the expenses and ability to spend money freely. in that regard, isil faces significant burdens. paying the fighters and attempting to govern territory is expensive and they don't have the monmeet costs. as we make progress in diminishing them, we will exploit this vulnerability. thank you and look forward to addressing your questions. >> the chair recognizes himself for five minutes. secretary, my understanding is that the ability to block terrorist funds derived from executive order 13224 issued by president bush shortly after 9/11 is part of that certain entities and individuals can be designated as specially designated global terrorists. i think the initial list has

grown from maybe 27 to now 800. as you know that's important because it means that funds in the u.s. can be blocked and the u.s. persons and entities are no longer permitted to do business with those on the list. it is my understanding that so far only four members of isis have been designated global terrorists by treasury and it is my understanding that these four are not involved with the major funding sources of this elicit petroleum trade to the black market. it strikes me as a little bit of a low number. can you describe the challenges and what should be the expectation of the committee and the american people going forward? >> absolutely. as you know, the authority to impose sanctions on terrorists and terrorists financiers arrive

as an authority that we have used extensively in attacking the foundations of a wide variety of organizations including al qaeda and their predecessor. we used this to designate in more than two dozen individuals and entities, some of them who necessary isil and some are part of the anti-seedent. we are continuing to look for opportunities to use this tool to designate these individuals. it prevents the use of the financial system. it also has ramifications overseas. >> understand what it does, but we have only got four people on the list. is this an intelligence challenge? is it a priority challenge?

what should be the 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 the oil trade. the agencies are working day and night to develop that and working with the partners to help us gain better insight. as we identify the individuals involved in the trade, they are vulnerable under this authority. we are eager to identify the individuals with a food hold in the financial system. we can designate people who are in syria and iraq who have no.

>> besides the question of priorities, is there any other legal authority that the administration is saying that it needs? on a go forward basis to deal with the financing? >> i think we have the authority we need. mostly we have a host of other authorities that are potentially available to us to address financing related to it. one of the keys to our ability to designate which is one aspect of our plan of attack. it is to develop better insight. i can tell you that that work is under way. we have -- >> on the remaining time i have, let me get dealing with intel.

my search of the records seems to indicate there is only one significant finance prosecution by the justice department and they received a lot of press in my hometown of dallas versus the holyland foundation. i'm unaware of the finance prosecution and i understand you are representing treasury and not justice here. can they describe the sharing between sharing and justice? one significant prosecution seems to be a dirth. >> i'm not sure there was other prosecutions. i'm sure there have been many. >> proceed. >> i understand they file an

annual report with congress about their activities in prosecuting terrorist financing. i can probably -- the best, but by no means the only is our relationship between our financial intelligence unit and the justice department and sharing information that they obtains regarding financial activity that could potentially be used for a host. >> i passed my time. they recognize the ranking member for five minutes. >> thank you very much.

rather than dwelling 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 appeared to know so little about isis. when the information finally reached public view it is inconceivable that we have what we think is the best intelligence agencies in the world. isis could have developed this far with sophisticated operations with selling oil and other things without us knowing what they were doing. without asking the questions that i would ask in a classified briefing, i would simply ask

you, have you been engaged with the cia and others who have the responsibility for intelligence in ways that we can catch up with how far they have developed and what they are doing. 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 got too little information about isis. >> i don't want to under state that to i till financing on a host of areas.

i do think we have good information. we need better. we are not by any means completely behind to how i till is raising funds. the wagz is that this oil smuggling that isil is taking advantage of has been going on for a period of time. you have people who were stealing oil from them and coming it through the black market for a long time. what changed was when irk till took over. that was the beneficiary at this preexisting smuggling.

with that involved and the smuggling of iraq or syrian oil, it is now a high priority to identify the isil beneficiary. they have control over the oil coming out of the ground. the work to external funding that works for isil is something that we have been very much involved in for many years to understand and take action against the funding networks that are coming out of the gulf. they will better understand the financing that works in the gulf and to take action.

we are working very, very closely and the cia and others that we have the information we need to execute the policy. >> i don't want to cut you off. my time is running out. >> to date, many of us are uncomfortable with the fact that isis got as far as it has gotten and raised as much as it raised and wreaking havoc in the way it is doing without us having known more about them. we invest a lot of money and we don't expect to be this far behind ever because of it. i yield back the balance of my time. >> as a reminder to state the obvious, this is an open hearing in 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 gentlemen from new jersey. the chairman of the capital markets subcommittee. >> thanks again. i had a number of concerns with this administration's approach to combatting isis. from the very beginning of the administration and the president under estimated a threat that isis poses to the region and the united states. we know the jv team suggests they were not informed of the threat. they missed more from the briefing. do you think they were always being communicated through the

president and other senior administration officials over the last year and a half. >> congressman, i don't accept the premises 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 of -- >> the premises of the question was that the president saw this as not a significant threat. the president said this was the jv team meaning there were other more looming issues. you are saying the president misspoke when he said that it wasn't a problem before and now it's a problem? >> i will obviously allow the president to speak for himself on this, but i tell you that 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. frankly from elsewhere as well.

throughout this administration. i can tell you that because i have been part of the team from the out set. we have been working day and night to degrade al qaeda and affiliates and as well as the terrorist organizations that have grown up in the turmoil in syria whether it's on the front or isil. we are working extraordinarily hard to ensure that we have both the information that we need to address the terrorist financing threats and the way these organizations are financed. >> just as a semantic point and you used the term that the president uses which is to degrade and then eliminate -- you used the term there. i will bring it up. is our attention been from the treasury's perspective to degrade al qaeda and isis?

our intention is to eliminate them. >> i think i said degrade, disrupt, and defeat isil. >> during other military engagements, we have veteran's day and world war ii, we never said we would degrade our enemies there. we said we were going to defeat them and during the other wars as well, we didn't say we were going to degrade, we said defeat them. i take it that both the president and you as well said it's to allow them to exist for a period of time and take that step. >> can i be very clear? the objective is to defeat isil and al qaeda. there is a process involved here that particularly on the financing side, initially we are looking to degrade the access to funding and ultimately to let to defeat of the terrorist organization. >> i would hope.

