Transcripts For CSPAN3 Key Capitol Hill Hearings 20141114

Production you would be familiar with the processes and the targets and things like that . In terms of the military targets . Yeah, youre sitting there, youre fairly comprehensive in this report here, are you in that room is all im 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 . Okay, so why didnt you stop it this afternoon . You really want to do it, youre 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. To move 350 barrels requires trucks. Now the report talks about choking off the funding for insurance. The insurance could cut the insurance off themselves, you dont 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 youre not stopping the oil today, because you can do it. It is well within your grasp. You have the technology and the information. You dont have to sort through banking or track companies. You dont have to find out which people in marseilles are tracking the oil. Why dont you do it . As you know the Defense Department has conducted airstrikes. Youre telling me it is not important, not a number ten on the list of the administration or they would have stopped it today. It doesnt 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. Everyone who operates oil, goes from a well into a tank. You can blow up the tank, the truck or the connection between the two. You dont just put oil in fivegallon trucks in a tanker truck, you put it in a delivery mechanism. Then you dont 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, im not a military targeter. It doesnt it doesnt require a military target. I asked you what is your commitment from this administration to stop the flow of oil. You said it is a number ten. That is the highest on the scale, ten to ten, and if the commitment is there you dont 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 youre 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 hasnt somebody said lets quit looking at Insurance Companies and financing. Who takes the oil. We dont have to know any of that. Stop it in its tracks. It is very simple. Okay, i understand your point, congressman. If you would take that message back, maybe someone would contact somebody in the oil field and they would find out what it takes to blow up a 120ton 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 youre working to limit isols 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 of money brokers and has been in place for centuries. And if the International Community imposes sanctions on persons and institutions under isol 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 iraq from the Financial System, we are very much focused on ensuring that they cannot use and cant 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 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 there. Are we looking at ways to prevent them from getting money so that the payments are interrupted so they wont be able to entice folks to join them because of the revenue that they generate . Absolutely, were 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 were very much working on with our partners in the Intelligence Community. I know we have to try to weigh these lines. Im trying to make sure that we dont have all of the folks over in the region against the successor. 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 that were taking, including providing guidance to the banking community. Implementing legislation that congressman ellison sponsored that was signed into law over the summer to try to ensure that the Money Service businesses can continue to operate. With respect to remittances into iraq our efforts to cut off the banking activity in the 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 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 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 doesnt flow into iraq and syria. When you say cut down on the source youre talking about the source being the illicit gain from hs 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 were trying to get a good handle on is how those payments were made. Whether through cash changing hands, through a hawala system or the formal Financial System, whatever the mechanism may be. Were looking for the key there so that we can disrupt that financial activity. Right, what makes isis unique is the ability to selffinance their terror interests. They use the oil this is different from other terror organizations to fund their recruitment, their training. Theyre equipping. And so while were taking a look at this, why isis is unique and how to deal with that i think youre 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 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 meetin g ings tha 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 on funding that comes out of qatar for terrorist organizations. Weve 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 t 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 kuwait as the two jurisdictions in the gulf where additional steps could be taken. Time of the gentleman is expired. Chair now recognizes the gentleman from massachusetts, mr. Lynch. Thank you, mr. Chairman, again, mr. Secretary, thanks for your willingness to testify. I just want to make one observation. I do share the frustration that some of my colleagues across the aisle have expressed about 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 dont know, about 75, maybe 150 miles north of baghdad, ive been there a couple of times. It is not really its low tech, but its the largest refinery that they have there in that region. If we had destroyed that a month ago i think the iraq government you know, last week, two weeks ago, the iraqi forces retook that refinery. So now it is pumping oil for the Iraqi Government. Its 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 Kurdish Forces and isol, we had a similar problem with Saddam Hussein when we first went in there about whether to destroy these Oil Facilities or whether to allow them to continue to operate and then capture them. So that will be an ongoing challenge for us as we go forward. What i would like to talk to you about, mr. Secretary, the actual shipment of what is going on right now over the Turkish Border. We have been largely unsuccessful in interrupting that oil flow. And i was in erbil in kurdistan recently and had a chance to talk to the 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 weve got to get at that. We have to disrupt that. And im not confident that that is happening now. And im not at all confident that were 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 know, we had back in 2006, 2008, in iraq we had threat finance cells. And we used this as well in afghanistan where we actually partnered up treasury folks and dod. 