expansion of isis in the middle east. after that remarks by the israeli prime minister benjamin netanyahu. next a look at u.s. strategy against isis. thursday david cohen, the undersecretary of treasury for terrorism and financial intelligence outlined his agency's work to attach the terror group's funding sources.

this hearing of the house financial services committee is three hours. >> the committee will come to order. the chair will declare a recess at any time. before we begin, if you think you are in a strange room, you are. we did not change the portraits, as i have announced previously to the committee. our hearing room, i think, is the last hearing room in the raburn building to receive a sound upgrade and other modifications to make the room ada compliant. as a reminder to all members, we will be a no maddic tribe between now and theoretically the end of march.

we hope that doesn't mean mid-w mid-wmid mid-may. and we will take whatever committee room our friends will allow us to have. so if you see chairman shoouser on the floor, thank you for his kindness in allowing our committee to use his committee room. this hearing is entitled terrorist financing and the islamic state. i wish to advise members who are unaware we have two panels today. we also have organizing meetings for the 114th congress that are ensuing. so we are going to release the administration witness, secretary cohen, at noon. we will convene the second panel at that time. then the hearing will be gavelled down at 1:00. please know this will be our first hearing on this vitally important topic. it will not be our last.

so members who don't have an opportunity to ask questions, if need be, we can call the witnesses back in the future. and at least for those on the republican side of the aisle, once we have the second panel begun, wherever we last left in the cue, those who didn't have an opportunity to ask questions, we'll start with you on the second panel. i now wish to recognize myself for one minute for an opening statement. the 9/11 commission estimated that al qaeda's brutal evil attack on 9/11 cost the terrorist half a million dollars. so terrorists were able to murder 3,000 of our fellow countrymen and inflict immeasurable suffering upon our nation. today we face another terrorist enemy for which a half a million dollars appears to be pocket

change. organization that reportedly raises between $1 and $2 million a day. and unlike al qaeda and other terrorist groups with which we are familiar and rely mainly on private donations in spate sponsorship to fund their activities, isil is internally financed rather and apparently is sitting on assets of almost $2 billion. so today's hearing continues this committee's ongoing efforts to ensure our government is doing everything possible to stop the islamic state and other terrorists from using the global financial system to pay for their evil activities. fighting the financial war against terror will demand constant innovation and improvement. the tools we have use d in the past may not be suitable for the future. i look forward to hearing from the witnesses on what may be necessary to upgrade and improve

our capabilities to starve the terrorists of the money they so desperately need to carry out their attacks. i will now recognize the ranking member for three minutes for an opening statement. >> thank you very much, mr. chairman, for scheduling today's hearing. i would like to thank undersecretary cohen and each of our other witnesses for being here today. i'm looking forward to hearing about the administration's efforts to degrade isil's financial capability and to review the effectiveness of our current legal framework in deteriorating terrorists and money laundering known as isil or isis is an incredibly violent organization that has shown a particularly callous disregard for human life for shocking and brutal tactics that include beheading, mass murder and rapes

and more recently allegations of chemical weapons use. the group is tremendously destabilizing force across large swaths of iraq and syria and the brutal campaigns have approximately u drawn the condemnation appropriately drawn of the broader international community. in addition to the horrific massacres, kidnappings and decapitations, officials believe that isil is one of the richest terrorist groups to ever exist with estimated assets in access of $1 billion. unlike most other terrorist groups, which tend to rely heavily on foreign sponsors, isil generally raises funds internally limiting available to the treasury department to cut them off. from the formal financial system regardless. the ability to sanction and block assets remains vital to ensure that over the long run

the united states and our allies can shut down any funds that are tied to elicit oil sales, extortion and kidnapping for ransom. as we make progress in curtailing isis's internal funding schemes, it may be forced to rely more heavily on types of funding that would most likely have to flow through the formal financial system. to guard against this and all other efforts to finance terrorist activities, treasury, our financial regulators, the department of justice as well as congress must work diligently to strengthen the enforcement and deterrent value by over o of our aipt money laundering laws. due to concerns that the department of justice and regulators have not met the tasks of holding banks and their executives sufficiently accountable for blatant violations of law designed to staunch the flow of funds to

terrorist groups, i join with my democratic colleagues earlier this congress to introduce a legislation that would close loopholes, encourage the flow of information related to elicit activity and strengthen powers to hold bank executives accountable for their role in safeguarding our national security among other things. i hope that as part of this committee's discussion of the adequacy of international banking policy, we take a hard look at the proposal that democrats have put forth, but has yet to be considered by this committee. i yield back the balance of my time. >> the chair now recognizes the chairman of our capital market subcommittee, the gentleman from new jersey, mr. garrett for one minute. >> i thank the chairman for holding this hearing today. isis inherits the claim to the evil legacies of senseless brutality and inhumanity.