>> there is no misunderstanding. >> assume you coordinate with the dod as well. it is my understanding that you employ a threat finance cell to gather on the ground intelligence with the transactions in the mideast. you are nodding yes. the units have been pulled out of iraq as a result of the president's troop withdrawal. can you explain how this lack of resources has it impacted on the fight against terrorist financing and within the time we have here, the administration is talking about removing them from afghanistan as well, the threat finance cells. will that have an impact on the intelligence gathering if that goes forward? >> on the classified subelemepps to the hearing, i can tell you that we are -- the iraq threat finance cell that existed a

decade ago was dismantled when the activity, the fighting on the ground was ramping down. i would like to leave the second half of the answer to the clo t classified setting. what we are doing to enhance intelligence selection. >> the time expired. the chair recognizes the gentle lady from new york. >> thank you. isis is the richest terrorist organization on earth and sophisticated unlike the other organizations we dealt with that riz money fr raise money from outside sources. that is from iraq and syria. one way to crack down is to crack down on the shell companies that are financing

terrorism towards this end last year. ranking lady waters, mr. keene and others on the other side and i introduced i bill called the incorporation assistance act that would require the disclosure of basic information from corporations of who the owners are. i was pleased when they proposed a rule to implement has it been successful and the revenues of what is happening with the rule you put into place. >> you highlight an important issue. the rule that you are referring to with a final rule in august and the president 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 rule. because it's an ongoing rule making. i should not get into more detail on where we are in terms of issuing the rule, but we are deeply committed and have been for a number of years as i know you have. to getting better transparency into the owner of legal entities. i would note that 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. we would be able to address this in two ways, both when they open a bank account, we will have insight into the owner of the

entity at that stage and also when a company is formed, better insight into who the beneficial owner is with the company that is formed. we are continuing to pursue this vigorously. >> it just seems like common sense to me and something we should have implemented yesterday. i think that is something that we could jointly work on that it is requiring this in helping you move forward with the rule making more quickly bypassing it in a bipartisan way in congress. secondly, you testified that making money off of extortion and took over the bank and so forth. one of the ways we can contain them is to obviously go after the territory. go after how they can hold on to that territory which is huge cars, tank, infrastructure and equipment. have we moved to block their ability to purchase this and

sanction companies and the materials they need to hold on to geographic areas. >> clearly one important line of effort to address isil's hold on geographic territory is working with the security forces. >> we support the military, but they also have a procurement system. can we purchase cars and tanks? >> absolutely. >> are we moving to do that? >> part of our strategy is to deprive isil of access to the financial system. obviously one way they can try to procure vehicles, weapons, what have you. >> we can cutoff the banks. 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 say. >> and then of course the third area is to cutoff their revenue from the illegal oil sales that they are controlling. they can't all be in cash. it's too much money. you are saying it's like a million a day and now it's down to a million or two a week. what are we doing to cutoff the transactions that are not in cash. it has to be through banks. >> very brief answer, please. >> we are working to answer how that occurs whether it's in cash or through banks. we will be able to address that.

thank you, chris chairman and secretary thank you for being here. you are kind of laying out the plan that they have for the counter terrorism financing. the question in my mind and they get into the point where we see diminishing amount of resources are going to us. >> it's a good question. it's a hard question to answer. we have begun to see dimini diminishment on the oil sales. we noted they were earning on average about a million dollars a day. over the summer. particularly because of the air strikes. as well as other activity. we have seen a decrease in what

we estimate to be the revenue from the oil sales from about a million dollars a day to several million dollars a week. there was progress there. the history of our counter terrorist financing work, not isil-related, but more generally is that it is small steps that you can see overtime having a real impact. i don't expect i will be able to come become to this committee a month from now and be able to give you a balance sheet that said this is what they have today and a month later show and the think the strategy will impair the access to funding. it will impair the ability to use the funding that they have. we will see an impact on i till as a result. it's going to take a dedicated effort over a period of time.

>> one of the things that came to mind, we sound like we were ramping up this anti-terrorism funding infrastructure. are we just taking this serious or is this a different situation? i'm not clear as to and why are we taking this more seriously? >> we have been looking for years on degrading the access to funding. whether it's al qaeda or affiliat affiliates, hezbollah, hamas or the network. you name it. we are working on this, including al qaeda in iraq which was the predecessor to isil as well as i till.

what we are obviously doing is talking more about the integrated strategy we have to defeat isil and to go after the financing. this is a reflection of a lot of work done over many years. >> in september, isil released the hostages from turkey. the turkish president said they said no pranz om was paid. there was a lot of ways to compensate for someone. it's outside of isil's pattern of releasing hostages even though you state that they are using hostages to raise money. are you sure that there was no quid proquo for releasing the hostages between turkey and

isil? i think this might be a topic better addressed in a closed session. i can tell you that it is u.s. policy not to pay ransom and other type of concession to hostage takers and obviously terrorist organizations. we are very aggressive in our efforts to ensure that others around the world adhere to a similar policy. do you think that's the best way to protect our citizens to adhere to no ransoms. >> before my time runs out, what are metrics that you use to have the plan and the metrics that you using that say this indicates we are being successful? we will get insight into how

they are raising their funds and use the funds and get reflections on the extent to which it feels it is under stress. we get information on the financial wherewithal and we will be able to track it. >> the chair recognizes the gentlemen from california. >> we have talked about the surprising strength of isis. the incredible and surprising weakness of the iraqi government and military which easily conceded territory. handed over weapons and left the vault open elsewhere. the problem is the government in baghdad. we under a previous administration installed a man whose evil is exceeded only by

inthompson tense. a man who refused to enter a status agreement not only with this administration, but refused to enter a long-term agreement with the prior administration that installed him. instead further repressed the sunnis in the middle of the country. we are talking a lot about how powerful isis is. keep in mind the hezbollah assad alliance or axis is far more money. it is a far greater capacity to carry out terrorist actions outside the mideast than isis does. looking at isis's finance, we have had discussions of their export and a smuggling of oil. do we have and this comes from the gentlemen from illinois,

mr. foster, do we have the technology to sample oil that might be on sale in turkey and do we know what field that oil came from. that came from a controlled field in syria. is that technology available or is oil more or less functioning? >> your question is that the outer edges of my knowledge of oil, but i can tell you this mostly from my work on iran sanctions. different oil has different properties. it is often possible to tell where oil comes from oil i am told that there is a reason for that. i can't tell you that we will be able to do that. >> we want to go after isis. the policy issue is do we go after isis in a way that causes harm to civilians under its

control? as i said, we didn't hesitate to occupy europe. if a business person 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? >> congressman, we would not try to stop a decent citizen trying to buy a -- >> we did in world war 2 which we have taken more seriously. you couldn't just say i'm an occupied and i want to buy a shipment of food and let's ship it over and use the banking system and you are saying that if i needed a replacement part for the factory in mosul, i can buy it online? >> no. i'm not saying that. >> do we prevent the honest

person in occupied mosul from conducting civilian transactions? >> what prevents most directly the citizen in mosul from conducting transactions is isil. the efforts are controlling that territory. the use of the banking system to facilitate a transaction coming out of mosul is something that we are as i noted earlier, attempting to protect. >> 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 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 is not related to isil in any way? >> no, except it's the guys located in mosul. >> so there is obviously an intelligence question embedded in there. is this person affiliated with isil. >> when we get serious, it will be. we did not wage world war ii and say every marseille businessman can conduct international business because we love the french. we notice that was nazi territory. i yield back. >> briefly. >> our efforts to prevent isil from making use of the system would effectively prevent that transaction, but we are not targeting the civilian in mosul who is being dominated and

subjugated by isil. what we are trying to do is prevent isil from making use of the financial system. >> the lights are on. >> the chairman recognizes the gentlemen from new mexico, mr. pierce. >> thank you for being here. thank you, okay. i appreciate your efforts to create national security and diminish the terrorist threat. are you in the rooms where you lay out a complex strategy in your report here. are you in the rooms where the strategies are being formulated? >> yeah. >> absolutely. >> on a scale from 1 to 10 where you talk about depleting resources from oil production, you would be familiar with the processes and the targets and things like that? >> in terms of the military targets?