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 were 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 isis revenue. And maybe we could establish some type of control. On the issue of the threat finance cells, as i noted earlier i think i would like to address that in a closed hearing. More broadly we are enhancing our efforts to collect intelligence, including intelligence on these Smuggling Networks which as you know have been in existence for thousands of years. That doesnt mean that we cant 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. Were 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. 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 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 citizenship based 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 those who are giving the orders in the Islamic State to come back and begin plots in the United States. Im wondering what is being done to follow these individuals, whether it is through financial transportations or any other way. Number one, im wondering why theyre allowed, number one, back in the United States. Im wondering why in the world we dont 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 arent we using our resources to thwart this . There has only been one serious terrorist investigation of terrorist financing since 2008. And that is the Holy Land Foundation trial. It was a Muslim Charity in the state of texas. That happened in 2008 from the department of justice. I assume that you are working, mr. Secretary, with the department of justice closely on this matter. And i am wondering what sort of prosecutions are going on. Because i can tell you from my state of minnesota this has not re receded. This has only gone uptempo, why arent 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 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 here in our homeland. Well, in the time i have remaining let me try and address that. The effort to identify those individuals from the United States who are traveling to iraq and syria as foreign terrorist fighters and those who seek to return is one there is an enormous amount of energy and resources dedicated, including from the Treasury Department in trying to understand how to identify these people through tracing their Financial Transactions and my counterparts, in particular, the department of Homeland Security and the fbi, allow them to describe it in more detail. But you can rest assured that the threat of the foreign terrorist fighter flow, both going to syria and iraq and coming back, whether into europe or especially into the United States is something that this administration is highly secretary cohen, i dont rest very well because they are allowed free reentry 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. Im over here mr. Cohen, over here in the corner, how are you . An area i think were not putting enough attention to is on our arab nations over in the middle east. I do not believe for one minute were getting the level of operation and cooperation and back bone inserted into this issue as we should. Were 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 theyre playing the American People for fools. And i for one am not going to stand for that. Now, i believe one of the weak points within the administrations 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. And 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 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 theyre getting so much of their money from. Do you think they could do that without turkeys cooperation . No. Unless theyre 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 wouldnt have these terrorist groups if it were not for saudi arabia. You think we would have al qaeda . Osama bin laden comes right out of the royal family there. You think we would have isis if we did not have al qaeda in iraq . And if we did not make sure we contain that area. So what im 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 were 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 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 this. What do you say about that . Congressman, let me just address your last point about a resolution coming out of congress. The administration has requested authorization for the effort against 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 narcotrafficking . Congressman, not that i am aware of sitting right here. But let me ensure that that this is not something i dont know about but i am not aware of any narcotrafficking by isol . I know they have given the taliban credit for almost 100 of the heroin trade, and the colombian rebels, almost 100 of 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 narcotraffickers. And my question for you is going to be what you are doing, or what steps youre taking to help change that. But i guess until you can qualify your position on isis being narcoterrorism, that may not be the right time. Congressman, im not aware that isis is involved in narcotrafficking. I will follow up on that with you. On the broader issue of attacking terrorist organizations use of narcotrafficking 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 in the isol situation something akin to what we see in the taliban organization, we wouldnt hesitate to use these instances. Again, the kingpin, there is a big hole there for narcotrafficking. And of course it has been the subject of one of the hearings we had previously. And some say we really need to be locking that up as much as we can. Im not aware of the particular deficiency that youre referring but im happy to follow up on that. Chair now recognizes mr. Green from texas, on the oversight 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 eliminating their access to funds if we if we dont 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. Were not sure who is holding her son captive. But i visited with this mother and father. And i know that they want their son returned home safely. And while i understand we cant pay ransom, i have been with them. And while