Friday, December 2, 2011

DISCLOSED: How the US Treasury Uses Financial Tactics to Destabilize Regimes

Assistant Treasury Secretary Daniel Glaser spoke today before the Washington Institute for Near East Policy and with remarkable openness disclosed the financial activities conducted by Treasury to destabilize regimes throughout the "Arab Spring". EPJ has obtained a copy of the speech and reproduces below key excerpts. My comments are in italics.-RW

In previous decades, it would have been unheard of for a Treasury Department official to be asked to speak before the Washington Institute to discuss the U.S. Government’s and the international community’s response to such events. Yet throughout the Arab Spring, the Treasury Department has been at the forefront of the international community’s response to these challenges on two fronts.

Treasury has, of course, been at the center of U.S. efforts to marshal international assistance and support for the transitions underway in Egypt, Tunisia and Libya, and to aid in fostering inclusive economic growth in the region. But today, I’d like to focus my remarks on Treasury’s Office of Terrorism and Financial Intelligence, which has crafted strategies for applying sanctions and other financial measures tailored to the unique circumstances of each situation we have faced. Along with the United States, the United Nations, the European Union, and our partners in Asia and the Middle East have all increasingly turned to targeted financial sanctions in response to repression and violence. And in a truly remarkable development, both the Arab League and Turkey have in recent days announced far-reaching measures of their own, making financial pressure the centerpiece of their respective efforts to end the bloodshed in Syria.

Before I turn directly to a discussion of the Arab Spring, I’d like to step back to offer some of the context in which we at Treasury’s Office of Terrorism and Financial Intelligence view these events. We have witnessed a dramatic change, globally, in the way financial measures are integrated into the international security toolkit. And these developments – the international community’s embrace of targeted financial measures, and the effectiveness of those measures – are to a large extent the result of the Treasury Department’s efforts over the past decade to create an institutional framework and to develop a strategic model for using financial tools to advance national security objectives.

[Note: I wonder if such skill at tracking financial transactions will ever be used against the American people to "advance national security objectives"-RW]

Within the Treasury Department, the mission of the Office of Terrorism and Financial Intelligence, known as TFI, is to marshal the Treasury Department’s policy, enforcement, regulatory, and intelligence functions to sever the lines of financial support to international terrorists, WMD proliferators, narcotics traffickers, and other threats to our national security. We seek to meet this responsibility by striving to achieve two overarching goals:

First, to promote financial transparency by identifying and eliminating vulnerabilities that make the domestic and global financial system susceptible to abuse by illicit actors.
Second, to identify, disrupt and dismantle the financial networks that support those who threaten U.S. and international security.

Promoting financial transparency is the key to creating a rules-based, global financial system that is hostile to illicit finance. Our efforts focus on both the formal and informal financial sectors, in both the U.S. and internationally. Indeed, a great deal of our work is aimed at strengthening global standards and facilitating implementation of anti-money laundering/counter-terrorist financing regimes, also known as AML/CFT, in countries around the world through the Financial Action Task Force or FATF, and other multilateral bodies.

In conjunction with our effort to promote financial transparency through a global AML/CFT architecture, we have also developed a strategic approach to target the financial networks of those who support terrorists, engage in WMD proliferation, and foment regional instability....

We first began to put this strategy to the test in 2005 and 2006 against North Korea and Iran, respectively. Beginning with unilateral targeted financial measures, we launched an unprecedented effort to engage the private sector and raise its awareness to the risk of doing business with these jurisdictions. And, most important, we engaged with our international partners to build a multilateral coalition that supports our strategy of financial isolation.

Today, as a result of this multi-front, multi-year campaign, Iran and North Korea have been almost entirely cut off from much of the world’s largest financial sectors. Iranian banks have been deprived of much needed access to financial services in Europe, Asia, and the Middle East, and the Iranian government struggles to manage its economy in the face of ever-tightening financial sanctions.

