are not expected to be “infallible” on carrying out the laws which have been imposed by Congress on the financial sector is absurd.

Suppose that one of the banks in question are taken to court someday by family members of somebody who has been murdered by Al-Shabaab.  Will the victims and the judge be comforted when the bank’s lawyers quote Treasury’s blog by saying, “Your honor, Treasury told us we don’t have to be infallible”?

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Obama’s flawed sanctions chief ends Arab trip

December 21, 2011

David S. Cohen, a former Clinton lawyer who Pres. Obama entrusted with a sanctions regime that is supposed to provide for the nuclear containment of Iran, is wrapping up a four-day trip to Saudi Arabia and Bahrain.

The State Department says that Mr. Cohen was conferring with officials in those countries about sanctions against the Central Bank of Iran and against Bashar al-Assad’s regime in Syria.

Surprisingly, although Bahrain shockingly has no legal means of freezing assets in its own country, there is no indication that Mr. Cohen addressed this shortcoming with officials in Manama.

Mr. Cohen has consistently misled the American public about the level of Saudi cooperation in combating terrorist financing.  Consequently, it will be difficult to judge the truthfulness of whatever statements are released at the conclusion of this trip.

Moreover, after Mr. Cohen back-stabbed U.S. Sen. Bob Menendez (D-NJ) during backdoor negotiations on Iran sanctions, one wonders what would make Arab officials trust Mr. Cohen.

Seeking cooperation on sanctions is a good objective, but sending a flawed messenger indicates Pres. Obama’s lack of seriousness about sanctions against Syria and Iran.

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Iran permits al Qaeda money pipeline

August 1, 2011
Map of money flow from Saudi Arabia & Qatar through Iran to Afghanistan & Pakistan

Iran lets money, arms, and men flow from the Gulf to Asia

Iran is permitting al Qaeda operatives to use their territory as a pipeline between Gulf donors and Afghani and Pakistani jihadists.  The Treasury Department is, somewhat surprisingly, actually calling Iran out for its behavior and sanctioning six al Qaeda operatives in Iran.  From the Financial Times on July 28:

US charges Iran with al-Qaeda links

By Anna Fifield in Washington

The US government has accused Iran of allowing al-Qaeda operatives to funnel a “significant” amount of money through its territory to the group’s leaders in Pakistan and Afghanistan, making the strongest allegation yet of a link between Tehran and the terrorist network.

The Treasury Department on Thursday imposed sanctions on six men that it says are operating through Iran as part of a “critical funding and facilitation network for al-Qaeda”.

The designation was also a direct hit at the theocratic regime in Iran, said David Cohen, the Treasury’s undersecretary for terrorism and financial intelligence.

“Our sense is that this network is operating through Iranian territory with the knowledge of and at least the acquiescence of the Iranian authorities,” Mr Cohen said. “They are not operating in secret. It is pursuant to an agreement.”

The Treasury targeted Ezedin Abdel Aziz Khalil, a senior al-Qaeda facilitator who it said has been living and operating in Iran since 2005 under an agreement between the network and the Tehran regime.

It said that the Iranian authorities were allowing Mr Khalil to move both money and recruits from across the Middle East through Iran to Pakistan. He required each operative to deliver $10,000 to al-Qaeda in Pakistan, it said.

The Treasury also designated five others who were linked to former al-Qaeda leader Osama bin Laden or to al-Qaeda in Iraq, or who had helped deliver money or extremists to the network’s base in Pakistan.

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Cohen adds Iran sanctions to get promoted

June 30, 2011

According to The Cable, David Cohen’s nomination to become Treasury’s new undersecretary for terrorism and financial intelligence is “back on track.”

Cohen’s nomination had been delayed because of concerns about the Obama administration’s lack of tenacity in enforcing anti-Iran sanctions laws.  Cohen, a former Clinton lawyer with little understanding of terrorist financing methods, responded to the delay by jumping through whatever hoops the Senate created in order to get confirmed.

This included the recent addition of sanctions against ten companies tied to Iran’s nefarious state shipping firm (IRISL) and a designation against Venezuela’s state oil company for selling gasoline to Iran.

But going after IRISL and Chavez wasn’t enough. 

It took sanctions against Iran Air and Tidewater Middle East, Iran’s major airline and port operator, to make Cohen’s final sale to the Senate.  Once those designations were announced, Sen. Ron Kirk wrote:

I applaud Acting Under Secretary David Cohen for moving decisively to designate Iran Air and a major Iranian port operator responsible for facilitating Iran’s illicit transfer of weapons and other proliferation activities. Both designations will significantly restrict shipping to and from Iran and put even more pressure on the Iranian economy.  Under Secretary Cohen has proven himself to be a worthy successor to former Under Secretary Levey. He has my confidence.