i dont feel their pain i have seen the evidence of it. And youre 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. Its a balancing act. Its contrary to what our policy is. And you understand that. But weve 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 were trying to do to make sure this mother gets her son returned home safely. Congressman, i think you put it beautifully. And i think it is an incredibly difficult issue. I share your feelings that you described. I cant 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 provide another source of funding to these horrific organizations that take hostages, commit other terrorist acts. We have seen evidence that it in fact does protect americans as these terrorist organizations choose not to take americans hostages. Because they know that they will not get paid ransom. It obviously does not work in every instance as the situation youre citing identifies. And reflects. But it protects our citizens over the longterm and as a whole. In terms of getting our citizens back who are held hostage, im sure youre 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 successful. But the fact that we will not pay ransoms or make other concessions to terrorists does not mean that we are leaving our citizens in the hands of these dastardly people. We try everything we possibly can ourselves and working with partners to free our hostages, short of conceding to their demands for ransom payments or other concessions. It is as you say an emotionally fraught difficult issue. But it is a policy that i think we need to employ ourselves and 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. 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 theyre carrying out their duties. I think theyre 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 derisking. I think it is essential we have laws to combat financing. I am concerned the broad derisking weve 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 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 antiMoney Laundering Regulatory Regime is a riskbased approach where we ask our Financial Institutions to assess the risks of the customers that they have on board or theyre 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 its in a position to manage. The concern that i was addressing in the speech earlier this week was that some institutions were acting in sort of a wholesale manner to just cut off entire categories of customers. Entire jurisdictions from correspondent kind of relationships without an assessment of the actual risk posed by that particular customer. And what i was advocating was that institutions and those of us in governments who are responsible for overseeing the institutions adhere to the riskbased approach and to a case by case analysis, perfect in approaching that. Thank you for that. Youre an expert on terrorist financi 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. Have you had any actions against these folks for terrorist Financing Activities . Im 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 youre 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. Youre 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 antilaundering money stronger, 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. 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. Im sorry, noon. Noon, dont want our witness to panic. I will call upon mr. Ellison, mr. Pittinger, and mr. Pearlmutter, and well welcome our next member, mr. Ellison is recognized. Mr. Cohen, thanks for your service to our country and your hard work to combat terrorist financing. Earlier you mentioned the money remittance improvement act was the bipartisan piece of legislation passed through Congress Earlier this year. Now were 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 antiMoney Laundering regulations. That will expand our ability to get insight into the quality of antiMoney 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 ill ask it so we can have as many people as possible ask you a few questions. Do you feel like our International Partners we have enough cooperation with people in the middle east, european world, do you think we have enough International Coope freeze to identify and freeze off some of the sources of terrorist financing in this in dealing with isil . Thats 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 theres 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. Its a big part of my job, big part of the job of the folks who i work with. We have made enormous progress over the last decade or so in improving International Efforts to combat terrorist financing. But this is a task that is never going to be complete. And theres still obviously work to be done. Thank you again. I yield back. The gentleman yielded back. 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 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, im not sure its either of those. But im 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 thats the most significant manner in which isis has obtained their 1 million to 2 million revenue a day . Absolutely. The conversations that im involved in, as you might expect, are conversations about policy and broad approach. I dont sit at im 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 isils financial strength, thats 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 one of the ways that we can impair the oil trade is to stop them from bringing it out of the country. What im not what i am not in a position to comment on is the practicality of doing that. Its 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, theres very robust an littic software programs. I have worked for a dozen years with Major Software companies originally related to medicaid fraud. In the discussions, we have transferred now on in talking about how we can dismantle the terrorist funding and the transfer of it outside the United States and inside the United States. As such, i wrote jennifer c calvary on september 4 and requested a meeting to make sure that the department is utilizing every available possible an littic 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 an alit cal 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 fundraising for isil and to push that out on a very rapid beasis to our Law Enforcement colleagues. That is happening. But i will convey your request. If you could bring about a meeting with her, i