>> you are fail comprehensive in your hospital. >> we are linked up closely with the defense department in terms of its overall level. >> so that's the direction. on a scale of 1 to 10, how committed are you to stopping the oil revenues from coming in? the administration. 1 to 10. >> i would give that a 10, congressman. >> why don't you stop it this afternoon? you want to do it, you are in the room, you can stop it today. you move 30,000 barrels of oil a day basically is what the report is saying. that sells anywhere from 25 to $60 a barrel. that results s in billions a d. your report starts talking about insurance and choking off the funding for insurance if you bound the trucks. they will cut them off themselves. you don't have to track them down. it is the trucks moving oil to

market. you have access to that. satellites tell you every movement and every highway and oil field. you know which are under the control. i wonder why you are not stopping the oil today. you can do it. it's well within your grasp and you have the technology and the information. you don't have to sort through the banking and track the companies and find out which people in marseille are taking the oil. stop the flow. why don't you do it? >> congressman, as you know the defense department has conducted air strikes. >> you are telling me it's not a number ten on the list or they would have stopped it today. it doesn't matter what the department said. the american people you said in the report that the american interests are at stake. then stop the flow of the oil. every single drop of oil, speaking of someone who comes from a count whoa makes their living on oil goes from a well

into a tank. you can enjoy up the tanks or the trucks or blow up the connection between the two. you don't put oil into a tanker truck. you put it into a delivery mechanism. you don't have to blow up the tanks. blow it up and it loads it on the trucks. this is a 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 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 it this afternoon. >> congressman, i am not a military targeter. >> it doesn't require a military target. i asked what is your commitment to stop the flow of oil. you said it is a number ten.

that is the highest on the scale. a 10 to 10. 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 simple process if we have a commitment. the other result i come up with is, maybe it's lacking. the commitment to absolutely stop the funding for isis. >> if i had a switch that i could turn -- >> you told me you were in the room, sir. is anyone talking about this? has anyone suggesting that we stop the flow of oil today. if it is a number ten item, if we have a desire on a number ten scale to stop the flow of oil, why hasn't somebody said let's stop the flow and quit working around the corners and quit looking at experience companies and looking at financing and who takes the oil? we don't have to know that. stop it in its tracks. it's simple. >> i understand your point. >> if you would like that back, someone would contact someone and find out what it takes to

blow up 120 barrels. it's not complex. i don't know that we got the technology in our county, but i suspect it exists in the department of defense. we just sit here and let them get $2 billion a day while the american people live in fear? it's irresponsible on the part of the administration. >> the time expired and the chair recognizes the gentlemen from new york and the ranking member of our subcommittee, mr. meeks. >> thank you, mr. chairman. mr. secretary, in your remarks at the carnegie endowment, i believe you stated that you were working to limit isil's ability to transact through iraq, syrian, and international banking systems. however it's the systems that are based on performance in the mideast with huge networks of money brokers that has been in place for centuries.

if the international community imposes sanctions under isil control, there is a chance that the sanctions will not only be this informal. my question is, is the treasury looking into the broker who is according to written testimony we received here today who were able to move isil monthrough iraq and syria and abroad. >> the networks are part of the system in iraq and syria. as well as the more formal banking system. as we are working to exclude isil from the ability and we are very much focused on ensuring they can't use and can't turn to the system to a greater extent than they already use it.

and in targeting the sanctions and disrupting the activity. although they are an informal mechanism for value exchange, they have intersections with the formal financial system. the brokers need to and we can disrupt the use with informal financial networks to transact outside of the formal financial system. >> they are finding the systems and others. that's the mechanism that isil used to also cent payment to the fighters and workers and regional leaders. we are looking for ways that the

payment is interrupted. they won't be able to join them. >> they are looking to identify who the brokers are and how they intercept with the formal financial system. they go through the system and you see it translated into cash or other being delivered to something on the other end. we have ways to disrupt the activity. that's one of the things we are working on and the papers in the intelligence community. >> we have to try to get these and make sure that we don't turn against them or have all the folks over in the region the sponsors of terrorist

organizations such as isil and at the same time keeping the channels open to the actors including the millions of immigrants which and immigrant families who provide that to their family members back in the home countries. i have some that said -- and i have them asking me and see what you have to say. >> we are working on the remittance issue to try to ensure that it's coming from the united states and going to communities around the world. i can go into more detail and the variety of steps that we are taking, including providing guidance and community

implementing and signed into law over the summer. to try to ensure that the money services businesses can continue to operate. with respect to remittances into iraq, our effort to cutoff the banking activity in the area where i till operates will not represent them going into baghdad, for instance. they prevent idyll from getting funds in the area where it's operating. i think that is pretty much in our interest. >> time for the gentlemen expired. the chairman from pennsylvania. mr. fitzpatrick. >> thank you, chairman. >> before i traveled, i had the chance to meet with your analysts and employees of treasury. i found them to be helpful and thorough in the information.

