The United States responded immediately and decisively to the terrorist attacks of September 11, 2001. Terrorist financing was, and continues to be, an integral element of the counter-terrorism strategy. A core requirement for a successful terrorist organization is funding. Disrupting the flow of funds between the source and distribution points diminishes the ability for these groups to succeed. This was one of the most important lessons learned following the 9/11 terrorist attacks.
In the aftermath of 9/11, terrorist financing became a significant focus in the U.S. government’s war on terrorism and had to be dealt with on both the agency and interagency levels. Each agency having a nexus to terrorism had to establish entities and internal mechanisms to deal with terrorist financing. The methodologies developed and implemented needed to be innovative and inclusive. The interagency had to develop a meaningful and effective mechanism for initiative prioritization, coordination, cooperation and information sharing. Today, combating terrorist financing has become an important tool in the U.S. government’s counter-terrorism arsenal.
Where We Have Been
The interagency formed an informal Policy Coordinating Committee (PCC) for Terrorist Financing in late 2001, and it was formalized under the National Security Counsel (NSC) in 2002. All agencies with a nexus to terrorist financing participated in the PCC. The PCC identified the highest terrorist financing targets and developed strategies to deal with them. The primary focus of the PCC was on State and Treasury Department led designation and sanctioning actions that were supported by information provided by all participating agencies. The Department of Justice (DoJ) played a prominent role in this process.
The PCC evolved into the Counterterrorism Security Group (CSG) on Terrorist Financing. The CSG, like the PCC, is a coordinating group that has no authority over the participating agencies. The 9/11 Commission determined that the PCC was generally successful in marshalling interagency resources to address terrorist financing following 9/11 [1]. Interestingly, the government has come under periodic criticism for not having one agency, entity or individual with authority over all agencies engaged in terrorist financing activities [2]. During at least the 2002-2004 period, a sub-group from the PCC involving the NSC, Treasury, CIA, FBI and State met on a weekly basis to discuss criminal and intelligence investigations or operations and to continuously prioritize interagency targets [3]. The priority financial targets identified by this group were primarily investigated by the CIA and FBI in conjunction with each other. Led by the NSC, State and Treasury, this group also developed a strategy to deal with getting Saudi Arabia engaged in terrorist financing issues.
At the agency level, the 9/11 Commission further determined that the post-9/11 interagency response was focused and driven by a sense of urgency concerning terrorist financing [4]. The PCC succeeded in coordinating and prioritizing interagency activities to include diplomatic actions, sanctions and designations, and intelligence and criminal investigations. In great part as a result of this coordinated effort, the 9/11 Commission Report Card graded the government A- for its efforts in terrorist financing. This was the highest grade given the government [5].
Immediately following 9/11, both the CIA and FBI took steps to coordinate more effectively on combating terrorist financing. The CIA established the Financial Operations Group (FINO), while the FBI created the Terrorist Financing Operations Section (TFOS). Within a week, FINO and TFOS established a joint working relationship. As the relationship grew and with the passage of the USA PATRIOT Act, each entity assigned personnel to the other’s operation and initiated an unparalleled information sharing mechanism. FINO and TFOS developed proactive strategic and tactical methodologies and initiatives. In addition, TFOS conducted historic or traditional financial investigations involving the review and analysis of financial records. The key was the development and implementation of time sensitive mechanisms.
For the first time, financial intelligence and the transactional flow through the financial system were used for strategic, tactical and historic purposes. Strategic financial intelligence was collected and used for analytical purposes to identify emerging trends and establish proactive strategic financial investigative methodologies. Financial information was used from a tactical perspective to engage in proactive financial investigative initiatives. From the intelligence and law enforcement standpoints, this was extremely productive. Treasury, FINO and TFOS participated together in a highly classified and successful operation tracking the flow of financial information. TFOS provided transactional information to an allied government in a near real time capacity that prevented at least four terrorist attacks in that country [6]. Financial information was used by TFOS, the Internal Revenue Service (IRS), Customs Service and other law enforcement agencies to build historical or traditional reactive investigations requiring the comprehensive review of financial books and records.
Between 2002 and 2004, Treasury agencies—including the Office of Foreign Assets Control, the Financial Crimes Enforcement Network, IRS, Customs Service and U.S. Secret Service—focused significantly on terrorist financing. In 2004, Treasury established the Office of Terrorism and Financial Intelligence to bring all of its assets together more effectively and to play a leadership role in battling terrorist financing [7]. This included financial and policy analysis, enforcement and investigations.