Political horse trading is what it is, but Mr. Cohen is still an unwise selection for the post for reasons discussed here.  A positive outcome of the whole seedy transaction is that the sanctions regime, which even Democrat Senator Bob Menendez called a “paper tiger,” has become stronger.

However, the enterprising Avi Jorisch recently noted that the sanctions “are not working” partly because of the large number of loopholes in the sanctions regime against Iranian banks that are involved with funding Iran’s nuclear program.  Specifically, Europe allows pre-existing bank relationships to continue, and only prohibits new ones.  Jorisch explains:

Unfortunately, many banks continue to do business with Tehran’s illicit financial industry, and this undermines the sanctions effort. Many of Iran’s designated banks, including those named by the United Nations and the European Union, have a number of branches in countries such as China, Russia, Italy, South Korea, France, Iraq, Lebanon, the United Arab Emirates, among others. Indeed, some of America’s closest allies have publicly claimed their support for sanctions, while at the same time, allowed the Iranian regime free access to hard currency and the international financial sector.

Quietly, European policymakers have said that designated branches can continue to operate in their jurisdictions as long as the transactions relate to contracts signed prior to the UN designation. No new business is allowed, not even “getting new phone lines.” Yet in practice, this loophole allows Iranian banks to maintain their business licenses in Europe, and continue to operate as they did before. In other words, as long as Iran signed a contract with a European company the day before UN sanctions were enacted, European officials are willing to look the other way.

Perhaps the Senate should have held out until these loopholes were shored up as well.

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Menendez suggests Cohen weakness

May 13, 2011

In a follow-up to this post about the confirmation hearings David Cohen, the nominee to be the Treasury Department’s undersecretary for terrorism and financial intelligence, Sen. Bob Menendez (D-N.J.) wants some reassurance that Cohen is committed fully to enforcing CISADA, a U.S. sanctions law against Iran.

When questioned about why more hadn’t been done to enforce the law, Cohen’s answer could be translated “we’re working on it.”  Froom Haaretz on May 5:

U.S. Treasury nears decision on expanding Iran sanctions

The law, aimed at curbing Iran’s nuclear program, effectively requires banks to choose between dealing with the U.S.-led financial system or to continue doing business with Iran.
By Reuters

The United States Treasury is close to a decision whether to blacklist more banks that appear to be defying sanctions against Iran, including an institution in Turkey, a senior Treasury official said on Tuesday.

David Cohen, nominated to be Treasury’s undersecretary for terrorism and financial crimes, told a U.S. Senate confirmation hearing that he will vigorously enforce the Comprehensive Iran Sanctions, Accountability and Disinvestment Act (CISADA)
 
The law, aimed at curbing Iran’s nuclear program, effectively requires banks to choose between dealing with the U.S.-led financial system or to continue doing business with Iran.

Members of the Senate Banking Committee questioned Cohen on why Treasury had not sanctioned any banks under CISADA, which was passed in July 2010 to enforce tougher UN sanctions against Iran.

“We are pursuing the leverage” against banks dealing with Iran, Cohen said. “Our first option is to get them to stop. Our second best option is to apply sanctions. Without getting into the details of any particular investigation, we are getting close to a decision point on several institutions,” Cohen did not name any of the banks, but said that one institution in Turkey was effectively violating the sanctions.

“We are committed to enforcing the law,” Cohen added. “Generically, we have a financial institution (in Turkey) that is not responsive to our overtures and it is engaged in activity that is sanctionable under CISADA. We will pursue that very vigorously.”

Senator Robert Menendez, a Democrat from New Jersey, said he was concerned that Treasury had not adequately enforced the CISADA law.

“I am seriously concerned that as one of the prime movers of that legislation, that a sanctions regime that ultimately goes largely unenforced or to low-level players, sends the message of a toothless tiger,” Menendez said.

He added that he wanted a sense that Cohen, who is now serving as acting undersecretary, would pursue sanctions under CISADA before he would support Cohen’s nomination.

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Counterterror finance bureaucracy useless

May 12, 2011

Terrorism expert Jean Charles Brisard calls the modern system of combating terrorist financing “basically useless”.  Mr. Brisard points out that in the wake of the vast Western bureaucracies and international agreements that cropped up to freeze terrorist assets, the terrorists have simply found other ways to move about their money.

This analysis comes at the end of a Wall Street Journal blog post about the supposedly stronger controls against terrorist financing that were created after 9/11.

Bin Laden may have temporarily caused the collapse of his own financial network after the 9/11 attacks, but he also tangled up the West and its banks in more red tape, and continued to raise funds through zakat and transfer them through hawala.

