DUTCH TERRORIST FINANCE CONFERENCE MARCH 15-16

UNCLAS SECTION 01 OF 05 THE HAGUE 000616 SIPDIS SIPDIS STATE FOR EB/ESC/TFS, S/CT, INL/C, IO/PSC STATE ALSO FOR EUR/PGI, EUR/ERA, EUR/UBI TREASURY FOR LEVEY/OBRIEN, OFAC NSC FOR ZARATE JUSTICE FOR CRM/AFMLS FBI FOR TERRORIST FINANCING OPERATIONS SECTION USEU FOR JUNDERWOOD E.O. 12958: N/A TAGS: KTFN ETTC EFIN PTER ECON EUN PREL NL SUBJECT: DUTCH TERRORIST FINANCE CONFERENCE MARCH 15-16 REF: 05 THE HAGUE 2356 ¶1. SUMMARY. Treasury Under Secretary Levey led the USG delegation to the March 15-16 Dutch-hosted international conference on terrorist financing issues. Expert-level workshops addressed enhancing the effectiveness of financial investigations, improving communications between the public and private sector, and assisting developing countries in implementing global anti-money laundering/counterterrorism financing (AML/CTF) standards. Conference Ministerial conclusions urged leadership by Finance Ministries to utilize their authorities to combat illicit finance of all types, including terrorist financing. Officials also stressed action in such areas as the development of interagency groups to improve information flows, lower thresholds for information exchanges between relevant foreign counterparts, training programs for financial investigations, guidance for the private sector on targeted financial controls, industry/government advisory groups to ensure information exchanges and the creation of effective risk-based guidance, and assistance programs supporting the progressive implementation of AML/CTF standards by developing countries. Dutch Finance Minister Zalm called for further discussion of these follow-on actions within upcoming meetings of the EU's Economic and Financial Affairs Council (Ecofin),G-7, G-20, ASEAN Finance Ministers, and Financial Action Task Force. The Washington interagency process and Embassy The Hague played a significant role in shaping the content of this conference. (This message has been cleared by Treasury Under Secretary Levey and Assistant Secretary O'Brien.) END SIPDIS SUMMARY. ¶2. The Dutch Finance Ministry hosted on March 15-16 in The Hague an international conference on terrorist financing issues. The concluding Ministerial session of the conference included presentations by Treasury Under Secretary for Terrorism and Financial Intelligence Stuart Levey, Spanish Finance Minister Pedro Solbes, South Korean Deputy Finance Minister Kwon Tae-Shin, and Dutch Finance Minister Gerrit Zalm. Other conference participants included Treasury Assistant Secretary for Terrorist Financing Patrick O'Brien, Financial Action Task Force (FATF) President Kader Asmal, EU Counter Terrorism Coordinator Gijs de Vries, as well as representatives from 41 countries, 15 international organizations (World Bank, IMF, UN, European Union, Europol, FATF and its regional bodies, Egmont Group, MONEYVAL, Asia Pacific Group, Eurasian Group, and Offshore Group of Banking Supervisors),and the private financial sector. The conference, an initiative first raised during Treasury Secretary John Snow's June 2005 visit to the Netherlands SIPDIS (reftel),was a follow-on to efforts begun in this area during the 2004 Dutch EU Presidency and designed to build on and complement existing international dialogues within the UN, FATF, G-7, and U.S.-EU dialogue on combating terrorist financing. FINANCE MINISTRIES KEY TO FIGHT AGAINST TERRORIST FINANCING -------------- -------------- ¶3. Dutch Finance Minister Zalm opened the conference by noting significant progress over the last five years in the fight against terrorist financing, including the seizure of some $216 million in terrorist-related assets, real progress in securing formal financial channels, and the creation of more effective regulatory and supervision regimes for alternative remittance systems and non-profit organizations. Despite such progress, he cautioned that now was not the time to sit back and relax and called on conference participants to re-energize their efforts in seeking improved cooperation THE HAGUE 00000616 002 OF 005 between investigative authorities at the national level, public and private sectors, and countries with developed, high-tech financial centers and those with less developed financial systems. As financial markets were crucial partners in this effort, Finance Ministers had the "ultimate responsibility within government to make this fight a success," Zalm stressed. (The full text of Zalm's remarks is available at www.minfin.nl.) ¶4. FATF President Asmal underscored the importance of political leadership, regional FATF-style bodies, and effective risk-based guidance to ensure private sector compliance with FATF recommendations. He highlighted the need to involve developing countries in the FATF to ensure a sense of ownership and recommended that developing countries focus on compliance with core AML/CTF requirements initially rather than attempt to implement all simultaneously. EU Counter Terrorism Coordinator de Vries stressed the role of the EU in the FATF, MONEYVAL, and UN. He noted EU technical assistance to Indonesia, Algeria, and Morocco, and a meeting this month to discuss the creation of common minimum standards for financial investigations in the EU. De Vries was critical of EU member states that had not ratified necessary protocols to the Europol Convention, adding that this prevented joint U.S.