These two case studies demonstrated that we could craft financial strategies tailored to the unique circumstances presented by particular international security challenges. The success of our targeted measures was linked in no small part to the less public but no less significant systemic work of promoting financial transparency and building AML/CFT regulatory regimes. And the work that we did in both areas – targeted and systemic – laid the groundwork for the international community’s response to the Arab Spring...

Tunisia and Egypt

In the early days of the Arab Spring, we witnessed the rapid growth of popular movements calling for the ouster of undemocratic rulers in Tunisia and Egypt. These popular movements were able to achieve relatively quick leadership changes. In these scenarios, our goal was to ensure that the outgoing regime elites did not undermine the political transition by looting their nations’ treasuries.

To achieve this, we engaged our interagency and international partners to apply a comprehensive anti-corruption strategy to identify illicit holdings, protect against illicit asset flows, and assist in repatriating assets stolen from the people of Tunisia and Egypt. The strategy relied on and benefitted from our prior experience in leading global efforts to trace and repatriate Iraqi assets stolen by the former Hussein regime, as well as longstanding efforts to create a global framework for combating kleptocratic asset flows. And, again, the strategy also relies upon our longstanding efforts to develop a global framework for the implementation of AML/CFT standards – which includes a focus on specific risks of foreign corruption, such as by highlighting the need for financial institutions to apply enhanced due diligence against foreign politically exposed persons and to recognize the potential for asset flight on behalf of deposed regimes...

Treasury’s Financial Crimes Enforcement Network – or FinCEN – issued advisories to warn U.S. financial institutions of the possibility of asset flight by senior Egyptian and Tunisian government officials. The advisories called for enhanced due diligence and scrutiny of transactions that could possibly represent misappropriated or stolen state assets. Treasury shared its advisories with counterparts in other financial centers, many of which took similar actions, globalizing the effort to identify, restrain and repatriate proceeds of corruption...

In the case of Libya, we faced a fundamentally different challenge. Our primary goal was not to prevent an ousted regime from looting the nation’s coffers, but rather to deprive a sitting regime of the resources it needed to sustain a campaign of violent repression. Our aim was to increase the financial pressure on the Qadhafi regime and hasten its downfall.

As we deployed our financial tools to isolate the Qadhafi regime, we were fortunate to be dealing with an unusually favorable set of circumstances. We had broad international support for sanctions, a strong mandate from the United Nations Security Council, and a NATO-backed military effort. Following closely on the heels of President Obama’s issuance of Executive Order 13566, imposing broad financial and other sanctions, the U.S. and its partners secured the adoption of UN Security Council Resolution 1970, which required all UN member states to freeze without delay the assets of Qadhafi, his family, and key individuals and entities affiliated with the regime, and to prohibit transactions with them.

The effect of these measures was magnified by the fact that the Qadhafi regime was relatively well-integrated into the international financial system, with a large amount of wealth held in foreign holdings and investments susceptible to the application of sanctions under U.S. and European jurisdiction. Just three days after the President issued the Executive Order, more than $30 billion of Government of Libya assets had been frozen under U.S. jurisdiction. Since March, this total has swelled to more than $37 billion.

This combination of factors – speed, coordination, and comprehensiveness – led to the implementation of one of the most successful sanctions regimes ever put in place...

The implementation of financial sanctions against Libya was not, of course, without its challenges. The principal challenge we faced in this context was facilitating and coordinating the effective implementation of sanctions in a sophisticated global financial system where the assets of concern were largely held in complex capital market arrangements across multiple financial centers. Treasury’s expertise in implementing targeted financial sanctions and its relationships with the private sector and with international counterparts were instrumental in ensuring effective global action...

Syria presents a more complicated set of challenges. In Syria, our policy goals are largely the same as in Libya – to deprive the Assad regime of access to resources that can be used to fund its violent oppression and ultimately to hasten Assad’s downfall. However, in the case of Syria, our challenge has been to develop and advance a strategy to apply financial pressure to the Assad regime in the absence of a UN Security Council resolution. Such a strategy must combine effective unilateral action with strategic outreach to international counterparts and the private sector...