if given the opportunity, isis would try to harm americans here in the homeland. as a member of congress, who represents a district across the river what once was the twin towers, i know we cannot be cavalier about security threats such assist partnerships our commander-in-chief hasn't appreciated this. i'm concerned how seriously president obama has taken this threat. so i look forward to the hearing and witnesses. i hope to get a better understanding of what has been done and what must be done to not only to degrade but actually to eliminate this terrorist threat. thank you, mr. chairman. >> the chair now recognizes mr. sherman for a minute and a a half. >> thank you, mr. chairman. i spent substantial amount of time on these issues at our terrorism subcommittee over on foreign affairs. we have learned that qatar is a

major source of funds, both at the governmental level but also allowing citizens to donate to hamas and isis. isis is now much more internal. there are those that attack the president's who have an oversimplistic view of the situation. ist cyst evil, but many of isis's enemies are just as evil and more dangerous than isis. given this complicated circumstance, simplistic attacks on policy don't really further our situation i'm concerned that the electricity continues to be on in all the cities that isis controls. this means that either we are providing that electricity from dams under the control of the iraqi government or we're allowing isis to operate

electric generation facilities. either way isis is able to sell electricity because we're unwilling to turn the lights off. we're in a difficult circumstance because the civilians that live under isis's rule are hostages and to some extent supporters of isis. but we did not hesitate to bomb targets that occupied europe and can't hesitate to bomb targets in isis-controlled northern iraq and eastern syria. finally, we have learned that the control of the new york fed and its ability to clear dollar transactions is perhaps the most powerful sanction that we have against terrorist states like iran and i'll be interested to see whether that would play a role. it has brought iran to the point they are willing to pretend o to negotiate with us. i yield back. >> the chair now recognizes the vice chairman of the

subcommittee, the gentleman from pennsylvania, mr. fitzpatrick for two minutes. >> i thank you, mr. chairman. this past month i had the opportunity to travel to the e region to investigate terror financing at meeting in qatar and turkey with the department of treasury officials to roubd out my understanding of terror financing and specifically the threat posed byist uist. i look forward to working with my colleagues on this committee to provide oversight over the government's response to isis and ensure that we have all the tools necessary to meet this unique challenge. isis is an enemy unlike any oh. they have their roots in al qaeda and iraq, they have not only learned from previous experiences, they have evolved and not just an organization committed to acts of terrorism but have designs on establish. ing their own state. the structure creates a unique challenge. for one of the means that we

have traditionally employed to combat terrorist threat, which is go after their money and resources. this mission to degrade and defeat isis demands coordination. our national security transcends all other and i look forward how we can work together to protect the american people. i yield back. >> the chair recognizes mr. lynch for a minute and a half. >> thank you very much, mr. chairman. i want to thank the secretary and the other panelists for working with the committee and helping with our work. as co-chair of the task force on anti-terrorism financing along with my colleague mr. king from new york, we have done a lot of work in this area in the traditional sense where we're trying to block terrorist organizations from using legitimate financial system.

this problem presents a different type of issue, where a lot of rev of knew are being generated internally by isis. and its totally different scale. we're talking $1 to $2 a day in terms of their revenue. i would be interested in hearing from the secretary on what we're doing in turkey along the northern border of syria there. i just came back from irbil and look at the situation in northern iraq as well as in turkey. we're concerned about the poorest nature of that border and how it elicits shipments are still being handled both through turkey and parts of syria. so will be interested in hearing

the comments on that. i want to say thank you for the work you have done so far. i think it's been commendable in terms of the work you have done. >> the chair recognizes the gentleman from florida for one minute. >> thank you, mr. chairman and thank you for holding this hearing. i want to thank our panelists for their testimony today. as you pointed out, it costs the terrorists who murdered thousands of zi citizens on 9/11 $500,000 to plan and execute their attack. in a single day, isil is estimated to bring in more than double that amount through elicit business practices. we must dismantle and destroy this terrorist organization before more american lives are put at risk. from selling oilg to taxing and extorting businesses to kidnapping, isil is a criminal organization with numerous resources that have perpetuated