-EU analysis of frozen bank accounts. He also urged the European Commission to move forward in the independent review of EU implementation of FATF Special Recommendations. ¶5. Urs von Daenike, Head of the Swiss Service for Analysis and Prevention, stressed the need to combine financial intelligence with other types of intelligence to gain a better understanding of cases as well as the importance of sharing such information with the private sector. Antonio Maria Costa, Executive Director of the UN Office on Drugs and Crime (UNODC),described the UN approach on terrorist financing as piecemeal due to the lack of a comprehensive, underlying agreement, which does exist in the area of drugs and crime. He noted UNODC efforts to provide assistance to countries to ratify UN instruments, adopt national legislation, build administrative capacity to implement legislation, and cooperate with third countries. He offered that the recently adopted UN Convention on Corruption could be a useful tool in addressing terrorist financing issues. Bert Heemskerk, CEO of Rabobank the Netherlands, said financial institutions, as the ultimate "gatekeeper" of the global financial system, were willing but needed the tools and authority to join efforts in the fight against terrorist financing. He also stressed the need to balance regulatory requirements with associated administrative burden costs. WORKSHOP I - COOPERATION ON FINANCIAL INVESTIGATIONS -------------- -------------- ¶6. Workshop I opened with a "sanitized" presentation of a recent investigation into the role of a Netherlands-based NGO suspected of involvement in terrorist and extremist activities and the role of operational cooperation and financial information in the case. Other panelists, including Treasury A/S O'Brien, shared national best practices in the area of cooperation between financial investigative authorities. Nicholas Kaye, Directorate General for Justice, Freedom and Security, European Commission, noted a European Commission/Europol initiative to promote the use of financial investigations via common minimum training standards in EU member states. Workshop participants agreed on the need for the following: -- Enhanced financial investigations as a standard part of criminal investigations into terrorist activities; THE HAGUE 00000616 003 OF 005 -- Legal frameworks that allow for the sharing of relevant information with appropriate privacy and civil liberty safeguards; -- Increased trust among various stakeholders in the investigative process; -- Pro-active intelligence gathering in addition to investigations following terrorist attacks; -- Development of operational interagency groups and task forces to ensure an expedited low threshold exchange of information among investigative authorities (intelligence services, police, customs, tax revenue services, financial regulators, public prosecutors, Financial Intelligence Units, and other investigative authorities) and a deconflicting of activities by agencies involved in investigations; -- Use of specialized services for analyzing and datamining of financial intelligence; -- Lower thresholds for the exchange of information with foreign counterparts; -- Investment in training programs for financial investigations; and -- Use of information from financial investigations to guide the private sector in applying targeted financial controls (concrete freezing controls, specific threat or risk information and targeted advisories, specific feed back from court cases, red flag indicators, broader trends and typologies, and general risk assessments). WORKSHOP II - PUBLIC-PRIVATE COOPERATION -------------- ¶7. Workshop II discussed best practices in the area of public-private and private-private cooperation, with views from policy-makers, financial supervisors, and private financial institutions. Workshop participants agreed on the following: -- Financial institutions have a clear interest in avoiding any links with the financing of terrorism and are ready and willing to contribute, within their capabilities, to the prevention and detection of funds used to support international terrorism; -- Cooperation between the public and private sector requires mutual trust and an effective exchange of information, including possible mechanisms to vet bank staff to receive classified intelligence; -- Finance Ministries must ensure that there are clear points of contact and clear distributions of responsibilities within governments to guarantee a systematic provision of relevant information to the private sector; -- Senior management of financial institutions is responsible for ensuring an awareness within their entire institutions of the need to prevent terrorists and other criminals from misusing the financial sector and putting in place systems that adequately assess risks, "know their customers," and report suspicious transactions to law enforcement; -- Intelligence and risk-based approaches require that government agencies, financial supervisors, and the financial sector work together as a team; -- Legal obstacles should be lifted, when possible, to ensure the exchange of relevant information, notably between financial institutions and within international financial conglomerates, with special reference to the work already begun in this area within FATF; and -- Countries should have in place appropriate