In March 2013, the Department of Justice Inspector General (IG) released an audit of the Federal Bureau of Investigations (FBI) and the DOJ’s National Security Division collaborative efforts to counter terrorist financing (CFT).  Along with making an unsupported claim that terrorists commonly use donations to charities as a revenue source, the audit touches on areas of the FBI and DOJ’s CFT efforts that are less commonly reported on, including the terrorist designation process and interagency Terrorist Financing Working Group.  It lays out eight recommendations for improvement, including identifying ways “that the FBI could strengthen its terrorist financing program through improved case management practices” and more specialized training for senior staff positions.

Unsupported Claims

In a brief and unsubstantiated section about terrorist financing, the audit says that terrorists may raise money through “seemingly legitimate sources” like “donations, community solicitation and other fundraising” activities.  “A common example of terrorist financing,” the audit says, “occurs when an individual donates funds to charities that serve as “fronts” for terrorist organizations.”  It then says that money needed for the terrorist group’s operational activities “is often covered” by the “group’s political and social activities.” No evidence or data are provided in support of these claims.

Terrorist Designation Process

On page 42 of the IG audit, information about the processes used by State and Treasury to designate entities as a Foreign Terrorist Organizations (FTO) and Specially Designated Global Terrorist (SDGT), is discussed.

On the purpose of designations, it says:

“Designation is intended to counter terrorism by exposing terrorist financing money trails that may generate leads to previously unknown terrorist cells and financiers. In addition, designation can potentially dismantle terrorist financing networks by encouraging designated persons to disassociate themselves from terrorist activity and renounce their affiliation with terrorist groups and their support networks.”

On defending  designations against legal challenges, it says:

“The [DOJ], along with the Departments of State and Treasury, work with the federal intelligence community to closely review a detailed administrative record that documents the terrorist activity of the proposed designee to ensure that the record supports adequately the factual findings required by the applicable authority and to assess litigation risk in the event a designation subsequently is challenged by the designated entity.” (emphasis added)

and

“[The DOJ] and the Departments of State and Treasury work together to revise the administrative record to ensure that the case for designation is legally sufficient and can withstand judicial challenge.” (emphasis added)

Terrorist Financing Working Group (TFWG)

On page 37 of the IG’s audit, it says:

“The FBI also participates in the Terrorist Financing Working Group, led by the Department of State, which coordinates government efforts to identify, prioritize, assess, and assist countries whose financial systems are vulnerable to terrorist exploitation.”

According to an October 2005 Government Accountability Office (GAO) report, the TFWG “convened in October 2001 to develop and provide counter-terrorism finance training to countries deemed most vulnerable to terrorist financing.”  Chaired by State, the TFWG also includes the departments of Treasury, Justice, and Homeland Security, and representatives from the United States Agency for International Development (USAID) and financial regulators.  It “meets on a bi-weekly basis to receive intelligence briefings, schedule assessment trips, review assessment reports, and discuss the development and implementation of technical assistance and training programs,” the GAO report says.

While specific information about the Terrorist Financing Working Group’s activities is largely unavailable, CSN has searched the public record and shared below what it found.

According to Paul Simons, former Deputy Assistant Secretary at State’s Bureau for International Narcotics and Law Enforcement Affairs, the TFWG helps promote the Financial Action Task Force’s (FATF) CFT policy.  In November 2005, Simons wrote that TFWG programs “are also increasing focus on emerging threats identified by FATF SR VI on alternative remittance systems, SR VIII on charities and non-profit organizations and SR IX on cash couriers.”   NOTE: FATF’s SR VIII on charities was later renamed Recommendation 8.  (Click here to find out why nonprofits are pushing back against Recommendation 8.)

Speaking before a House hearing about terrorist financing in
May 2004, Donald Semesky, the head of the Office of Financial
Operations in the Drug Enforcement Administration at DOJ,
testified about this interagency collaboration.  “The [TFWG] has identified 42 countries whose cooperation is crucial to
the war on terrorism. All of the participating agencies work
closely to provide training or technical assistance to each
of those countries.”

In December 2003, George Glass, former director of the Office of Terrorism Finance and Sanctions Policy at State, testified before a House hearing  that one of the first TFWG projects involved “experts from the FBI and IRS” created a training course “designed to strengthen the financial investigative capabilities of the Saudi security forces.”