CATF Reports Dec. 23, 2015, 3:38pm


In the early days of the Reagan administration, Attorney General Edwin Meese announced a major initiative--seizing the assets of drug traffickers and associates who laundered their funds. The goal was to strip the profits from mainly Colombian cartels, theoretically removing the windfall financial incentives for staying in the narcotics underworld. Results grew from meager beginnings (a few million dollars) seized mainly from drug and money couriers, to an impressive tally of $543 million in 2004. Last year, the total ballooned to $3.8 billion, swelled in part by forfeitures from Wall Street frauds as well the staple of drug cartel and bank money laundering forfeitures.

In response to the 9/11 al Qaeda attack, Congress passed the USA Patriot Act (Patriot Act) which enhanced legal tools to pinpoint and seize funds destined for terrorists. In the leading example of the new law’s bold reach, a Hamas front organization known as the Holy Land Foundation lost $12 million in a major Justice Department forfeiture victory. The funds were later used to satisfy a civil judgment against Hamas brought by the families of Israeli terror victims.

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Is it fair to question the impact of enhanced Patriot Act provision because of the lofty expectations set by its Congressional drafters? Absolutely! The “teeth” in the Patriot Act consists of tough sanctions such as Section 981 (a)(1)(G) that authorizes forfeiture of all assets of anyone engaged in terrorism, any property affording any person a "source of influence" over a terrorist organization, and any property derived from or used to commit a terrorist act. This strong provision clearly encourages the reader to expect significant sanctions to follow, but the record suggests that has not been the case--with few eventual asset seizures resulting. The next question is why?

The answer may lie in the Justice Department’s view of the practicality of relying too heavily on Patriot Act forfeiture provisions. For example, the Department’s Asset Forfeiture Strategic Plan: 2008-2012 mentions ”terrorism” only once—and in a transmittal letter. Five specific reasons appear responsible for misplaced confidence in asset forfeiture as a potent counterterrorism weapon. First, the law’s drafters may have rushed enhancements to existing money laundering legislation—when in fact, terrorist finance is often a parallel phenomenon and not one that evolved directly from traditional money laundering. Use of antiquated Hawala systems for transferring value, smuggling cash across borders in car trunks, and a preference for small money remittances via Western Union—together combine to frustrate detection. Overall, the result is that vulnerable assets became much harder to pin down as the destructive requirements of small cell and lone wolf terrorists have become low-dollar phenomena.

Second, the more substantial financial assets that support terrorism often reside in foreign countries that are hostile to cooperation with U.S. agencies, placing candidate terror assets effectively beyond the reach of our toughest post-9/11 laws. Add to that the burgeoning reality of state sponsored terrorism in Iran and ISIL-controlled regions in Iraq and Syria, and even expert the most FBI investigations cannot subject monetary assets to the long arm of U.S. law. Also, increasing levels of government chaos in high-risk nations like Yemen, Syria, and Libya likely increase the problem’s complexity by a full order of magnitude.

Third, certain indigenous terrorist groups like Boko Haram in Nigeria and al Shabaab in Somalia, rely on massive numbers of small cash transactions like the sale and extortionate taxation of charcoal fuel to generate just enough money to buy guns, explosives, and field provisions—and those sales are classical “off the books” transactions rendering recordkeeping impossible to reconstruct and proceeds virtually impossible to trace and interdict.

Fourth, currently the international community is emphasizing “crippling” ISIL financially with priority targeting of its greatest financial assets. Typically, they are black market oil revenues parked in bank accounts in captive countries, totaling tens of millions of dollars. Unfortunately, evidence of this “high level focus” at the expense of lower level financial reality, unfolded in the latest U.S.-led UN strategy to strangle ISIL financially. Even if seizing and otherwise interdicting those financial assets were to succeed, ISIL retains the capability to ramp up its kidnappings for ransom and widespread wage “taxation” in vanquished areas, to keep their violent strategies flush with cash.

Fifth, a significant portion of vulnerable assets repose in identified bank accounts and are otherwise assets under the control of known terrorists or their co-conspirators. Those assets have been frozen under U.S. Treasury Office of Financial Assets Control (OFAC) provisions intended to deny terrorists and other criminals (e.g. drug dealers) access to their funds. Although the percentage of total funds available to terrorists is not openly known, it is safe to assume that OFAC (which works closely with our intelligence community) has effectively targeted the majority. Therefore, additional monies subject to forfeiture represent residual “working capital”, making their seizure for most of the above reasons difficult if not impossible.

Clearly, the worldwide community of civilized nations must unite more forcefully to stanch the flow of terrorist dollars—but to succeed requires a dual strategy that not only proceeds from the “top down” but also starts from the “bottom up”.

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