would very much appreciate it. I yield back. Gentleman yields back. The chair recognizes the gentleman from colorado. Mr. Secretary, thanks for your testimony today. I want to compliment treasury and the administration, the stock markets are hitting new highs again today. From where we were six years ago. I want to follow up on the line of question iing 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, youve got the production piece, which is what he was talking about. Can we eliminate or destroy the production . I would rather focus on the price. We have had a 30 reduction in price of oil in the last five months. West texas intermediate has gone from 103 down to 75. Basic economics would say to me, thats 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. Im 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 dont know the answer to that question. Let me see if theres 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, theres 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 cant give you a dollar figure on what it costs for them to produce a barrel of oil or to then refine it in one of their mobile refineries. Theres obviously some expense involved there. Im not trying to stump you on this. You did. This is basic stuff im trying to understand. Everybody else has gone into monologue about whats 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, weve got oil. And theres some revenue stream thats coming from oil. And id 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 . 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, theyve 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 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 beers about 1, a month. That comes to 360 million a year in just the expenses for fighters. Now, that figure is obviously a soft number. I dont know if thats 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 was planning to. But isil does try to portray itself as if it were a government that can deliver social services. Thats 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. 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. Matthew 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. Im not sure who has testified before congress before. But like the traffic light system, we have the green, yellow, red lighting system. Yellow will go off when you have one minute to go. I ask you each observe the fiveminute 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. Governments Counter Terrorist financing strategy against isis, i would like to make several recommendations. First recommendation, targeted blocking actions. The centerpiece of the governments Counter Terrorist is to freeze the assets of the financial supporters and facilitators of terrorism and prohibit such individuals and entities from doing business in the United States. The strategy is preemptive 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 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 treasurys departments designation and the internal funding for isis. Whether were talking about 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 dont know if this is the case. It would seem toe 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 fundraising 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 thats happening, who is involved in that and designating individuals 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. Im 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. Im 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. Reggie dags is that the treasury should intensify and accelerate its efforts in sharing Financial Intelligence 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 Actions where fines have been imposed on banks for noncompliance 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. Its 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. 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. Its 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. Theres 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. Isis was financially selfsufficient 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 significant expenditure and requires more significant revenue streams. Therefore, while its true isis within iraq is focusing even only on those areas that are vulnerable 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 groups criminal epter prices and further such strikes should continue that trend. They dont hold territory, they cant tax people in the territory, they cant abuse domestic resources. While the prospects of real political reform in iraq are bleak today, should the Iraqi Government repry or advertise government, perhaps they could investigate and prosecute isis in their country as the domestic criminal activities they are. Treasurys 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 doesnt do a thing. Its a wise strategy using these treasury tools that we have. But i encourage people to look beyond the tools as im 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 that does this better thinking outside the box to develop strategies needed to deal with tomorrows 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 irans financial couldnt 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. Theres evidence that treasurys full court press is working away from iraqs 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 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. Thats 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. In the long run, at the end of the day, the only way to stop criminal enterprise within iraq is for Law Enforcement within iraq to 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 isils money amplifies the threat that opposes im sorry. Could you bring the microphone closer to your mouth. Were having trouble hearing you. Better . Challenges and opportunities. I want to note countering isils 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. So in my testimony, i want to make three main points. My written testimony contains fuller discussion of each. My first point is that isil raises almost all of its money within the territory it controls. This has been discussed by other members. I will be brief. The funding scheme differs from 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. And these documents show with meticulous detail how the group raised money during this period and how it the group spent money. They were