Patrick McHenryChairman

Washington, July 12, 2018 -

The Subcommittee on Terrorism and Illicit Finance met today to examine strategies to disrupt both the financing and procurement of weapons and how financial institutions can best identify proliferation activities.

“On the Terrorism and Illicit Finance (TIF) Subcommittee, we are charged with providing the tools and resources our nation’s intelligence and financial communities needs to succeed and be secure. Part of this essential function is learning how hostile actors work to avoid and counter the sanctions and other regulatory actions our nation imposes. Today’s focus was specific to the financial networks that support weapons proliferation,” said Subcommittee Chairman Steve Pearce (R-NM). “If we can identify and cut off these funding streams, we can prevent the proliferation of weapons of mass destruction, and I believe we have come one step closer to these efforts today. With the takeaways learned at today’s hearing, TIF and the Financial Services committee can better serve and assist the Treasury Department and Financial Institutions with the rules and authorities needed to combat proliferation financing. Hostile nations and groups are constantly evolving and changing the way they finance their illicit activities, TIF remains committed to providing the tools needed to the Treasury Department and Intelligence Community to counter these very real threats.”

Key Takeaways

• Countering the financing of weapons proliferation is a key foundation of U.S. counter-proliferation efforts.
• Proliferation networks often use established financial mechanisms, including wire transfers, trade finance products, cash, checks, and credit cards, but vary in sophistication.
• Strategies used by the U.S. to disrupt both the financing and procurement of weapons of mass destruction must also consider the scope and effectiveness of relevant enforcement actions brought by the Departments of Justice, Treasury, Commerce, and Homeland Security.

Topline Quotes from Witnesses

“Preventing proliferation financing… is one of the most important aspects for detecting and stopping exports of sensitive goods… Many countries perform poorly [on preventing proliferation financing] due to having excessive bank secrecy, providing tax havens, and being places where front companies find it easier to finance nefarious activities. Other countries simply lack regulations and effective institutions. One of [our] most critical recommendations is that countering proliferation financing needs to be integrated into many more aspects of counterproliferation including export controls.” – David Albright, Founder and President, Institute for Science and International Security

“To-date, the international community has primarily addressed state-based proliferation activity via controlling certain goods and sanctioning bad actors. Yet this approach is fragmented, poorly enforced and too narrowly focused… proliferators such as North Korea employ an array of funding operations, such as repairing and servicing military equipment; training police forces; and building statues, and a range of commercial trading activities which involve both a logistical and financial operation… focusing merely on goods, either preventing their sale or interdicting their transfer once purchased, is just one part of establishing an effective response. Proliferators depend on access to financial assets and services, and the international financial system has become a critical lifeline for the regime. Detecting and stopping financial access will complicate and obstruct the wider operations of proliferation networks… In sum, the global architecture for disrupting proliferation finance requires improved design and implementation.” – Tom Keatinge, Director, Center for Financial Crime and Securities Studies, Royal United Services Institute

“Iranian attempts to obfuscate and conceal illicit procurement and sanctions evasion activity follow established patterns and share common features. Financial institutions and intelligence practitioners can use these typologies to identify actors and transactions that are potentially harmful to the integrity of the financial system or pose challenges to international security. The Treasury Department plays a key role in this regard. Its sanctions and designations over the years have helped name and expose Iranian efforts to circumvent sanctions… But… this is a cat-and-mouse game… A constant update of sanctions and rigorous enforcement is therefore a key part of Treasury’s ongoing effort.” – Dr. Emanuele Ottolenghi, Senior Fellow, Foundation for Defense of Democracies