i wanted to follow-up on the systems which are informal and they have been around a long time. they pose quite a challenge, i think, in terms of following the money and how it flows. does the department have a handle on how many there in iraq or qatar or perhaps as a percentage of the bigger banking system there? >> i want to commend you and i was there after you were there. i got a briefing and i think they were useful. i appreciate your interest in the issue. in terms of the networks, let me get back to you. i can tell you that the networks that cross the borders from iraq

and syria into whether it's qatar or saudi arabia, into kuwait. you can work on both ends both on what's happening in the area where isil is operating, but also in the other end where it may be transmitted. part of the strategy is to work with the partners on the gulf to cut down on the source of the financing and cut down on the ability to transfer money. whether through the formal system or through the informal system. so that the money doesn't flow into iraq and syria. >> cut down on the source, you are talking about the source being the gains from the oil? >> no, i mean through donations collected in the gulf. >> okay. >> the oil sales are more of an issue going north into the kurdish region in iraq or into

turkey. as i was answering earlier, we are trying to get a good handle on how the payments are made, whether through cash changing hands or through the system or through the formal system. whatever the mechanism may be, we are looking for the key so that we can disrupt that financial activity. what is unique is the terror interests. they used the oil and this is different from other terror organizations to fund their recruitment and training. they are equipping. we are taking a look at why isis is unique and how to deal with that. you are correct that we can't forget a more traditional source and you are talking about donations on the subject. one of the meetings is with the social affairs. he was talking about a new law

that they have in qatar to crack down on funding that comes through on the charities that we have a concern. some of it my find a way to radial islamists. do you have faith that they law will work? >> the law that was adopted in september is well designed. it can cut down on the misuse of charitable organizations and provide funding to organizations. what it requires is solid implementation. i had similar meetings to the ones you have. we have been pressing the qataries to move from the situation where they have the right structures in place and the right laws and the right institutions in place to being more effective in cutting down on funding that comes out of

qatar for terrorist organizations. we have recently seen very positive steps that qatar has taken after your trip and some of the engagement we had. they have deported an individual who was involved in elicit fund raising in qatar. it was not charitable, but for a terrorist organization. they have committed to implementing the charities law. the other laws to cut down on terrorist financing. there is still work to be done there. i think some of the recent steps are good things to come. there is clearly work that needs to get done. you able to identify other regimes 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 gentlemen expired. the chair recognizes the gentlemen from massachusetts, mr. lynch. >> thank you, mr. chair >> thank you, mr. chairman. again, mr. secretary, thanks for 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 starching 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 baiji oil refinery, i don't know, maybe about 75 miles, 150 miles north of baghdad, i've been there a couple of times. it's not really -- it's low-tech. but it's the largest refinery that they have there. in that region. if we had destroyed that a month

ago, i think the iraq -- you you know, last week -- two weeks ago, the iraqi forces retook that refinery. so, now, it is pumping oil for the iraqi government. it's a key asset. if we had gone in there and destroyed that asset, that refinery, it would have been a huge setback for the iraqi government to retake. and re-establish their oil flow. we have a similar situation in the kirkuk region that is in dispute right now between kurdish forces and isil. sure, we can go in there and destroy those oil wells, but there's a longstanding problem there. we had a similar problem with

saddam hussein when we first fwhe about whether to destroy the oil facilities or whether to continue to allow them to operate and then capture them. so that will be an ongoing challenge as we go forward. what i'd like to talk about, mr. chairman, is about the actual shipment that's going on right now over the turkish border. we have been largely unsuccessful in interrupting that oil flow. i was in erbil in kurdistan recently, had a chance to talk to the foreign 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 isil forces over the turkish border. and we've got to get at that. we've got to disrupt that. and i'm not confident that that is happening now. and i'm not at all confident

that we're getting cooperation from the turkish government. the same situation is ongoing in syria and al keim. there are smuggling routes there that have been in use about a thousand years. we weren't 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 that were taking illicit oil. so there's two ways to get at this. one is to -- eventually, this oil is going to find its way to a legitimate country and a legitimate company that you can apply sanctions to. but before it gets there, you know, we had back in -- back in 2006, 2008, in iraq, we had had threat finance sales. and we used this as well in

afghanistan. where we actually partnered up treasury folks and dod. we had military. so it was a joint operation where they actually had boots on the ground. they could identify shipments that were going over the turkish border like they are right now. and we were able to disrupt that, and i'm just curious why we got away from that model where we had military paired up with treasury folks and we were actually doing a pretty good job of disrupting that oil flow. it's commodity exchanges now across border that is really financing about 75% of isis' revenue. so, just like to hear your thoughts about what we might do in the future, if we could restart those threat finance cells. and maybe re-establish some type of control. >> well, on the issue of the threat finance cells, as i noted earlier, i think i'd like to address in a closed hearing.

more broadly, we are enhancing our efforts to collect intelligence, including intelligence on the smuggling networks which you know have been in existence for thousands of years. that doesn't mean that we can't get better fidelity on who's involved, where it's going across the border and how we can stop it. including through the financial options 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. we're also engaging with the private sector to stop this. but there are other mechanisms that rely on intelligence. and at some point, we can get into more detail on that. >> thank you, mr. chairman. >> time of the gentleman has expired. the chair now rec nice, the gentlelady from minnesota who searches as the chairwoman of the committee. >> thank you, mr. chairman.

the state that i represent in minnesota has a tragic nexus to terrorism. we are the only state that has a convicted member of al qaeda from 9/11. that was moussaoui. my largest city in my district is st. paul, minnesota. that is where moussaoui went to receive instruction in how to take off in a plane. he was interested in how you take off in a plane, he wasn't so interested in how you land a plane. he was the only convicted frich terrorist since 9/11. we also have the largest number of americans who have left united states to fight on behalf of the the lammic state. first two americans killed fighting on behalf of the islamic state were both from the state of minnesota. we know that today there are those who 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 allowed to transit out of syria and iraq back to western nations. whether it's in the europe, the uk or whether in the united states of america. our country today is freely allowing the return of terrorists who have given allegiance to the islamic state, back to the united states. on the basis of their american citizenship and their passport. that makes a lot of americans very nervous. especially people in my state of minnesota, wondering with battlefield experience, with relationships 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. i'm wondering what is being done to follow these individuals, whether it's true financial transactions or any other way. number one, i'm wondering why they're allowed, number one, back in the united states. i'm wondering why in the world we don't pull their passports and prevent them from come to get united states in the first place? number two, why do we allow them in? number three, why are they allowed to resume their lives have they have joined a murderous ban that is killing innocent women and children across the country? why are we allowing that? why aren't we using our resources to thwart this? there's only been one serious terrorist investigation of terrorist financing since 2008. and that is the holy land foundation trial. it is 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 is not receipted. this has only gone up-tempo. what sort of prosecutions are going on? why is it that six years later, there have been zero prosecutions coming out of the department of justice? number one, are you working with the department of justice? are you identifying individuals? there are over 40 known individuals who have now returned to the united states who are terrorists. who have participated in terrorist activities, who are freely walking 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 to you 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? you have 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 america 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 both individuals in the united states

who are traveling to iraq and syria as foreign terrorist fighters and those who seek to return is one where there's 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, at the department of homeland security and the fbi, allowed 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 into europe or especially the united states is something that this administration is highly -- >> secretary cohen i don't rest very well, because they are allowed free re-entry into my state. >> time of the gentle lady is expired. the chair now recognizes the gentleman from georgia, mr. scott. >> thank you very much, mr. chairman. i'm over here, mr. cohen, over here in the corner. how are you?