DoD’s Role in Countering Terrorist Financing
Prior to 2004, the Department of Defense (DoD) had a limited role in terrorist financing and only participated passively in the PCC. It did not have initiatives or operations specifically focused on terrorist financing. Nevertheless, DoD intelligence components did support the FBI, CIA and other law enforcement and intelligence terrorist financing operations. For example, when Iraq was invaded, FBI agents were selectively embedded with military intelligence to collect information on al-Qa`ida. This included agents from TFOS, who coordinated forwarding financial intelligence to TFOS for analysis. Subsequently, TFOS and IRS agents were deployed to Iraq and worked with DoD conducting financial investigations and intelligence collection. In addition, TFOS deployed teams of agents on a rotating basis to Guantanamo Bay to identify detainees believed to be knowledgeable about terrorist financing. With DoD support, TFOS conducted numerous interviews and developed useful lead information.
In August 2004, CENTCOM established the Threat Finance Exploitation Unit (TFEU) [8]. The TFEU had small groups in Iraq and Afghanistan. They went beyond terrorist financing and identified the underlying problem more broadly in the context of threat finance. DoD considered the problem two-fold. There was terrorist financing, and in the broader context there was threat financing, which included weapons of mass destruction funding, narco-trafficking, organized crime and human trafficking [9]. The primary focus of the TFEU in Iraq was on the insurgency, while in Afghanistan the top priority was narco-trafficking. In developing the operational concept, DoD sought to capitalize on its military resources in theater. By capitalizing on these resources, the TFEU has functioned as a valuable financial intelligence collection mechanism. This tool can be used to identify and destroy enemy threat targets. It also serves as a mechanism to share information with the interagency. Treasury has played a very active role in working with the TFEU, and DoD considers Treasury the lead agency in this area [10].
There have been a variety of media reports concerning threat finance successes in Iraq [11]. The evolution of threat finance within DoD began at the grassroots level and progressed at a slow pace. The U.S. Special Operations Command (SOCOM) has responsibility for leading the DoD global war on terrorism. By 2006, all geographic commands were putting together threat finance cells. In addition, SOCOM dedicated resources to work in conjunction and coordinate with the interagency community in Washington.
DoD is perfectly positioned with its global presence, reach and resources to more fully engage in threat finance and the collection of financial intelligence in support of its military objectives and the interagency terrorist financing mission. Thus far, DoD has failed to maximize its threat finance capabilities and has not established a policy for the same [12]. DoD is, however, engaged in a number of productive initiatives with the interagency. Treasury, for example, continues to work closely with the TFEU in Iraq. DoJ has begun a targeted initiative with the TFEU in Iraq, and DoD has assigned an officer to coordinate this project at DoJ. DoD and the FBI are working in conjunction with each other on a number of cases.
The interagency strategy between 2001 and 2003 was to use the full weight of government powers to combat terrorist financing. This included coordinated diplomatic actions, designation and sanctions, law enforcement and intelligence investigations. As the 9/11 Commission Report Card reflects, this was a success. An important element, however, was missing: military action. Since 2004, DoD has played an increasingly important role in the government-wide terrorist and threat financing initiative. Adding military action to the arsenal of diplomacy, sanctions, law enforcement and intelligence provides the government with its most robust terrorist and threat financing capability.
Where We Should Go
The interagency community must continue to evolve both at the agency and interagency levels. The challenge is that the enemy is cunning, as terrorist groups are learning organizations [13]. They are adept at avoiding detection and exploiting financial systemic vulnerabilities. Methodologies must continue to be developed, implemented and enhanced that disrupt and minimize the flow of terrorist and threat finance. One means to achieve this is the collection of financial intelligence that can be strategically applied to identify emerging trends. This trend analysis would be beneficial in the development and implementation of tactical operations. This is particularly important for military and law enforcement operations.
The most significant areas of vulnerability or weakness to terrorists and terrorist organizations are communications and finances. These areas consistently lead to the disruption and dismantlement of terrorist groups and activities. Although terrorists consistently change their methods of operations and demonstrate adaptability at avoiding detection, they must communicate and raise and spend money to function. Government strategies should focus on the disruption of funding flows. The optimal situation would be to trace terrorist funds back to the point of origin and forward to the terrorist strike team or cell. This would enable the government to take action to disrupt and dismantle the identified funding stream through intelligence, investigative, Treasury enforcement, and/or military action.