reign of terror across the middle east. i look forward to working with my colleagues to ensure the federal government uses every tool to prevent isil and all terrorist groups from acquiring the funds to reign their terror. i u yield back. >> the chair recognizes the gentle lady from ohio for one minute. >> thank you, mr. chairman and undersecretary and the other panel i panelists. today we're examining the important topic of terrorist financing in islamic tats, specifically how the trigs group known as isil obtains financial resources to further their operations in iraq, syria and the middle east. each night my constituents turn on the news and they find reports of isil's acts and the brutality gejs gejs women aid workers and journalists. this must stop. while the military is providing aid to moderate rebels and

legitimate governments to defeat isil, we must also highlight the efforts of other agencies within the administration and how federal resources may be coordinated to erode and ultimately eradicate i'll u i'll. the u.s. government is combatting terrorist financing, attempting to choke off sources of funding for isil and related organizations. mr. chairman and my other colleagues here, i look forward to working with you because the hearing on this topic not only protects our financial interests, but our national security interest as well. thank you, and i yield back. >> the chair recognizes the gentleman from indiana for one mant. >> thank you, mr. chairman and thank you for calling this important hearing. mr. chairman, islamic state is one of the most well armed and well financed organizations. they are the moegs bar baric as well.

since 2013 they have recruited thousands of fighters from around the world, swept through iraq and syria and killed thousands of innocent people who do not conform to their ways. it's reported that islamic state controlled around 60% of the oil fields in syria, which are bringing in massive daily revenues to fund their operations. one of the most effective ways the u.s. has disrupted terrorists has been to cut off financing limiting their ability to plot and plan attacks. multd pl revenue streams may require new tactics. so today i'm looking forward to hearing exactly how we are identifying and blocking financial intermediaries to keep them in a strong position. is our current strategy working? are allies doing all they can? thank you to the witnesses for appearing today and i look forward to this conversation. i yield back. >> last the chair recognizes the gentleman from north carolina for one minute. >> thank you, mr. chairman, for

calling this critical hearing. the threat seems to be growing and the summer we were told there were about 15,000 soldiers. now between 40 and 80,000 soldiers. our best hope and opportunity appears to me to be to intercept the transport of funds coming from the sale of oil. of course, there's extortion and other means. it does beg the question whether we have enough on the ground to make these interceptions. another area of real opportunity is with software that's available. i met with several times as chairman of the task force on terrorism. many national software companies and with the sophisticated available, i hope that the department is making every effort to utilize the software to engage these funds as they get into the international financial system. thank you.

>> we now turn to our treasury department witness, the undersecretary for terrorism in financial intelligence, a position to which he was confirm ed in june of 2011. mr. cohen leads the department's policy enforce mement rel toir intelligence functions, aimed at identifying and disrupting the lines of financial support to international terrorist organizations. prior to his current service, he held other positions at treasury, practiced law in the private sector. we welcome you, mr. undersecretary, to the committee. without objection, your full written statement will be made a part of the record after your oral remarks. you're now recognized for five minute summary of your testimony. >> good morning, chairman, ranking member waters and -- >> could you pull the microphone a little closer? >> certainly. good morning, chairman, ranking

member waters, distinguished members of the committee. i thank for the invitation to appear before you today to testify on this very important topic. i will focus my testimony this morning on the treasury department's efforts to undermine isil's financial strength as part of the administration comprehensive strategy to disrupt and defeat isil. we're determined to defeat isil not just because of its brazen atrocities, but also because it threatens core u.s. interests. isil threatens american personnel and facilities, it threatens our regional allies and if left unchecked, it could pose a direct threat to the u.s. homeland. that's why under the leadership of president obama, a broad coalition of more than 60 partners has come together to stop this threat. isil has been grabbed the world's attention for its brutality but also for its substantial wealth. so i'd like to outline how we

are focused on undermining isil's foundation. our work is one of several kpli rimt ri lines being taken by the coalition. these include military operations and training, additional humanitarian assistance, stemming the flow of foreign terrorist fighters into and out of syria and iraq and exposing the hypocrisy of propaganda. the military components are bolstering our work in the financial foundation. as would the rest of the campaign our efforts to combat the finance iing will take time parks and extensive collaboration. but so long as isil terrorizes the people of iraq and syria and threatens u.s. interest, we will remain committed to degrading its financial strength. our strategy. involves three elements. the first is working to cut off isil east main sources of