an area that i think we're not putting enough attention to is on our arab and muslim nations who are over in the middle east. i don't believe for one minute that we're getting the level of cooperation, the level of back bone and insert into this issue, as we should. we're never going to solve the middle east problem. we're never going to solve this problem with terrorism. and certainly, not this problem of financing the terrorists. if saudi arabia, if jordan, if egypt, 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 they're 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 administration's efforts 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 billion, $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's enough of us in congress who would demand that saudi arabia, that egypt, that turkey, that the united arab emirates all would come in or out, they would feel the sting of our

pulling back, the billions of dollars that taxpayers' monies are going into it. now, money laundering, you think they can launder this had money of the state who have the banking assistance to do it? the oil that they're getting so much of their money from. do you think they can do that without turkey's cooperation? no. and, so, unless we get very 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 wouldn't have these terrorist groups if it weren't for saudi arabia. you think we'd 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 contained that area. so, what i'm saying is, that we need to send a message back to the world. that congress wants in on this. the people elected to 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 we're 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's 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 to these nations. while they on the one hand take our 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 shabaab. egypt coming up with the brotherhood of muslim brotherhood. come on. only a joint strong resolution working with the president, then this nation will take the united states 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 isil. and i think 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 narco trafficking? >> congressman, not that i'm aware of sitting right here. but let me ensure that there's -- there's not something i don't know about it but i'm not aware of any narco trafficking by isil. >> okay. giving the taliban credit for almost 100% of the heroin trade

and farc the colombian rebels almost 100% of the cocaine trade. and one way to go after terrorist funds is through americans who are terrorized or victims of terrorism to see their attackers and go after their frozen assets of second 201 under the terrorism risk insurance act under its trio. the plaintiffs cannot, however, currently seize the funds related to narco traffickers. and my question to you is going to be what you are doing, or what steps are you taking to help change that. but i guess, until you can qualify your position on isis, being in narco terrorism, that might not be the right time. >> congressman, i'm not aware that isil is involved in narco trafficking.

i will follow up on that with you. on the broader issue of attacking terrorist organizations' use of narco trafficking as a way to raise funds. you mentioned the taliban, you mentioned the farc, we have been aggressive in our use of authorities to try and prevent that, to disrupt that. we use the kingpin act as a way to identify the major traffickers and apply sanctions to those who are involved in the activity. i can assure you that if we see in the isil situation something akin to what we've seen with the taliban, or with the farc, we won't hesitate to use those same authorities in this instance. >> but, again, with kingpin, there's a big hole there for narco trafficking. and, of course, it's been the subject at one of the hearings that we had previously.

and we really need to be locking that up as much as we can. but -- >> so, i'm not aware of the particular deficiency that you're identifying but i'm happy to follow up on that issue. >> okay. thank you, mr. chairman. >> the chair now recognizes the gentleman from texas, mr. green, the ranking member of the oversight investigation subcommittee. >> thank you, mr. chairman. and i thank the witness for appearing today. my feeling are ambivalent on this topic of kidnapping for ransoms. it is my understanding that isil has receiveded as much as $20 million. i also understand that this undercuts the goal of eliminating the access to funds.

if we -- if we don't 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. we're not sure who's holding her son captive. but i've visited with this mother and father, and i know that they want their son returned home safely. and while i understand that we can't pay ransoms, i have been with them, and while i don't feel their pain, i've seen the evidence of it. and you're in a tough position.

but i want you to do all you that can, please, please, do all that you can to try to get these people who are being held hostage returned home safely. it's a balancing act. it is contrary to what our policy is. and i understand this. but we've got to do everything that we can to prevent these dastards -- that's 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, give some indication as to the balancing act. and what we're trying to do to make sure that this mother gets her son returned home safely.

>> congressman, i think you've put it beautifully. and i think it is an incredibly difficult issue. i share your feelings that you describe. i can't imagine the pain that a family goes through in this situation. our policy is one, as you note, that is intended to protect americans by removing incentive to take hostages in the first place. and 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 hostage because they know that they will not get paid ransom. it obviously does not work in every instance, as the situation you're citing identifies, reflects. but it protects our citizens over the long term and as a whole. in terms of getting our citizens back who are held hostage, i'm sure you're aware, over the summer there was a rescue attempt made to try and free james foley who was being held hostage by isil. 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's a -- it is, as you say, a emotionally fraught difficult issue. but it's a policy that i think we need to employ ourselves. and frankly, need to get our partners around the world to employ because it's to the benefit of all of our citizens. ultimately. >> thank you, mr. chairman. >> the time of the gentleman has expired. the chair now recognizes the gentleman from missouri, mr. liukinmyer. >> thank you, mr. chairman.

secretary cohen, i want to frame my questions and remarks with regards to the united states banking system, providing access and being complicit in money laundering. i've been concerned about things going on with different banking regulators and doj, and how they are carrying out their duties. i think they're going a little too far with it but i certainly support their going after bad actors. anyway, in remarks you made earlier this week with regards to derisking. i think it's essential to have laws in place to combat terrorist financing, our regulators have no -- i'm concerned that the broad derisking that we've seen in financial institutions is having a negative situation. i know that there's concern voiced by the comptroller of the currency recently about this. and in your remarks i gave a copy of your speech to the aba

of enforcement conference this week, you talk about that. i just would like you to tell us how you think bank regulators should judge risk and how it should not be done on a case-by-case basis. >> well, congressman, the foundation of our anti-money laundering regulatory regime is a risk-based approach where we ask our financial institutions to assess the risks of the customers that they have on board, or that they're thinking of taking on board, on a case-by-case basis. and make a judgment whether the risk profile of that particular customer is one that the institution feels that it's in a position to manage. and 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 corresponding 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 government who are responsible for overseeing the institutions, adhere to the risk-based approach and to a case-by-case analysis in approaching that. >> thank you for that. you're an expert on terrorist financing. i'm just kind of curious, can you tell us what types of activities lead to isis financing? you know, some of these regulators are going after folks' firearms sales, fireworks sales, petty lenders, tobacco sales. are these folks engaged in terrorist activities?