To accomplish this, investigators must identify three funding tracks. First, identify funding flows between a terrorist network or organization and the point of origin. Second, identify funding flows from the network or organization to fund operations, including organizational operations and specific terrorist activities. Third, identify funding flows from operations to individuals, cells or groups.
Collecting financial intelligence information and conducting analysis to identify emerging trends should be utilized in developing strategic and tactical strategies at the agency and interagency levels. Agencies must then balance agency priorities with the priorities of the interagency CSG as part of the overall government counter-terrorism mission.
Training is the one area where the interagency has been inadequate. Training models should be developed and implemented at the agency and interagency levels. There should be a broad awareness overview for most agency personnel about the terrorist or threat financing function and responsibilities of the agency. Comprehensive training is needed for personnel assigned or interested in assignment in terrorist or threat finance. This training should include legal instruction to ensure personnel are cognizant of legal parameters and sessions on dealing with the financial and business sectors. The training should provide an overview of the jurisdiction and responsibilities of other agencies having a nexus to terrorist or threat finance. Many individuals in one agency do not understand the capabilities or responsibilities of other agencies. These sessions should contain workshops addressing interagency issues and impediments to sharing information or working together.
Overall, the interagency has consistently done a good job in dealing with terrorist and threat finance. Nevertheless, it must conduct regular self-assessments to enhance its capabilities. It must be vigilant in identifying emerging trends and continue to develop innovative techniques. The interagency must ensure there is a consistent level of coordination, cooperation and information sharing. In so doing, there is a better expectation that U.S. national security will be safeguarded.
Dennis Lormel retired from the Federal Bureau of Investigation following more than 30 years of government service, almost 28 years as a Special Agent in the FBI. During his distinguished career, Mr. Lormel amassed extensive major case experience as a street agent, supervisor and senior executive, particularly in complex, document and labor intensive financial related investigative matters. Immediately following the terrorist attacks of September 2001, Mr. Lormel formulated, established and directed the FBI’s comprehensive terrorist financing initiative. Mr. Lormel currently serves as Senior Vice President, Anti-Money Laundering and Terrorist Financing, with the corporate security consulting firm Corporate Risk International. Mr. Lormel provides consulting services and training related to terrorist financing, money laundering, fraud and financial crimes.
Notes
[1] National Commission on Terrorist Attacks Upon the United States, “Monograph on Terrorist Financing,” Staff Report to the 9/11 Commission, p. 8, available at www.9-11commission.gov.
[2] Major Wesley J.L. Anderson, “Disrupting Threat Finances: Utilization of Financial Information to Disrupt Terrorist Organizations in the Twenty-First Century,” Army Command and General Staff College Fort Leavenworth, April 2007, p. 56.
[3] Ron Suskind, The One Percent Doctrine (New York: Simon and Schuster, 2006), p. 144.
[4] 9/11 Commission, “Monograph on Terrorist Financing,” p. 7.
[5] 9/11 Commission, “Report Card,” 2005.
[6] Testimony of FBI Deputy Assistant Director John S. Pistole before the House Committee on Financial Services Subcommittee on Oversight and Investigations, September 24, 2003.
[7] Testimony of Undersecretary Stuart Levey before the House Financial Services Committee, August 23, 2004.
[8] Lieutenant-Colonel Darryle J. Grimes, “The financial war on terrorism, grading U.S. Strategy for combating the financing of terrorism,” National Defense University, April 15, 2006, p. 54.
[9] Ibid., p. 50.
[10] Testimony of Acting Deputy Assistant Secretary of Defense for Special Operations and Combating Terrorism James Q. Roberts before the House Armed Services Subcommittee on Terrorism, Unconventional Threats and Capabilities and the House Financial Services Subcommittee on Oversight and Investigations, July 28, 2005.
[11] Andrew Cochran, “U.S. ‘Iraq Threat Finance Cell’ Puncturing Insurgents’ Financial Network,” Counterterrorism Blog, November 20, 2007, available at www.counterterrorismblog.org.
[12] Anderson, “Disrupting Threat Finances: Utilization of Financial Information to Disrupt Terrorist Organizations in the Twenty-First Century,” p. 63.
[13] James JF Forest, Teaching Terror: Strategic and Tactical Learning in the Terrorist World (Lanham, MD: Rowman and Littlefield Publishers, 2006), chpts. 1-3.