funding. i'll ul has raised a significant amount of money from selling oil it extracts from the fields in iraq and syria. from mid-june until e recently, isil's daily oil revenue was $1 million. although it's now likely lower thanks to coalition airstrikes. to further disrupt this market, we are targeting for sanctions anyone who trades in isil east stolen oil. it is true that the oil moves in e elicit networks that are largely outside of the formal economy. but at some point, that oil is acquired by someone who makes use of the financial system and is vulnerable o to sanctions. we are working with our partners as well as with regional companies to clamp down on the cross border smuggling. next isil like other terrorist organization kidnaps civilians to profit from ransoms paid to obtain their release. isil has taken in at least $20

million from ransoms this year. to address this, we are redoubling our engagement with foreign partners as we urge them to subscribe to a no ransoms policy. refusing to pay ransoms not only make s it less likely that innocent civilians will be kidnapped, it deprives terrorists of funding critical to deadly aspirations. isil also takes in some funds from financial supporters and we'll continue to target them for sanctions. we intend to make sure that donations do not become a more significant to isil as we squeeze its other revenues. as the revenue that isil generates from crime and extortion by demanding cash at gunpoint, shutting down this source of funding ultimately will require breaking but treasury has a crucial role to play and that brings me to the second element of our strategy.

restricting access to the international financial system in order to impair its ability to collect funds from abroad and to store, move and use the funds it acquires locally. the ability to use money or fund external operations depends on its access to the banking system. so we are working with iraqi authorities, iraqi banks and international banks and regulator os to prevent isil from using bank branches located in territories where it operates. the third element of our strategy aims to dismantle the financial foundation through targeted sanctions on its leadership and financial facilitators. this will make it harder for isil to conduct commercial activity and also clearly identify who stands behind this evil organization. before concluding i'd like to make one final point. we should not confuse funding with financial strength. while isil is well funded,

terrorist group's financial strength turns not just on its income but also on its expenses and ability to spend money freely. in that regard, isil faces significant financial burdens. paying its fighters and attempting to govern sprawling territory is expensive. and isil does not have the money to meet its costs. as we make progress in diminishing revenue, we will further exploit this vulnerabili vulnerability. thank you and i look forward to addressing your questions. >> the chair recognizes himself for five minutes. my understanding is that the ability to block terrorism funds derived from executive order 13224 issued by president bush shortly after snen part of that executive order certain entities and individuals can be

designated as specially designated global terrorists. i think the initial list has grown from 27 to now 800, which is important because it means that funds in the u.s. can be blocked, u.s. persons and eptties are no longer permitted to do business with those on the list. it is my understanding that so far only four members offist uist have been designated global terrorists by treasury and it is my understanding that these four are not involved with major funding sources of the elicit petroleum trade to the black market. so it strikes me as a little bit of a -- well it does strike me as a low number. can you describe briefly some of the challenges here and what should be the expectation of this committee and the american people going forward? >> absolutely, mr. chairman. as you know, the authority to

impose sanctions on terrorists and terrorist financiers, it's authority we have used in att k attacking the financial foundations of a wide variety of terrorist organizations including al qaeda and isil's predecessor al qaeda in iraq. so we have over the years used this authority to designate in more than two dozen individuals and entities some of whom are in the current manifestation of isil, some of whom are part of isil east ant see dent in al qaeda and iraq. we are continuing to look for opportunities to use this tool to designate these individuals. as you note, it freezes their assets. it prevents their use of the u.s. financial system. but equally importantly, it also has ramifications overseas. >> i understand what it does, but we only have four people on

the list. so is this an intelligence challenge? is it a priority challenge? again, what should be our expectation here? >> specifically with regard to your question on the oil trade, there is work that needs to be done to get better insight into precisely who is involved in that oil trade. is our intel agencies are working day and night to develop that intelligence. we're working with partners in the region as well to help us gain better insight into that. as we identify the individuals who are involved in that oil trade, they are vulnerable under this authority. as i noted in my remarks, what we are particularly eager to identify are the individuals who have some foothold in the formal financial system. because we can designate people who are in syria and iraq who