will let me rephrase it. have you had any actions against these folks for terrorist financing activities? >> i'm not wear of any actions against any of the entities you just describinged. >> okay. any of those industries, okay. >> certainly, just isil. >> very good. i know that the financial crimes enforcement network, fcen put out a paper this week on money laundering, and the bank indiscriminately terminating accounts, how closely do you work with these folks. do you work with them every day, i assume? >> these folks work for me. >> you there go. so you're aware of this paper and aware of this statement and support their conclusions as well, i assume? >> yes, sir. >> very good. one last question here, your remarks earlier in the week also mentioned that the farms needs to make the anti-money laundering stronger. one of those is a safe harbor

from civil liability from suspicious institutions that follow activity. i recommend in my bill hr 4986 the end operation point act. can you tell the committee why you believe a safe harbor is important and how this will help institutions in the fight against terrorist financing? >> the issue there is there's 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 unable to prove a good faith basis for filing reports. these reports which are confidential, based on suspicion of potential illegal activity that are filed with fcen used by law enforcement to pursue cases, but as an open end to cases are

incredibly valuable. and what we are looking to do is to ensure that solutions can comply with their obligation to file these reports without fear of civil liability. >> thank you. 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. and empanel the second panel. which means that the chair plans to call upon miss -- i'm sorry, noon. excuse me, noon. don't want our with the tons panic. i will call upon mr. ellison, mr. pittinger, mr mr. pearlinfluenceder and relear and then mr. ellison is recognized. >> mr. cohen, thanks for your service to our country and your hard work to help combat terrorist financing. earlier you mentioned the money

remittance approval act which is a bipartisan piece of legislation passed in congress earlier this year. now we're in a phase that 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 for pushing it through the house and getting the -- >> 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 anti-money laundering regulations. that will expand our ability to get insight into the quality of

anti-money 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 to get back to the derisking question. what we're hoping to foster is environments where institutions do in fact engage in a -- continue, really, to engage in a case-by-case analysis of risk. and the better the foundation, for that risk assessment the better off we all are. >> thank you. i just want to say, i'd like to work with to help more financial institutions understand what's available under the act. let me ask you another question and then i'll pass it so we can have as many people as possible to ask you a few more questions. do you feel that our international partners, we have enough cooperation with people

in the middle east, european world? do you think we have enough international cooperation to freeze out -- to identify and freeze off some of the sources of terrorist financing in this -- in dealing with isil? >> that's a big question. i think the answer is, we have cooperation. it varies. as you might expect, from country to country. we have some partners that are, you know, 100% committed and effective. other partners where i think there's 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. it's 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, you know, this is a task that is never going to be complete. and there's obviously some work to be done. >> thank you, again. and i yield back. >> the gentleman has yielded back. the chair now recognizes the gentleman from north carolina, mr. pittinger. >> thank you, mr. chairman. secretary cohen, following up on congressman pierce's questions, during operation dessert storm we had an average of 1100 strikes a day. 12 years later against saddam hussein, iraqi freedom, we had 800 strikes a day. in the last two months, against isis, we've had a total of 412 strikes. 7 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 precipitously pulling out our forces several months ago? or is it lack of will by the administration to take out particularly this transfers of all out of country? >> congressman, i'm not sure it's either of those. but i'm 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 that that is the most significant manner in which that isis has obtained they're $1 million to $2 million revenue a day? >> absolutely. the conversations that i'm involved in, as you might expect, are conversations about policy and broad approach.

i don't sit at centcom, i'm not doing -- targeting the day in and day out basis. but in terms of the overall policy direction and the contribution that i cited, that the defense department can make efforts to undermine isil's financial strength, that is 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 out of the country? >> all of the illicit -- >> the 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 i'm not in a position to comment on is the practicality of doing that. i just -- it's just not my area of expertise. >> i appreciate that. please convey our continued concerns on the matter of the limited approach that we've had in terms of our commitment to air strikes in various capacities, but particularly related to trying to disrupt the income flow back to isis. on another matter, i mentioned earlier, the availability of technology. you know, there's very robust, analytic software programs. i've worked for a dozen years with major software companies originally related to medicaid fraud. but in these discussions we've transferred now on and talking about how we can dismantle the terrorist funding and the transfer of it. and outside the united states and inside the united states.

and as such, i wrote calvary the director of financial network on september 4th and requested a meeting to make sure that the department is utilizing every available possible analytic support software available. i'd appreciate your help and response so i can meet with miss calvary. be most appreciated. >> certainly. i can tell you that fcen directed overseas has usually gone through an i.t. enhancement. it has some advanced analytical tools available to it. and they are using those tools to go through the reports that they receive from u.s. financial institutions to identify potential fund-raising for isil and to push that out on a very rapid basis to our law enforcement colleagues. so that is. happening, but i will convey

your request. >> if you could help bring about a meeting with her, i'd very much appreciate it. i yield back. >> the gentleman yields back. the chair now recognizes the gentleman from colorado, mr. pearlnutter. >> will secretary, thank you for testimony today. the stock markets are hitting knew highs today from where we were six years ago. i want to follow up on the line of questioning mr. pittinger was just asking you. he was talking about, one of your points was, we got the refuse news the flow of money and we've got expense. get back to basics, okay? so on the revenue side of this, you've got the production piece which is what he was talking about, can we eliminate or destroy the production. i'd rather focus on the price. we've had a 30% reduction in the price of oil in the last five

months. so west texas intermediate's gone from 103 down to 75. just basic economics would say to me, that's 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? and then i'll get to expenses in a second. >> congressman, the price at which isil is selling the oil that it's stealing has never been at the open market price, i'm sure you understand. whether the drop in oil price has also forced a decline in the discounts that isil is taking off the oil it's on, i don't know the answer to that question, but let me see if there's something that i can

give you. >> 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? >> okay. so let me move to the expense side. so on the expense side, there is 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, you know, sophisticated operation. you know, we've seen them take over wells, but also, sort of, in some sense, destroy the wells and have the oil pool and just taking it that way. so i can't 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. there's obviously some expense involved there but -- >> i'm not trying to stump you on this. >> yeah. >> but this is for the basic stuff that i'm trying to understand. everybody else has kind of gone into monologues about what's going on in the middle east. i mean, just basic price, production, expense of producing this. let me change it just a little bit. so, on the revenue side, we've got oil, and there's some revenue stream that's coming from oil. and i'd like a little more sfes physic sfes physicality on you on what affects that. other piece does this get, you mentioned some charity from other countries, does it have earnings? i mean, what other kinds of revenue do they have? >> just on the price of oil, i

can provide you more detail on that. i'd just like to do it in a different setting. the other sources of funding for isil are ransoms from kidnapping. extortion and crime from within the territory they're operating, especially forcing people to hand over money at gunpoint. and donations from external sources, from wealthy donors overseas. those are the four most significant sources of funding. >> so, now, moving to their total expense, obviously, they've got to be paying their soldiers or whatever they're called, their fighters, their terrorist group. they've got 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 streams, their expenses for paying fighters for

attempting to deliver social services of some sort in the territory where they're 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 fighters about $1,000 a month. that comes to $360 million a year. in just the expenses for fighters. now, that figure is obviously a soft number. i don't know that's exactly right. but it gives you sort of an idea of the magnitude of the expenses. if you look at what the iraqi government had budgeted for this year, for the territories where isil's currently operating for the delivery of social services, it was well over $2 billion. now, 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. that's going to be quite a substantial test. >> thank you, mr. chairman. >> undersecretary cohen, we appreciate your testimony today. 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 witness.