President Obama has signed three new Executive Orders since March, each serving as a response to Assad’s escalation of violence. E.O. 13572 targets individuals and entities responsible for human rights abuses in Syria. E.O. 13573 expanded this further by targeting President Assad and other senior regime officials. In August, the Administration took the strongest step yet with E.O. 13582, which prohibits transactions between U.S. persons and the Government of Syria, bans the export of U.S. services to and new investment in Syria, and targets a crucial revenue stream for the Syrian government by banning all dealings by U.S. persons in Syrian-origin petroleum products. In addition to these new measures, we continue to hold Syria accountable for all of its illicit behavior and took the important step of designating the Commercial Bank of Syria as supporter of WMD proliferation under Executive Order 13382.

These domestic measures have helped deny the Assad regime access to the resources it needs to continue financing its repression. But the defining element of our Syria strategy – and what has made our strategy effective – has been our close coordination with our partners in Europe and elsewhere and our aggressive outreach to expand the coalition of countries willing to take complementary action...

Without question, U.S. and EU financial measures have successfully undermined the financial underpinnings of the Assad regime. Our actions against the Commercial Bank of Syria have helped to constrain the Assad regime’s primary facilitator of foreign transactions. More importantly, since the EU previously accounted for more than 90 percent of Syria’s crude exports, U.S., EU, and Canadian sanctions on the Syrian petroleum industry have effectively eliminated the Assad regime’s revenue from the petroleum sector, which accounted for one third of its total revenue prior to the imposition of sanctions...

We have arrived at this current state of affairs in no small part because of the U.S. Government’s persistent engagement with its foreign partners. The Treasury Department has played a leading role in emphasizing the power of financial measures, in particular in the Syria context...

As we continue to respond to developments across the Arab world, we stand ready to take action where needed, and will be ready to apply financial measures in support of our national interests.

We continue to witness the uncertainty of a tumultuous, historic time, however, one thing is certain: Financial tools will continue to play a central role in our nation’s and the international community’s response, and we will continue to work multilaterally where possible, and unilaterally when necessary, to achieve our policy aims in the context of the historic changes sweeping the Arab world today...

[Absolutely frightening is the only response I have to the role the United States Treasury has played from a financial perspective relative to the Arab Spring. And I shudder to think what would happen if the Treasury ever decided to turn their financial tools inward against Americans that they deem, for some reason, should be separated from their financial assets for "national security reasons".-RW]


  1. Of course the 37 Billion in seized assets will end up in the pockets of the bankers and their friends. Another reason why alternative currencies that exist outside of normal banking channels (like bitcoin) are needed.

  2. It doesn't take much imagination to see such forces directed at gold/silver holders or their channels, like MF Global.

  3. "And I shudder to think what would happen if..."

    Already in progress. Hope you personally have your taxes in order.

  4. Why is it that drug traffickers are only caught after the fact in spite of all these wonderful tools? Just asking'?


    DAMASCUS, Nov. 18 (Xinhua) -- Thousands of Syrians thronged a main Syrian square on Friday to express support to Syrian President Bashar al-Assad and to express discontent with the Arab League's decision to suspend Syria's membership.

    After Friday's noon prayers, thousands went out of the Umayyad Mosque in the old city of Damascus on a rally titled "The Mosques Are Ours." The participants crossed al-Hamidiyeh market toward Saba' Bahrat Square chanting slogans against foreign interference in Syria's internal affairs.

    A convoy of cars also set off from al-Hassan Mosque in al-Midan neighborhood on a rally meant to show solidarity with the process of reforms announced by President Bashar al-Assad.

    In the coastal city of Latakia, Syrian Arab News Agency (SANA) said thousands of citizens voluntarily gathered near Haroun roundabout condemning the AL decision against Syria.

    In addition to the pro-regime rallies, opposition protests also erupted in northern and central Syria, according to Sham FM radio.