have no -- >> if i could, my time is running out. i'm going to attempt to set a good example here. besides the question of priorities, we have mentioned the executive order. . is there any other legal authority that the administration is depositing that it needs on a go-forward basis to deal with financing? >> mr. chairman, i think we have the legal authorities that we need. mostly the executive order, we have a host of other authorities that are potentially available to us to address terrorist financing and the financial activity relate odd it. one of the keys to our ability to designate, which is just one aspect of our plan of attack. >>. i understand. >> is to develop better insight, better intel. i can tell you that that work is

underway. we have -- >> the remaining time i have let me get this last question in dealing with intel. my search of the record seems to indicate that there has been really only one significant terrorist finance prosecution by the justice department and as a texan it received a lot of press in my hometown of dallas. but i'm unaware of any other major terrorist finance prosecution. you're representing treasury and not justice here, but can you at least describe the intel sharing between treasury and justice? because again, one significant prosecution seems to be a dearth. >> mr. chairman, i'm not sure there's only been one terrorist financing prosecution. i think, in fact, there have been many -- >> well significant may be a

term of art, so proceed. >> defer to my colleagues at the department of justice, who i understand file an annual report with congress about their activities in prosecuting terrorist financing. in terms of information sharing between treasury and justice, we are very, very closely linked up with justice on a policy level and also on an information sharing level. i think probably the best but by no means the only is our relationship between our financial intelligence unit and the justice department in sharing information that they obtains regarding financial activity that could potentially be used for a whole host of financial prosecutions. >> i have run past my time u. the chair recognizes the ranking member for five minutes. >> thank you very much, mr. chairman. the questions that i have

perhaps are questions that should only be asked in a classified briefing. and so rather than delving into some of the questions that i have about what we have not been able to do, i will simply say this. many of us were shocked and surprised that we appear to know so little about isis when the information finally reached public view. it is inconceivable that we have what we think is one of the best intelligence agencies in the world that isis could have developed this far with sophisticated operations for selling oil and other kinds of things that it's doing without us knowing what they were doing. so without asking the questions

that i would ask in a classified briefing, i would simply ask you, have you been engaged treasury been engaged with the cia and other who is have the responsibility for vejs in ways that we can catch up with how far they have developed and what they are doing? i heard what you said about their inability to spend the money and they are short of the money because of the payouts they have to do, e et cetera. but how can we have confidence in that kind of representation without knowing what you have done to fix the system or to mend the lack of communications that got us to the point. that we are with too little information about isis. >> i don't want to understate

our insight into isil financing on a whole host of areas because i do think we have good information. we need better information, but we are not by any means completely blind to how isil is raising its funds. on the oil transactions in particular, the situation there is that this oil smuggling that isil is now taking advantage of had been going on for quite some period of time. you had people who were stealing oil from iraqi and syrian wells, selling it through the black market that has existed in that part of the world for a long time, but what changed is when isil came in and took over the fields. it became isil that was the beneficiary of this preexisting smuggling network. in years past, when it was not a

terrorist organization that was involved in this smuggling network, it frankly wasn't a high u priority for our intelligence community to understand who was involved in the smuggling of iraqi or syrian oil. it's now an enormously high priority to identify these individuals, but what has changed is you now have isil as the beneficiary because they have control of the oil coming out of the ground. the work to identify external funding networks for isil is something that we have been very much involved in for many years to understand and to take action against the funding networks coming out of the gulf. kw qatar was referenced earlier. we have been engaged over the years to both better understand

the financing networks in the gulf and to take action to cut those funding networks off. so we are working very closely with the intelligence community and other members of the intelligence community so we have the information we need in order to execute the policy. >> i don't want to cut you off, by my time is running out. let me just say that to date, many of us are uncomfortable with the fact that isis has gotten as far as it's gotten, raised as much money as it has raised and is reeking havoc without us having known r more about them. we invest a lot of money in our intelligence operation here many this country and we don't expect to be this far behind because of it. i yield back the balance of my time. >> as ae reminder to state the

obvious, this is an open hearing. a side bar conversation between myself and the ranking member, we anticipate a classified hearing very early in the next congress. the chair recognizes the gentleman from new jersey, subcommittee mr. garrett. >> thanks, mr. chairman. i have had a number of concerns with this administration's approach to combatting isis from the very beginning. the administration including the president has underestimated the threat that isis poses to the region and to the united states. his early on characterization of isis, the jv team, suggests that the president was not informed of the threat. so it's also concerning that the reports that the president missed more than half of his security briefings at the beginning of the administration. so looking to you from your perspective within the department of treasury, do you believe the necessary information is now being