i will introduce briefly, we first welcome the honorable jimmy gruelier, a law professor at notre dame law school. professor gruelier has notable experience in the field of terrorism and finance in his ten years at treasury and the department of justice. next, we will welcome dr. matthew leavitt, the director of the stein program on counterterrorism and intelligence at the washington institution for near east policy. dr. leavitt previously served as dispute 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 counterinsurgency, and counterterrorism especially in afghanistan and the philippines. without objection, your testimony will be made part without your remarks. we have the green, red, yellow

lighting system. the yellow will go off when you have one minute to go. i ask that you each observe the five-minute time allocation. professor gruelier, you are now recognized for a summary of your testimony. >> thank you, chairman, members watters, and other members of the house committee for financial services. allow me to thank you for permitting me to testify for the islamic state of iraq and syria also known as isis. to enhance the u.s. government's counterterrorism financing strategy against isis, i'd like to make several recommendations. the first recommendation, targeted blocking actions. the centerpiece of the government's counterterrorism strategy is to freeze the assets of suspected terrorists, terrorist-related entities, deep-pocket donors and our financial supporters and

facilitators of terrorism and prohibit such entities from doing business in the united states. the strategy is a preemptive strategy, intending to prevent the financing of terrorist attacks and the killing of innocent civilians. more specifically, the ability to block isis funds executive order 13224, was actually issued after the terrorist attack, of september 11th, 2001, by george h.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 raised two primary concerns. first, few individuals associated with isis have been san diego natured for asset freeze under executive order 13224. 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 kuwait to syria. and then the fourth, was involved in raising money from deep-pocket donors and external -- external funding. none, unfortunately, of the treasury designations, include individuals engaged in any of the major sources of internal funding for isis. absolutely none. i have a very basic fundamental question, and that is, who is the finance minister for isis? who is he? and why is that individual not on the treasury list under executive order 13224? it seems to me that there needs to be a direct nexus between the treasury department's designations and the principal sources of internal funding for isis. whether, again, we're talking

about elicit oil trade. ransom payments, trafficking trading and stolen artifacts in iraq and syria. extortion payments, those are the individuals that the treasury department should be focusing on for designating blocking their assets, if any, in the united states. it seems to me, i don't know if this is the case, but it seems to me, and it would seem to make good sense that there should be financial intelligence teams focused on each of the principal sources of internal fund-raising for isis. there should be a financial intelligence team dealing with the payment of hostage ransom payments. and where those monies go. there should be an intelligence team dealing with oil -- the elicit oil trade. and how that's happening and who's involved in that and

designating individuals involved in illicit oil trade. there's been discussion of this and i'll keep my remarks on this front very brief. the bottom line is the department of justice has a mixed record on prosecuting terrorist cases. since the september 11th, 2001, terrorist attacks have there have been very few major financing terrorist cases. i'm aware of one that has been referenced to the holy land foundation case. by the way, a charity who was involved in raising money for hamas. i'm not aware of any significant terrorist financing prosecutions dealing with terrorist finance years of al qaeda and certainly none dealing with terrorist financiers of isis. to increase the number of terrorist financing prosecutions, my recommendation is that the treasury department should intensify and accelerate its efforts in sharing financial

intelligence information with doj. so doj has the evidence that it needs to bring criminal indictments against terrorist financiers and take those indictments to successful prosecution. the last point has to do with recommendation has do with the bsa, bank secrecy act, and i would just add that under the bsa, there have been over the last ten years, only two enforcement actions by fcen where fines have been imposed on banks for noncompliance with the b assessment dealing with terrorist financing. i think that effort needs to be enhanced. thank you very much. >> dr. leavitt, you're now recognized for your testimony. >> thank you ranking members of the committee. it's an honor to be here. the u.s. government effort to counter the islamic state of isis is focused on five lines of effort one of which is to stop isis financing and funding. 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 beyond the international community's capabilities. combat financing is an important component to be against any group to be even too extreme for even al qaeda. corner terrorism tools have been found uniquely effective in terrorist groups but also a source of financial action of intelligence that can leverage even greater success. sometimes, you let the money flow so you can watch it and tag it. there's no doubt that financing crosses international borders or leverages international financing system, especially the formal secretary of banks, even the alternative financial mechanisms. in those cases tools set and developed since years from 9/11. this includes isis oil funding and donations from the deep pocket funders in the gulf and elsewhere kidnapping to

reference antiquitities ancient artifacts and more. but this is unlikely to be enough to fully dismantle isis. unlike al qaeda and other groups, isis was financial self-is sufficient for eight years as an insurgent group before a proto state before it renamed itself it was islamic state. al qaeda iraq. jihad, it went through many iterations. and other donations, now isis was financial independent for years by virtue of engaging in a tremendously successful fund domestically. today, complementing the group's other forms of income. on its own, criminal enterprise is insufficient source of funding for groups not just of terrorists and insurgent but

capturing and holding territory which involves significant expenditures and therefore requires much more significant revenue streams. therefore while it's true that it's beyond the reach of traditional law enforcement and regulatory reaction, we do not have an iraq on the ground like we once did. focusing only on those areas vulnerable to current tool sets will currently affect isis the money it needs to hold and administer the islamic state. meanwhile, military tools under other circumstances be be the last thing that one might think of as a logical means of combatting crime. the fact is that air strikes against isis have already significantly undermined some of the group's criminal enterprises and further such strike should continue that trend. they don't own territory. they can't tax people in that territory. they can't abuse domestic resources, et cetera. and while the prospects of real political reform in iraq are bleak today, should the iraqi government at some point reprioritize governance and the

rule of law own sectarianism and corruption, as the domestic criminal activities as they are. treasury's financial crisis on anyone who trades in stolen oil inducing foreign partners to put an end to financial payments, targeting sanctions. restricting isis financial system and leadership and facilitators. i think those should be done in those places where it makes most of the difference not where it feels good about ourselves. if in fact it's happening domestically in iraq targeting them doesn't do a thing. it's a wide strategy using the treasury tools that we currently have but i encourage people to look beyond these tools as i'm sorry treasury already is to envision what treasury might need to adapt and deal with a threat. i submit there is no agency that

does this better, thinking outside the box to develop the strategies needed to deal with tomorrow's threats. treasury terrorism intelligence branch did that after 9/11 to deal with the threat of al qaeda. it did it an even more substantial way in 2005, 2006, when it developed tools and strategy to deal with iran's illicit conduct support. and proliferation in iraq, et cetera. i expect that we will see similarly created tools. first, i'll say this, there is no silver bullet to dismantle isis financing, let alone to ultimately defeat the organization. isis presents an unique set of circumstances. and treasury should do what it does best, asset the situation and develop new tools. there is evidence that treasury's full court press is already working far away from the borders. consider a case of a jihadist for joining a group in syria, like the united states who