national responses to ensure the necessary exchange of information between the public and private sector on all levels, including a clear public confirmation of the importance of sharing public sector information with the private sector, structures that support coordinated, effective, and swift communication between the public and private sector, advisory THE HAGUE 00000616 004 OF 005 groups of industry and government representatives to ensure the development of effective risk-based guidance, and a network of specific contacts (security vetted staff members) in financial institutions to receive specific threat information. WORKSHOP III - ROADMAP FOR ACHIEVING GLOBAL STANDARDS -------------- -------------- ¶8. Workshop III explored means for creating a more conducive environment for countries with less developed economies and institutional capacities to help them implement progressively an effective counterterrorism financing regime. Workshop participants discussed the need to raise awareness of the importance of AML/CTF and to increase political support and focus on AML/CTF implementation. Participants agreed that the pace at which this could be achieved would vary from country to country and that further work in the FATF and other international fora was needed to help such countries focus on fundamental requirements and threats first before moving to a more comprehensive level of implementation, including the following roadmap: -- Increased customized technical assistance; -- Improved coordination mechanisms for the delivery of technical assistance; -- Larger roles for regional organizations (FATF-style regional bodies) in coordinating the demand and supply of technical assistance; -- Continued recipient country control, with appropriate internal coordination mechanisms, over technical assistance needs, to encourage "ownership" of assistance programs; -- Recognition of the private sector's potential contribution to technical assistance programs; and -- Strengthening of technical support and guidance by international organizations (i.e., World Bank and UN) to countries transitioning from informal to formal systems for both domestic and cross border remittances. MINISTERIAL CONCLUSIONS -- APPLYING THE RIGHT TOOLS -------------- -------------- ¶9. In the concluding Ministerial session, U/S Levey highlighted the powerful tools that Finance Ministries, like the U.S. Treasury Department, have at their disposal to accomplish the dual mission of protecting financial markets from abuse and combating threats to national security. He stressed the important role that financial authorities have played in disrupting and dismantling terrorist networks, including the development of effective targeted financial sanctions regimes. While more work needed to be done in this area, he suggested that such tools could also be used to combat threats of all kinds, including the proliferation of weapons of mass destruction (WMD). Various UN Security Council Resolutions also called on the use of financial tools to combat these threats, and he expected more calls to action by financial authorities in the future. U/S Levey also noted that the creation of his position within Treasury represented a new approach to defending national security interests by attacking the financial underpinnings of any threats. (The full text of U/S Levey's remarks are available at www.treas.gov/press/releases.) ¶10. While Justice and Interior ministries often played the largest role in combating terrorist financing, Spanish Finance Minister Solbes agreed that Finance Ministries had a decisive part to play in protecting the security and integrity of the financial sector. He stressed the need for measured and tailored responses to such threats that minimized the burden on working immigrant populations. THE HAGUE 00000616 005 OF 005 Noting Spain's chairmanship of FATF's working group on Special Recommendation VIII (charities and non-profits), Solbes called for greater national and international cooperation, increased financial targeting actions, enhanced public-private cooperation, and improved guidance to the private sector in this area. ¶11. South Korean Deputy Finance Minister Kwon pointed to a significant increase in anti-money laundering and terrorist financing efforts in South Korea since 2001. He indicated plans to incorporate conference conclusions within counterterrorism legislation currently under consideration in his country. He also proposed the convening of an ASEAN meeting of Finance Ministers on the issue of helping developing countries establish effective AML/CTF systems and called for increased technical assistance in this area through the World Bank and Asian Development Bank. ¶12. In presenting recommendations from the conference workshops, as outlined in the Ministerial Conclusions statement (see www.minfin.nl),Minister Zalm recalled that the idea for the conference had first been raised during the June 2005 visit to the Netherlands of Treasury Secretary Snow. He stressed that the fight against terrorist financing required cooperative efforts within and outside the realm of Finance Ministries. With this in mind, he called for effective follow-on actions within countries around the world as well as in upcoming meetings of the EU's Economic and Financial Affairs Council (Ecofin),G-7, G-20, ASEAN Finance Ministers, and FATF. ARNALL