Keith Rothfus, former congressman for Pennsylvania's 12th congressional district, spoke to a July 13 Middle East Forum webinar (video) about U.S. laws and regulations designed to track and disrupt "financing that goes to and from bad actors around the world."
Collectively known as Anti-Money Laundering/Combating Financing of Terrorism (AML/CFT), these safeguards (1) deny bad actors the ability to take earnings from "nefarious deeds" and "[launder] the proceeds ... into legitimate businesses" and (2) prevent the movement of funds "to facilitate the commitment of any illegal acts and terrorism."
The Bank Secrecy Act (BSA) of 1970, the "foundational law" upon which AML/CFT regulations are based, established reporting requirements for financial institutions, and there have been a series of subsequent amendments that "sharpen the government's tools."
Following the 9/11 terrorist attacks, Congress passed the Patriot Act, which criminalized terror financing, strengthened reporting requirements, and prohibited financial institutions from engaging in business with foreign shell banks.
The recent passage of the National Defense Authorization Act (NDAA) introduced additional AML/CFT regulations, including requirements for the disclosure of "beneficial ownership of companies," protections for whistle-blowers who report AML/CFT violations, and the extension of regulatory requirements to cryptocurrency and other digital assets.
The AML/CFT regime is administered by Treasury Department in coordination with the Department of Justice and the State Department of State in interactions with global agencies. The Financial Crimes Enforcement Network (FinCEN) is a bureau of Treasury that collects and shares financial transaction information with international counterparts.
An important new area of focus is "trade-based money laundering," which involves inflating invoices to hide the value of imports/exports – a method employed by Hezbollah to move money from Latin America to the Mideast.
A big challenge in cracking down on terrorist financing is securing the cooperation of policymakers in countries involved, said Rothfus. "When you have business interests, when you have one country wanting to cut a deal with another country ... it becomes almost a Rubik's cube, where you're trying to line up the colors on the right side, before you get everybody to go forward."
This was evident during the Obama administration, which "backed off" a terror financing investigation "tracking ... relationships between Hezbollah and one of the Mexican drug cartels." During that time, negotiation of the Iran nuclear deal, or Joint Comprehensive Plan of Action (JCPOA) was under way and "the Obama administration was so intent on getting Iran to the table and getting a deal done" that a critical counterterror financing investigation into "the connection between the narco-traffickers and the terror groups ... to exploit the world's financial system" was sidelined. "That [was] not in [America's] interests. Not at all," said Rothfus.
Biden's bid to "coax Iran" back to the negotiating table may compromise the fight against terror financing.
Today there are concerns that the Biden administration's bid to "coax Iran back to the table for negotiating on the nuclear deal" will similarly compromise the fight against terror financing. The Biden administration is "giving up a good bit of leverage" by lessening the "very effective" sanctions against Iran enacted by the Trump administration. Negotiations will be impacted by the appointment to fill the position of Treasury's undersecretary for terrorism and financial intelligence. The administration's nominee, Brian Nelson, recently appeared before the Senate Banking Committee, but Senators Pat Toomey (R-PA) and Bob Menendez (D-NJ) put a hold on his nomination, citing concerns as to whether Nelson will penalize China and Russia for violating U.S. sanctions by purchasing oil from Iran, "the world's number one state sponsor of terror."
Rothfus said that what is necessary is "moral leadership coming out of Washington, DC" to take a stand against "Iran, and to an extent, China." Rothfus sees the need for "moral suasion" to exhort "our partners who believe in freedom" to work in tandem with U.S. efforts and stymie terror financing. Rothfus advised American listeners to "put pressure on members of Congress" to "hold the Biden administration's feet to the fire to make sure that we are exerting maximum pressure" on bad actors in the world. "It's a question of ... will. It's as simple as that."
Marilyn Stern is communications coordinator at the Middle East Forum.