Treasury affirms crackdown on terrorists involved in trade
A senior U.S. Treasury Department official told lawmakers Thursday his agency has made significant headway to stopping money flows to terrorist organizations, but more work remains.
“We are challenged to innovate ways of securing the international financial system and disrupting the financing that fuels terror, without doing damage to the workings of the free markets,” testified Juan Carlos Zarate, assistant secretary at Treasury for terrorist financing and financial crimes, before the House Financial Services Committee.
“This challenge extends to less formal and previously unregulated sectors of the international economy,” he said.
Treasury, for example, has increased its regulatory oversight of the diamond trade.
“The illicit diamond trade provides an instructive illustration of how terrorists could abuse the precious commodities industry to fund their efforts,” Zarate said. “Unfortunately, the legitimate diamond processing steps of mining, trading, cutting, polishing, and retailing can be abused by corrupt regimes and criminal organizations to place, layer, and integrate illicit diamonds.”
Zarate said federal authorities must improve the oversight of the diamond and precious commodity industries by developing effective international standards and domestic regulations. “We must identify and disrupt illicit actors within the system through targeted actions,” he said.
The U.S. government subscribes to the international diamond control standard, known as the Kimberley Process. This process requires that each shipment of diamonds being exported and crossing an international border be transported in a tamper-resistant container and accompanied by a government validated Kimberley Process Certificate, which is uniquely numbered and includes the description of the shipment’s content.
However, Zarate warns that the Kimberley Process is not foolproof. “There are reports that in some locations that Kimberley certificates can be purchased on the black market. Moreover, the trade in polished stones is not subject to the Kimberley Process,” he said.
Zarate said the U.S. government must develop better systems to pinpoint and track illicit trade. “Our experience demonstrates that an effective way to analyze and investigate suspect trade-based activity is to have systems in place that can monitor specific imports and exports to and from given countries,” he testified.
U.S. Customs and Border Protection has used a process of detecting trade anomalies to fight the Colombia black market peso exchange, examine suspect gold shipments from non-gold producing countries in the Caribbean, and take enforcement action against the illegal transshipment of textiles.
“We will continue to work with our colleagues from throughout the U.S. government … to detect trade anomalies that point us to fraudulent value transfers, money laundering, terrorist financing, and other financial crimes,” Zarate said.