fairly comprehensive over certain time periods in 2005 and 2006 and 2009 and 2010. What these documents show i think really importantly are two different things. One is that this group has been making money at least in mosul in the same ways for at least the last six years and probably longer. So this is nothing new despite the change in the groups 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 whats going on in mosul and with isil is the scale at which it raises funds. So what were able to see through looking at the groups 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 its 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 longterm protracted fight against various enemies. The real challenges in disrupting finances and restricting access to the international Financial System, i think that undersecretary cohen is correct that key individuals should be targeted for sanctions and that isil ben it does benefit from access to the international Financial System. But the facts dont negate another fact which is that a large share of isils revenues made internally, its 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 thats necessary to effectively apply targeted sanctions. Absence of such intelligence were left with a blunt set of Financial Instruments at our disposal that are unlikely to cut off isil from key Revenue Sources that could sustain the organization for the next several years or longer. My third point covers a few things that could be done to disrupt and degrade isils 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 intell gens 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 isils Financial Capabilities. As an Early Warning of sorts. And identifying and monitoring all external contracts for areas in and around the territory that isil controls allowing action to be taken to reduce isil extortion, revenue by stopping these contracts if they are not absolutely necessary for the populations wellbeing. To recap, the three main points is the importance of isils internal funding scheme, the challenges associated with targeted financial sajss and efforts to cut off a group like isils access to the International Economy and to use this as sort of the primary tool kit to degrade the specific threats, Financial Capabilities and improved Financial Intelligence as a way to 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. 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 is the finance minister for isis. Can you give us a Historical Context going back to the early 2000s when you were in Public Service and individuals we would have been identifying within al qaeda to compare and contrast . Thank you for the question. First of all, we have to keep in mind that the method of raising money by al qaeda is different than the method isis uses to 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 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 selffunded 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 theres 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. 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 tthey are doi. We talked about the charity law they have in place. I think the undersecretary had made statements about qatar and kuwait being permissive for tear a 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, no . Ever used this . No. Theres 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 didnt prosecute the individual, didnt 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. Theres people you could hit the threshold, you could designate them. But think dont have assets here, they dont 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, thats where these designations have teeth. Are there leverage points that treasury or anywhere in the administration, that we could use to encourage whether its 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 bafrn ining banks in q. We should work very closely to ensure that those banks are applying the relevant anti Money Laundering terrorist financing regulations that they should. If not, perhaps their banking licenses, if they have u. S. Branchs in the United States, perhaps those banking licenses should be revoked other other restrictions on their ability to do business in the United States. Time of the gentleman is expired. The chair recognizes the gentleman from massachusetts, mr. Lynch. Thank you, mr. Chairman. I have want to thank the panel. Thank you very much. Youve 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 holding that . From a custodial sense, how do you think they hold that reserve of 2 billion . So this is purely speculation. But i think the easiest way to hold it would be in the banks that it overran when it overran mosul and to 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 its 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 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 theyre 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 thats i think they will exhaust that at some point. Its the oil that is going to be if they are going to have a sustainable system here, an organization, its going to be the oil. How do we get at that, dr. Johnson, in terms of our strategy . I know that were doing targeted missile strikes and bombings. But to really take away the capacity to produce oil, youve got to occupy the ground. Im 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 to 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 whats being done right now, actually. And thats using air strikes to limit the freedom of movement and ability to move oil and smuggle it as easily as isil was able to before the air strikes started. Meanwhile, buying time for an advice and assist effort and Capacity Building effort to try to stand up in some cases local Security Forces or the iraqi army to conduct effective operations essentially to push isil back from the territory that its controlling. I appreciate that. I dont 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 country and syria. In the race against time, as isis gets stronger and stronger, were back again with this training operation. I just i just have some misgivings about, you know whats that saying that the definition of insanity is doing the same thing over and over again and hoping for a different result . Im just a little i think the training piece in kurdistan is money well spent. Im 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 direct this