communicated to the president and do you think the information was always being communicated to the president and other senior administration officials over the last year and a half? >> congressman, i don't accept the premise of your question. the president and the national security team as a whole has been focused on the terrorist threat that we see coming out. >> the premise of the question was that the president saw this as not a significant terrorist threat. the president said this was the jv team, meaning there were other more luming issues. that's from the president's comments. so you're saying the president misspoke when he said that it wasn't a problem before and now it's a problem? >> i will always allow the president to speak for himself, but i'm telling you the national security team from the president on down has been focused like a

laser on the threat of terrorism coming from this part of the world and elsewhere as well. >> that's really the question. >> i can tell you that because i have been part of this team from the outset. we have been working day and night to degrade u al qaeda, degrade al qaeda affiliates and as well as the terrorism organizations that have grown up in the turmoil in syria, we are working hard to ensure that we have both the snfgs we need in order to address the financing threats in the way that these organizations are financed. >> just as a se maic because yo used the term to degrade and then eliminate.

has our attention been simply to degrade al qaeda and now isis? or is our intention has been to eliminate them? >> i think i said degrade, disrupt and defeat isil. and -- >> during other military engagements, veterans day, we talked about world war ii. we never said we're going to degrade our enemies there. we said we were going to defeat them. both the president and now you as well say our intentions seem to be to degrade them for a period of time and then take that step. >> the objective is to defeat i'll skpil al qaeda. there's a process involved here that particularly on the financing side officially what we're looking to do is to degrade their access to funding

ultimately to lead to e defeat of this terrorist organization. >> i would hope. >> there's no misunderstanding. >> i assume you consult and coordinate with dod as well. it's my understanding that the u.s. employees threat finance cells to track financial transactions in the middle east. you're nodding yes. it's my understanding these units have been pulled out of iraq as a result of the troop withdrawal. can you explain how the lack of resources hasn't impacted our fight against financing and also within the time we are here, i think the administration is talking about removing them from afghanistan as well. will that have an impact upon your intelligence gathering if that goes forward? >> picking up on the classified supplement to the hearing, i can give you an expansive setting in that setting.

i can tell you that the iraq finance cell that had had existed a decade ago was dismantled when the activity, the fighting on the ground was ramping down but i would like to leave the answer to a cls if ied setting. what we're doing to enhance our intel collection. >> time of the gentleman has expired. the chair recognizes the gentle lady from new york. >> thank you, mr. cohen. isis is the richest terrorist organization on earth and financially sophisticated unlike the other terrorist organizations we have dealt with that raise their money from outside sources. they basically raise it and spend it internally in iraq and syria. and one way to crack down on

them is to crack down on the companies that are financing terrorism. the ranking lady waters and introduced a bill called the incorporation law enforcement assistance act which would require the disclosure of very basic information from corporations of who their benefit owners are. i was pleased in august when treasury proposed a rule to implement many parts of my bill. i would like to know what is the update on this. what is happening with the rule that you put into place? >> congresswoman, you highlight an important issue with the issue of shell companies. the rule that you are referring

to we proposed a final rule in august. the comment period on that final rule actually i think the comment period expired in august. we are in the process of reviewing the comments that i think we received over 120 comments on that proposed rule. i should probably not get into anymore detail on where we are in terms of issuing the rule, but we are deeply committed and have been as a number of years to getting better transparency into the beneficial owner. in the president's budget this year, there was a proposal for legislation that would enhance our insight into the beneficial owners of legal entities at the time they are formed so we would be able to address this in two

ways. both when they open a bank account and also when a company is formed better insight into who the beneficial owner is of a company that's formed. so we are continuing to pursue this very vigorously and -- >> it just seems like common sense to me and something we should have implemented yesterday. and i think that's something we could jointly work on is requiring this and helping you move forward with your rule making more quickly bypassing it in a bipartisan way in congress. secondly, you testified that they are making money off extortion and their territorial gains as they took e over the bank and so forth. one of the ways that we can contain them is to obviously go after their territory. but go after how they can hold on to that territory, which is

huge cars, tanks, infrastructure equipment. have we moved to block their ability to purchase this sanction companies, the materials that they immediate to hold on to geographic areas? >> clearly, one important line of effort to address isil's hold on geographic territory is the defense department's line of activity working with the iraqi security forces -- >> obviously, we support the military, but they also have a procurement system. can e we cut off their ability to purchase cars, tanks -- >> absolutely. >> and are we moving to do that? >> part of our strategy is to deprive isil of access to the financial system. because one way they can try to procure vehicles. >> we could cut off their banks and territories. have we looked at that? >> we have.