struggled because of meshes put in place. the court proceedings and local media courts describe a picture of jihadist groups to send supplies because it has become too hard to transfer money without being traced. that's not all. the extremists use the wire service of western union to send money around the world but it becomes so aware of transactions being monitored they're afraid to pick up the money. >> if you could summarize quickly. >> absolutely. we have to use the military to disrupt oil, no question. as to move isis back from controlled territory so it cannot gain activities in those areas. even though major donors are not a part of financing, as soon as we have more success in cracking down on existing streams that will increase. as i get to the written statement, we neat to focus on qatar and but also kuwait. the fact that he passed a law does not mean anything. we need to isolate isis from the

financial system to be sure that in the long run, at the end of the day, the only way to stop criminal enterprise from iraq is for law enforcement within iraq to do the job. thank you very much. >> dr. for a summery of your testimony. >> mr. chairman, ranking member and distinguished committee members, thank you for allowing me to testify. today i'll discuss how isil accumulated the wealth that made it the richest terrorist group in the world. how isil's money amplifies the threat that it poses -- >> i'm sorry, doctor, could you bring the microphone a little closer to your mouth? we're having a little trouble hearing you. >> better? >> thank you. >> and challenges and opportunities for degrading its finances. before i begin, i just want to note that countering isil's funding is both difficult and important. the methods isil uses to raise and move money make it a hard target for traditional account finance instruments. nonetheless, money is a critical component of all of isil's activities and failing to degrade isil financially would increase the threat both in the

region and to europe as well as the u.s. homeland. so in my testimony i want to make three main points. my written testimony contains a fuller discussion of each. my first point is that isil raises almost all of its money within the territory that it controls. this has been discussed already by other members, so i'll be brief. but the funding scheme differs from a lot of the terrorist organizations. that some of these tools and instruments that treasury uses now were developed for, and this is challenging given the way that isil makes its money internally, which i'll discuss in turn. but i've 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 the group spent money. and 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 its money, at least in mosul, in basically the same ways for at least the last six years. and probably longer. so this is nothing new, despite the change in the group's name, and 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's using now. the main difference in really what's going on in mosul, and

with isil, is the scale at which it raises funds. so what we're able to see through looking at the group's captured financial ledgers is that in mosul in 2008 and 2009, the group known as the islamic state of iraq, was making about $1 million total per month on average, and now as we know just from oil revenues alone, revenues have been estimated between $1 million and $3 million per day. so it's an enormous increase. and one that i think needs to be appreciated when we think about how threatening we viewed al qaeda in iraq and the islamic state of iraq. and then with the additional finances that the group has now. what that might mean for their capabilities. and also, for their ability to sustain a long-term protracted fight against various enemies.

there are real challenges in disrupting isil's targeted sanctions in restricting access to the international financial system. i think undersecretary cohen is correct that the involvement in the activities should be targeted for sanctions and isil does benefit from the access to the international financial system. these facts don't negate the other fact which is a large share of isil's revenues made internal, it's moved through internal channels by networks and intermediaries and other methods that are used. all these methods combined make it difficult to collect the precise financial intelligence that's necessary to effectively apply targeted sanctions. absence such intelligence we're left with a rather blunt set of financial circumstances at our disposal to cut off isis to

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 isil's internal financing. this refers specifically to extortion, and various types of crime. robust partnerships with local, regional and u.s. government interagency partners will be necessary to collect the high quality intelligence on isis' local funding sources, methods. several steps could be taken, including enhancing intelligence cooperation, with kyrgyzstan and iraqi oil facilitfacilitators, prioritizing the quantity and prices of oil over time that facilitators and mediators are smuggling, to maintain the situational awareness of isil's 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 population. to recap, the three main points is the importance of isil's internal funding scheme. the challenges associated with targeted financial sanctions and efforts to cut off a group like isil's access to the international economy, and to use this as sort of the primary tool kit to degrade this specific threat, the financial capabilities, and improved financial intelligence as a way to understand the threat better. and then to conduct targeted operations, whether by treasury, dod or other agencies. thank you. >> i want to thank each of the gentlemen for their testimony. the chair now recognizes the gentleman from pennsylvania.

>> thank you, mr. chairman. professor gurule, you talked about the global terrorists, and we've only had four identified, i think, with isis. and you made a good point about who is the finance minister for isis. can you just give us a little historical context going back to the early 2000s when you were in public service, and individuals we would have been identifying within al qaeda, just 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 very different than the method that isis uses to raise money. al qaeda relied almost entirely on external sources of funding. so, for example, we focused on corrupt charities that were raising money for al qaeda and related affiliated terrorist groups. when i was undersecretary, we

designated global terrorists probably closer to 40 charities for that purpose. but again, the focus was on external sources. isis is very different. it's principally a self-funded organization. what treasury has to do is they have to pivot, they have to refocus, they have to recalibrate their efforts to the dynamic that they're currently facing with respect to isis funding. and my point is, i think they're struggling to make that change, to make that adjustment. and it's borne out by the fact that there's only four -- >> do you believe that there would be individuals that treasury would be aware of today that could be designated? >> i would certainly hope so. because if they're not, then the situation is even more dire than it appears. >> we've talked a little bit with the undersecretary and other panelists have mentioned

some of the countries in the area, and members of the panel can address this. the undersecretary talked about this, that there still needs to be more work to be done, for example, with qatar and what they're doing. we've talked about the charity law that qatar has in place. i think the undersecretary had previously made statements about qatar and kuwait being permissive jurisdictions for terrorist financing. what kind of things could these countries be doing now that they're not doing today? >> a lot. mostly these are countries that have passed fantastic laws on the books when you look at them on paper. i've sat and i've gone to the middle east many times, sat with some of these individuals, that have given me enough hard copies, soft copies, i could wallpaper my house with them. but when you get them privately, and you ask them, this is a great law, 3.1, have you ever

implemented it? no. have you ever used this? no. there's very few cases, especially in kuwait and qatar of any kind of implementation. even the case that the undersecretary pointed to you earlier, qatar did not prosecute the individual, didn't hold the individual accountable, he's deported and presumably continuing that activity from someplace else. i get into qatar in great detail in my written report with the concerns, the financial action task force, the international monetary fund, and others who have gone to qatar and investigated like i have with their ability to implement. similar concerns about kuwait. on the question of the sgdts. what we should not be asking treasury designate as many people as possible. we want them to designate as many people as possible that would have an impact. there are people around the world relied to isis and other groups. youl