House Terror Financing Task Force Releases Results of Two-Year Investigation

Federal Issues International Department of Treasury U.S. House OFAC Anti-Money Laundering

On December 20, the House Financial Services Committee’s Task Force to Investigate Terrorism Financing announced the release of a report detailing the results of its two-year investigation into terror financing. The report, entitled Stopping Terror Finance: Securing the U.S. Financial Sector, is intended to “serve as a useful summary of the key points illuminated by Task Force hearings regarding the terrorist financing threat, the necessary components of an effective strategy to address such financing activity, and current efforts to combat it.

Among other things, the Task Force took a more granular look at some less well-publicized terrorist financing methodologies, including: (i) the use of trade-based money laundering; (ii) the use of individual and corporate charitable foundations; (iii) the plundering of arts and antiquities by terrorists, especially by Islamic State of Iraq and Syria (ISIS); and even (iv) drug trafficking.

Moreover, as explained by Task Force Chairman Mike Fitzpatrick (R-Penn), the task force “discovered highly critical vulnerabilities” for which it presented several recommendations and called for further Congressional attention. Among other things, the report highlighted a need for:

• Better interagency coordination and resource allocation;
• Better use of and access to information that can identify illicit finance;
• Adding more overseas Treasury attachés;
• Continued attention to helping developing countries fight illicit finance;
• A greater domestic and international focus on stopping trade-based money laundering;
• Development of a harmonized regulatory and examination procedure for nonbank financial institutions – primarily money service businesses (MSB) but also emerging value transfer technologies – to squeeze out illicit finance and provide banks the comfort necessary for them to again widely offer MSB retail account services;
• Development of a whole-of-government strategy to combat terror finance and other forms of financial crimes; Beneficial ownership of corporate entities; and
• Re-animation of the interagency Terrorist Financing Working Group.

Notably, members of the Task Force have already introduced several bipartisan bills aimed at addressing some of the concerns identified in the report, including:

• H.R. 5594, the “National Strategy for Combating Terrorists, Underground, and Other Illicit Financing Act,” which passed the House on July 11, 2016 by voice vote, and requires the President, acting through the Treasury Secretary, to develop and publish an annual whole-of-government strategy to combat money laundering and terrorist financing.
• H.R. 5602, which passed the House on July 11, 2016 by a vote of 356-47, requiring more detailed information to be reported to the Treasury regarding certain types of transactions in a specific area for a limited amount of time.
• H.R. 5607, the “Enhancing Treasury’s Anti-Terror Tools Act,” which passed the House on July 11, 2016 by a vote of 362-45, enhancing Treasury’s anti-illicit finance tools by addressing issues that came up repeatedly in Task Force Hearings.
• H.R. 5603, the “Kleptocracy Asset Recovery Act,” which is sponsored by Ranking Member Stephen Lynch (D-MA), and seeks to establish a reward program aimed at helping the U.S. identify, freeze, and, if appropriate, repatriate assets linked to foreign government corruption, which is often an enabler of terrorism.
• H.R. 5606, the “Anti-Terrorism Information Sharing Is Truth Act,” which is sponsored by Task Force Vice Chairman Pittenger (R-NC) and which seeks to refine “safe harbors” for the sharing of anti-terror information, reaffirming Congressional intent in existing statute to encourage government sharing of terror methodologies with banks to help them better recognize such activity.