Here are both sides, although Brisdard only gets two paragraphs at the end:

Though Osama Bin Laden evaded military forces for nearly 10 years, the capability for the U.S. to track, freeze and seize the finances of terrorists increased considerably in that time.

Prior to the Sept. 11, 2001, terror attacks, Bin Laden’s financial empire was described as “elusive and impenetrable.” Since then, international cooperation, a recognition in governments around the world of how terrorism gets its operating funds, and a heavy dose of U.S. legislation and structural changes at the agency level have all contributed to major progress on curbing terrorism financing, experts said.

“Post 9/11, we’ve learned an awful lot about how terror organizations finance themselves, how they select their targets, the importance financial institutions have for them as a target or for growing their enterprises,” said Jack Williams, who is a professor at Georgia State University College of Law/Middle East Institute and a senior managing director at Mesirow Financial Consulting.

For example, there was no office in the Treasury Department that handled financial intelligence before the attacks. Today, the U.S. Treasury’s Office of Terrorism and Financial Intelligence, or TFI, is the only full-fledged intelligence office in a finance ministry in the world.

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Cohen gives bland testimony to Senate

May 5, 2011
TFI Undersecretary nominee David Cohen before the Senate

David S. Cohen

The Senate Banking Committee has heard testimony from David S. Cohen, President Obama’s nominee to become the next undersecretary for terrorism and financial intelligence.

Cohen’s prepared statement was boilerplate and Senate video did not include any questions or answers from the nominee.

News reports indicate that Cohen hailed the death of Osama bin Laden as “tremendously important” because bin Laden was “a symbol that was helpful in raising money.”

True to form, Cohen praised his and Treasury’s inside-the-beltway efforts “to identify the networks where the money is raised and money is moved into Pakistan, and it has really put a fair amount of pressure, financial pressure on al-Qaeda.”

Mr. Cohen, it is men like those from Navy SEAL Team 6 that is putting “a fair amount of pressure” on al-QaedaOne would think you might have acknowledged that in your prepared statement.

News coverage of the hearing was very limited, which is disappointing given the pivotal role that the TFI undersecretary plays in the U.S. sanctions regime against Iran.  This brief item comes to us from Bloomberg on May 3:

The death of Osama bin Laden is a “tremendously important step” because the al-Qaeda leader was a symbol who attracted funds for the terror group, a U.S. Treasury official said.

Bin Laden was “a symbol that was helpful in raising money,” David Cohen, the Obama administration’s nominee for Treasury undersecretary for terrorism and financial crimes, told the Senate Banking Committee today. “But our assessment is that it’s by no means the end of the road in terms of going after the financing.” Cohen, 47, has been assistant secretary for terrorist financing.

Cohen said the U.S. has been working with Gulf region governments “to identify the networks where the money is raised and money is moved into Pakistan, and it has really put a fair amount of pressure, financial pressure on al-Qaeda.”

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Obama names fool to lead on terror finance, sanctions

January 28, 2011
Democrat lawyer and Obama mouthpiece

"These books make me look smart"

The White House has announced that Stuart Levey, the Treasury Department’s Undersecretary for Terrorism and Financial Intelligence, will resign.  His replacement will be Democrat lawyer David S. Cohen, the current Assistant Secretary for Terrorist Financing.  Cohen doesn’t deserve his current job, much less a promotion.  The Republicans in the Senate need to resist and grill Cohen during confirmation hearings.  Here’s why:

  1. Cohen has praised Treasury’s efforts at containing terrorist financing to Al Qaeda while failing to recognize the contribution of the U.S. military in the war against terrorism.  It is largely the military pursuit and elimination of insurgent and terrorist financiers and cell leaders that has pushed Al Qaeda closer to insolvency.  It has not been the men in navy blue suits inside the beltway. 
  2. Cohen “is pleased with the contribution that Saudi Arabia” has made in combating the financing of terrorismPleased?  Cohen’s statements on Saudi Arabia are for public show and border on outright lies.  His statements to more than one media outlet have been made to highlight a spirit of cooperation with the Muslim world and to paint a picture of Pres. Obama’s effectiveness at using “soft” power.  The reality is that Saudi cooperation in the financial war on terror is limited to public statements, meager proof, and multiple examples of Saudi duplicity.  Relatedly, Cohen has downplayed the role of the Middle East in international terrorist financing.  At a speech to the Washington Institute for Near East Policy, Cohen addressed terrorist financing problems in Mexico, North Korea, Africa, and getting slightly closer, Afghanistan and Pakistan.  He spoke some about Iran and Hezbollah, ignored Yemen, and left out Saudi Arabia’s role in funding Al Qaeda and the Taliban entirely.
  3. Cohen supports Carl Levin’s dreadful incorporation transparency bill which would deepen the federalization of what has historically been a state role—the incorporation of businesses.  The bill would require additional disclosures by companies, additional paperwork by the state incorporation agencies, and would subject the states to turn over records on their businesses to Washington, D.C., and even to foreign countries upon request.  Contrary to what supporters say, the bill would not help expose the Iranian or terrorist shell companies of tomorrow—it is a bill designed to discourage foreign companies to offshore their revenues in the U.S. in the vein hope that foreign countries will reciprocate by helping the U.S. crackdown on its own tax deadbeats.  Cohen’s support for the bill was a deviation from the Treasury policy stated by another assistant secretary who testified under oath before Congress that no new laws are necessary to fight terrorist financing.  Cohen’s position also put him at odds with current FinCEN director Jim Freis, who has a less rigid approach toward beneficial ownership.  That makes Cohen the odd man out among the assistant secretaries he will be supervising if confirmed. 
  4. More broadly speaking, sanctions are the last bow in Pres. Obama’s quiver against a nuclearizing Iran.  Either the Obama administration is or is not serious about enforcing those sanctions, about bringing more nations on board with those sanctions (particularly Europe and Russia), and about keeping the sanctions tight.  Letting the well-respected Levey go and selecting a lightweight like David Cohen suggests that Pres. Obama is no longer serious in this approach.  More menacingly, that suggests that the Obama administration no longer has a genuine plan for containing Iran’s nuclear ambitions.

Reuters reports that the announcement of Levey’s replacement “comes as the United States and its allies appear likely to make a push for stiffer sanctions on Iran… U.S. officials emphasized they did not think the staff change would stem the momentum for the drive to put the financial squeeze on Iran or to choke off access by militant groups to international sources of money.  ‘It will have no effect on policy, or on our ability to execute the president’s policy,’ U.S. Treasury Secretary Timothy Geithner said.”

Really, Tim?  But is it not informative that the question is being asked?

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Poor follow-through by FinCEN?

September 19, 2010

Over the past five years, the anti-money laundering staff of the IRS has referred 60 significant money laundering cases to FinCEN which has resulted in only four fines by FinCEN.  This embarrassing revelation comes from an Aug. 31 article by MoneyLaundering.com:

IRS AML Exam Violation Letters, Referrals Lead to Few FinCEN MSB Penalties

By Brian Monroe

The division of investigatory and enforcement powers between two U.S. Treasury Department agencies has resulted in few monetary penalties for anti-money laundering compliance lapses by money services businesses and tension between the two agencies, say current and former government officials.

While the IRS’s anti-money laundering (AML) examination division issued more than 10,000 letters to money services businesses (MSBs) and referred more than 60 cases of “significant noncompliance” to the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) over the past five years, only four have resulted in monetary penalties, according to government data.

It’s a system that undermines AML compliance, said Dave Tilzer, the former head of the New York IRS AML division. MSBs that deserve monetary penalties, including those who have shirked off several warning letters, are not being penalized, he said.

“We are the biggest paper tiger,” Tilzer said of the IRS’s AML examiners. The New York IRS division referred several cases to FinCEN the group believed were deserving of monetary penalties, “but the referrals didn’t go anywhere,” he said…

Some officials have argued that there were few penalties because the MSBs corrected their noncompliant behavior before the case progressed any further.  Nevertheless, one wonders why FinCEN can’t fine an MSB for prior noncompliant activity while acknowledging that it has taken the steps to correct it going forward.

It doesn’t look like MoneyLaundering.com could get a quote for this story from FinCEN Director James H. Freis, Jr. or Deputy Director Charles M. Steele, but I’d love to hear their reaction.

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Letter to Treasury

September 14, 2010

Dear Under Secretary Levey,

You have an important job.  It’s challenging work.  And most people agree that you do it well, or you probably wouldn’t have retained your position during both the Bush administration and the Obama administration.  Treasury has, by its own account at least, succeeded in restricting the financial activities of al Qaeda and has cracked down on entities that help Iran evade sanctions.

But we can all use an outsider perspective from time to time.  If you won’t invite anti-terror finance bloggers in for a rap session with you, sir, please at least consider the following constructive criticism and recommendations: 

  1. Stop letting the Saudis get away with lying to us about the continued transfer of funds overseas without SAMA approval.  The Hialeah, Florida, office of the International Islamic Relief Organization was incorporated under Saudi auspices without disclosing that information to the GAO.  As such, the feds should raid the office and seize its records for review by TFI.  All TFI assistant secretaries should be instructed to refrain immediately from painting a rosy picture of Saudi cooperation in the war against terror financing.
  2. Stop behaving like a charitable facilitator. Read the rest of this entry ?