and we have worked closely with the iraqi central bank and with the iraqi banks that have branches in the territory where isil operates to ensure that isil does not have the opportunity to use those banks to make payments for whatever reason including the reasons that you cite. >> and then, of course, the third area is to cut off their revenue from the illegal oil sa sales that they are controlling. and they can't all be in cash. it's too much money. you were saying it was like a million a day. now it's down to a million or two a week. what are we doing to cut off the transactions that are not in cash? it's got to be through banks. >> we are working to understand exactly how those transactions occur whether it is in cash or through banks. through banks, we will be able to address that. >> which means we don't know.

>> the chair recognizes the gentleman from texas. >> thank you, mr. chairman. thank you for being here. as you were kind of laying out the plan that treasury has for the counterterrorism financing, i think one of the things that came to my mind was two things. one, how long do you think it will take to get into this plan to the point where we see some diminishing amount of resources go into isil? >> it's a very good question. it's a hard question to answer. we have begun to e see some d n diminishment in revenue from the oil sales. as i noted, they were earning, on average, about $1 million a day over the summer. in particularly because of the

airstrikes, the mobile refineries as well as other military activity, we have seen a decrease in the -- in what we estimate to be the revenue sales from about a million dollars a day to several million a week. there is some progress there. the history of our counterterrorism financing work has been more generally that it is small steps that you can see over time having a real impact. so i don't expect i'm going to be able to come back to this committee a month from now and be able to give you a balance sheet that says okay, this is exactly what isol has today and then a month later show a decrease. i do think that the strategy we're employing will impair isol's access to funding. it will impair their ability to use the funding that they have. and we'll see a real impact on

isis, but it will take a dedicated effort over some period of time. >> now one of the things that came to mind was we almost sounded like we were ramping up this anti--terrorism infrastructure. we have been fighting these terrorists for a long time. so are we now really taking it seriously, or is this a different situation -- i'm not clear as to where we have been and why we are just now i think you know maybe taking this more serious. >> well, we have been working for years on degrading the access of terrorist organizations to funding. whether it is al qaeda, al qaeda affiliate, hezbollah, hamas, you name it, we are working on this including al nusra fronts and al

qaeda in iraq and fronts as well as isol. what we are doing is talking more about the integrated strategy we have to defeat isol and go after its financing. but this is a reflection of a lot of work that has been done over many years. >> now, recently in september isol released 46 hostages like you said -- from turkey. and the turkish president said no ransom was paid. the president of the united states said no ransom was paid. but there are a lot of different ways to compensate for someone. and i think it is kind of outside of isol's pattern here of releasing hostages even though you state they're using hostages to raise money. are you absolutely sure that there was no quid pro quo to

releasing those hostages and isol? >> congressman, recognizing these are open hearings, i think this topic may be better addressed in a closed session. i can tell you it is the u.s. policy not to make a concession or ransom to any type of hostage-shaking terrorist organizations. we are very aggressive in our efforts to ensure that others around the world adhere to a similar policy. we believe that is the best way to protect all of our citizens is for everyone to adhere to no ransom policy. >> final question before my time runs out. what are the metrics that you use to -- in other words you have this plan you use. what are the metrics that indicates okay, we're being successful? >> well, most importantly is we

will continue to get insight into how isol is raising its funds and the ability to use the funds. and we can get extensions on how they feel they're using the financial stress. we do get information on the financial -- wherewithal of these organizations and we'll be able to track it that way. >> the time of the gentleman has expired. chair now recognizes the gentleman from california, mr. sherman. >> some of my colleagues have talked about the surprising strength of isis. i think instead it is the incredible and surprising weakness of the iraqi government and military, which easily conceded territory, handed over weapons. left the bank vault open in mosul and elsewhere. the problem is the government in

baghdad, we under a previous administration installed mr. nouri maliki, a man whose evil is only exceeded by his incompetence. a man who refused to enter a status of force agreement not only with this administration but refused to enter a long-term agreement with the prior administration that had installed him. and instead, wanted and succeeded in getting american troops out so that he could further oppress the sunnis in the middle of his country. secondly, we talked about how powerful isis is. let's keep in mind, the hezbollah, assad, iran alliance access has par more money and greater ability to carry out terrorist agendas outside the area. we have had discussions of their export and the smuggling of oil.