first question to dr. Levitt. Would you assess that the primary source of revenue for isil is the oil revenue . By far. Okay. And so how effective has u. S. Effort u. S. Efforts been so far, the coalitions efforts been so far at targeting the middle men in iraqi the iraqi kurds or the turkey to the t turkish elements how afhow effective have we been in identifying middle men that are delivering the oil to other parties . Theres 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 working with partners in places like turkey and in the kurdish areas in the north of iraq where the problem isnt so much criminal middle men but corrupt politicians who are involved in this as well. Keep in mind, these are Oil Smuggling routes and individuals have been involved in this for years since the oil for food program. So combating something that has that kind of traction is difficult. What about air strikes with these mobile refineries, how effective has that been . Military says they have been very, very effective. If you look at the numbers, we were saying that isis was making 3 million a day. And now most say about 1 million, maybe a little less. I would say thats about twothird reduction. Thats successful, but in the right direction. To followup, mr. Lynchs line of questioning, is there any way even if we have had v had 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 on 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 border. One of the points i didnt 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. Its increasing. Its difficult though. This is something thats been going on for years and years. The price of oil in southern tir i c turkey. Theres 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 cohens testimony was its u. S. Policy to refuse payment of ransom or 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 wasnt helpful. I think its inconsistent. Its 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 hostages. 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, thats significant. We need to undercut that ability and when we are engaging in this type of conduct, i think its 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. I looked at the strategy of the administration in regard to its mission to disrupt, degrade and defeat isis. I take issue with the way they lay that out. I wish they would say we are going to defeat isis. Spending 500 million and trying to train 500 quote moderate unquote rebels to take on 40 to 80,000 jihadists doesnt 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 late. My concern is has been with the administrations strategy and im concerned that the lackluster approach that i have just referenced is taking place on the finance side. Does the panel think treasury has been adequately engaged on the terror finance side of disru rupting the money that flows to isis . As i stated in my opening statement, i think they are struggling. I think certainly they have good intentions and they treasury is struggling . They are struggling with gaining footing. Thats in the low number of designations. Treasury is struggling . Yeah. To the panel, i think mr. Pierce asked this but im confused. Moving oil is not like moving nuggets of gold or diamonds . Its a pretty theres a large quantity of oil that has to be moved from the oil fields and or the refineries, is that correct . Were talking about 20,000 to 30,000 barrels a day. That may there may be some its not an exact figure but its a significant amount of oil thats being transported every day. Once its sold, it can be more difficult to identify those who are participating in the finance side and the purchase side and the middle man side of oil. But does it seem impossible that we couldnt bomb tankers of oil as they leave the refinery or leave the wells . Why arent we engaging in military action to destroy the oil as it leaves . Why arent we doing that . To anyone on the panel. Mr. Levitt . I dont have the answer to that. Its more of a military question than not. My guess is that if it were that simple, we would be doing it. Theres no one who disagrees with the premise of what you are saying. Sometimes theres small trucks i think that people watch too much tv and think we have complete coverage of everything happening at all times. I dont have the perfect answer to your question. I would say that i am absolutely certain that the approach at treasury is not lackluster in the least. People are working very, very hard on these issues. Its the nature of the problem that they are facing. If what Congress Really wanted them do is designate 40 people, we could do that tomorrow. Im not saying that. Were moving large quantities of oil. We have drones in the air. We have air superiority. That we cant take that out is concern. Were not dealing with a small terror network. Were dealing with large amounts of money. I would imagine its easier to trace large amounts than a few Million Dollars here and there. Where he talking hundreds of millions of dollars . Correct. While i would just challenge the idea that we have complete coverage at all times. Its better asked to a military person. I want to switch to another topic. The United States and turkey are leading an initiative within the Financial Action task force. You are aware of that . Is it fair to say that turkey was just removed from the gray list from that task from that task force . Thats right. That was a lot of treasury and other work to get them listed and then to get them to the point where they can be delisted. We dont have a choice as to who sit on the borders of syria and ir iraq. If you can get turkey to get off the list but now to be helpful which isnt a favor to us. This is their border. We need to sit on them very carefully. So looking at turkey, kuwait, iraq, qatar, are we applying adequate pruessure to get them o engage on the finance side of isis . I think theres always more that can be done. One of the points that i made in my written testimony is i think that there has been ineffective or inadequate use of the bsa Enforcement Actions. They can impose civil fines on banks not complying with the regulations. With respect to Counter Terrorist financing, treasury has done a good job on anti Money Laundering side. With respect to finding banks, theyre not in compliance with the terrorist financing regulations. Ive only identified two banks in the last ten years. Those include the arab bank and the doha bank from