do we have -- and this comes from the gentleman from illinois, mr. foster, do we have the technology to sample oil that might be on sale in turkey? and say we know what field that oil came from? that came from an isis-controlled field in syria. that came from northern iraq. is that technology available or is oil more or less fungible? >> your question is at the outer edges of my knowledge of oil. but i can tell you this mostly from my work on the iran sanctions, different oil has different properties. it is often possible to tell where oil comes from although i'm also told there are some similarities among fields. i can't tell you with great certainty we'll be able to do that but i believe so. >> we all want to go after isis. the policy issue is do we go

after isis in a way that causes harm to the civilians under its control? as i said in my opening statement we didn't hesitate to bomb occupied europe. if a businessperson of good character and reputation in mosul wants to buy something from europe using the international banking system, a civilian item, do we try to stop that? >> well, congressman, it's -- we obviously would not try to stop a decent citizen in mosul -- >> well, we certainly did in europe, you can't say i want to occupy this area, let's buy food from argentina and ship it over, use the banking system. but you're saying if i need a replacement part for my factory in mosul i can just buy it on

line? >> no, i'm not saying that -- what -- >> do we prevent the honest business person in occupied mosul from conducting civilian transactions? >> well, what prevents most directly the citizen from conducting transportations is isol. and isol's efforts to control that territory. but the use of the banking system to make a transaction coming out of the area as i noted earlier is what we're attempting to prevent. >> okay. you have answered this question, but with two inconsistent answers. if you get an international banking transaction where a civilian business person, not affiliated with isis but located in mosul is moving its investments around on wall

street or is trying to buy replacement parts for his factory is that something where if a bank is involved in that transaction they will be sanctioned? >> it's not related to isol in any way? >> well, except the guy is located in mosul. >> well, there is obviously an intelligence question imbedded in there, do we know this person is or is not affiliated with isol? if he is not affiliated with isol, it is not a sanctionable transaction. >> when we get serious it will be, we did not conduct ourselves in world war ii, we noticed it was nazi territory. i yield back. >> could i just briefly -- our efforts to prevent isol from making use of the banking system would effectively prevent that transaction. but we're not targeting the civilian in mosul who is

currently being dominated and subjugated by isis. those people are dominated as well. what we're trying to do is keep isis from making the transaction -- >> chair now recognizes the gentleman from new mexico, mr. pierce. thank you, mr. chairman, thank you. we -- i appreciate your efforts to create national security and diminish the terrorist threat. are you in the -- realm where you lay out a fairly complex strategy in this report. are you in the rooms where the strategy is being formulated? >> yes. >> on a scale of one to ten when you talk about depleteing the resources say from oil production you would be familiar with the processes and the

targets and things like that? >> in terms of the military targets? >> yeah, you're sitting there, you're fairly comprehensive in this report here, are you in that room is all i'm 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 didn't you stop it this afternoon? you really want to do it, you're 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 don't 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 you're not stopping the oil today, because you can do it. it is well within your grasp. you have the technology and the information. you don't have to sort through banking or track companies. you don't have to find out which people in marseilles are tracking the oil. why don't you do it? >> as you know the defense department has conducted airstrikes. >> you're telling me it is not important, not a number ten on the list of the administration or they would have stopped it today. it doesn't 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 don't just put oil in five-gallon trucks in a tanker truck, you put it in a delivery mechanism. then you don't 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, i'm not a military targeter. it doesn't -- >> it doesn't 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 don't 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 you're 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 hasn't somebody said let's quit looking at insurance companies and financing. who takes the oil. we don't 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 120-ton 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 you're working to limit isol's 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 can't 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 won't be able to entice folks to join them because of the revenue that they generate? >> absolutely, we're 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 we're very much working on with our partners in the intelligence community. >> i know we have to try to weigh these lines. i'm trying to make sure that we don't 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 we're 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 doesn't flow into iraq and syria. >> when you say cut down on the source you're 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 we're 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. we're looking for the key there so that we can disrupt that financial activity. >> right, what makes isis unique is the ability to self-finance their terror interests. they use the oil -- this is different from other terror organizations to fund their recruitment, their training. they're equipping. and so while we're taking a look at this, why isis is unique and how to deal with that i think you're 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. we've 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 n