qatar. I think we can do treasury can do a better job in that area. Thank you. Time of the gentleman has expired. The chair recognizes the gentleman from california. Isis rules territory and extracts money from the territory thats probably the biggest source of revenue. The lights are on in mosul, but electric electricity continuity is shoddy in many of iraq. Before there outbreak, a lot of the electricity for mosul came from the mosul dam. Is that still providing electricity to those living under isis . Does anyone have an answer . Is isis collecting money from the people who receive that electricity . My understanding is that the dam is not under their control. Not money from any of it. They couldnt control the dam. How are they getting the electricity in. The government that controls the dam is allowing electricity to go into the city because there are citizens who live there. Thats basically the point. The electricity goes into mosul, isis collects for that electricity. I dont know that that last part is true. Well, we do know that they are in a position to collect for the electricity. We know theyre able to tax for anything they want. For the air they breathe or anything else. When we were serious about world war ii, we didnt provide electricity or food or anything else to the people of france when they lived under nazi occupation. Yet you are saying the Iraqi Government is providing electricity to mosul. Is the Iraqi Government being paid for that . I dont know. It supports the economy of mosul and other areas under isis control. Isis taxes those people. Its very hard to wage war if you supply strategic assets to the to areas under enemy control. I have never seen that done in a war in the past. I hear your point. I say we are short of world war right now. If you want one sure way for the Central Government in iraq to go even further to losing the support of more of their constituencies, deny electricity to iraqi citizens who let me get this. You supply the economy under isis control. Isis then taxes that economy and thats did we lose the hearts and minds of those who are resisting nazis because we not only did not provide free food or electricity to the people of france, obviously electricity wouldnt have worked but food, but in fact, we prevented food imports in france . Didnt we retain the support of the civilian population under nazi occupation . Is there any other war you can point to where free electricity goes from one side to the other . Again, unless you have information i dont know its free electricity. I dont know if theyre taxing electricity. This say deeply sectarian war more than anything else. So the further you make divisions between the sectarian communities in iraq, the worse its going to be. So you think you are for a policy of supporting the Strategic Elements of the economy under isis control . Thats certainly i think you know thats not what i said. What . I think you know thats not what i said. You can clarify for the record in writing what your position is. Now, i guess that would also apply to petroleum. If you are in favor of the lights being on in mosul, then people ought to be able to drive. We are preventing them from exporting oil. Have we done Everything Possible to prevent them from producing enough oil for the civilians under their control . Professor . Again, i think this is as we have discussed, a very important source of income for im not talking about exporting. Im talking about providing for the millions of civilians under their control. I dont think it has been a priority. I dont think it has been a focus. Turning off we did not hesitate to bomb oil fields during world war ii. We did not think that making sure that the people of france could drive around paris was essential to retaining the support of those civilians. The idea that there would be people driving civilian cars in mosul that somehow the tanks captured by isis would not have obviously, a lot of this hearing is focused on the oil exported by isis. But isis has no shortage of oil for its own military operations and even for the civilians under its control. I yield back. Gentleman yields back. The chair wishes to to anno that we will clear the remaining three members who are in the hearing room then well adjourn the hearing. Chair recognizes the gentleman from virginia, mr. Hurt, vice chairman of the Capital Markets subcommittee. Thank you, mr. Chairman. I want to thank the witnesses for providing testimony today. I represent virginias fifth district, and i can tell you that most of the people that i represent have concerns about the way this administration has approached this crisis in syria, in iraq, and i think that theres a lot of concern that the administration was either didnt know or ignored critical information that could have prevented us from being in the situation that we find ourselves. With that said, i was interested in the testimony of each of you as it relates to the hard work that goes into identifying those who should be subject to the sanctions that are allowed by u. S. Law and law of other countries, and it strikes me that that information has to be gathered really on the ground and is has to come to treasury through, again, department of defense and intelligence agencies who are in the business. And so i guess my question is is after listening to undersecretary cohen for two hours, i came away with a little concern that maybe he is not treasury is not at the table as much as he indicated that it was, and i wanted to start with you, dr. Johnson, and then maybe get comments from the other two witnesses. But my question is this, is secretary cohen eindicated he was, i think in his words, at the table. There were a lot of questions he couldnt answer and perhaps thats the nature of an open meeting like this in an unclassified setting, but i do wonder whether or not he is getting the cooperation and the precise information about these targets from intelligence agencies and from the Defense Department. And is he getting what is treasury getting what it needs it be able to make these decisions and impose these sanctions . And secondly, if not, what can be done to make sure that treasury is at the table . Because i think we all agree those of us sitting here today that the, you know, stopping the financing is extremely important. So, dr. Johnson, if i could start with you . So on the first point, first part of the question, i think its hard to say the extent to which hes at the table for any given decision, but my sense is that the treasury has done extremely well in working with interagency partners to include the department of defense and various parts of the Intelligence Community to get the capabilities that it needs to make the impact thats desired for a policy outcome. Why do you say that, though . Can you explain that . So, since the i mean, since 9 11 and the realization that terrorist financing really matters and that to disrupt terrorist networks and terrorist attacks, going after their financing is really a useful instrument to have, you know, among the various tools that we have. Treasury couldnt do it alone. Didnt have the capacity and its worked successfully with interagency partners in iraq, among other places, during the second war. But i think that for the purposes of the current treasury effort, its still a young effort, and i think that really their programs and approach is kind of still developing, and i think that well see more as the policy becomes clearer and kind of the overall posture and footprint that the administration wants to have becomes clearer. Treasury role and the interagency role thank you. Just briefly, we only have a few seconds, but just, the question is, are they getting enough information . Are they at the table . And if not, how do we what can we do as congress to help that out . I think the portion where mr. Cohen was saying that hes at the table, he couldnt answer the question, was on military strikes. I dont think they are at the meeting where specific targets were being selected. Not only are they at the meeting at the senior level, his level, assistant secretary level, but treasury now has its own office of intelligence and analysis which i once helped run. And because of that, theyre not only getting information from they are actually part of the Intelligence Community in every way. Not that theres not enough effort, not enough people at the table, but developing the intelligence takes time. Excellent question as to why were only developing that now. Thats a very strong question. The interagency structure, others are located in treasury, vice versa, means theyre at the table. Time of the gentleman has expired. Chair recognizes gentleman from pennsylvania, vice chairman of oversight subcommittee, mr. Fitzpatrick. I thank the question. I have a question for dr. Levett, witnesses who may want to answer, about the mobile refineries. What do they look like . More importantly, where are they coming from . Whos manufacturing them . How are they delivered to the regions where the oil fields exi exist . Id love to know that, too. I think its quite clear these were there already. Not something thats suddenly been imported into iraq from someplace. Its a cape blt theyve had. Apparently theyre relatively low tax, so a very small refinery put in the back of a truck. More than that, i dont know. Do you believe theyre manufactured in that region or being imported from somewhere else . My understanding is this is something that is slapped together and so its being put together by, you know, people right there. I dont get the sense that this is something thats being imported. And to the extent that im wrong, that this is something more sophisticated that needs to be imported, my sense this happened some time ago. This is stuff thats already been there in iraq. Once the oil is refined, youve testified that this assad regime is purchasing some of that oil. Some of it is being smuggled into the southern regions of turkey where you side the price of gasoline is higher than we would expect here or you would see in yaueurope. If youre purchasing barrels of oil with 30 or so a barrel, reason to know that this may be elicit oil, are we doing enough, either treasury, United States, or intelligence agencies, to determine who the middlemen are purchasing it at 30 a barrel . Thats exactly what treasury are doing, identifying those middlemen. Thats i think what undersecretary cohen was referring to and what i discussed more explicitly in my testimony. I think theres also a significant, diplomatic push to get the turks to do more in southern turkey. People know that this is elicit oil. They really dont air. Oil costs so much there. People have been for years putting, you know, basically garden hoses across the river and air pumping oil from the syrian side to the turkey side. Theres lots of ingenious ways that this is being moved and theres a market for it. One of the concerns that i have for the banks that are helping move the proceeds, the profit from the sail le of the s oil. That money is not being transported in shoeboxes and placed under somebodys mattress. That money has to be entering into the Financial System at some point, and i think we need to do a better job. Department of justice, department of treasury needs to be doing better job or intensify its efforts, let me say, intensify its efforts to identify the Financial Institutions that are knowingly receiving and transferring isisrelated funds. Where are the gaps in the system, then . One of the gaps could be the fact that some of that money may be going to iraqi banks. I think principally foreign banks, and, of course, the u. S. lack of control over foreign banks. Banks in qatar, banks in iraq. Thats the difficultfy. The same time, if those banks have u. S. Branches in the United States, we do have control over those, so there would be an opportunity where we could exert greater leverage with respect to the u. S. Branches to ensure that the foreign banks arent being used to move isis oil money. Nothing further. Thank you. Chairman yields back. The last member to be recognized will be the gentleman from north carolina, mr. Pittinger. Thank you, mr. Chairman. Professor, in your testimony, you stated that there were only two banks who had violated our bank secrecy act. The arab bank of jordan and the bank of new york. Heard correctly. Thats just over the last ten years 37. Is that as a result of our lack of past to track these focapaci folks or others that are complicit that we havent been successful in tracking . Sfwlaps the questio thats the question. Has done a fairly good job in terms of sanctioning banks that do not have compliant Money Laundering regimes. With respect to financing it doesnt seem to be a priority, and i wonder is that because of a lack of resources, personnel, maybe theres not enough bodies to bga