Remarks by Under Secretary Stuart Levey on the Treasury's New Security Role at the American Enterprise Institute (Excerpts)

September 8, 2006

Weapon Program: 

  • Nuclear
  • Missile

Thank you for inviting me to speak today. It is an honor and a pleasure to be here. Policymakers have grown to trust AEI as a valuable source of insightful analysis, honest assessments, and fresh ideas. As we take a moment to assess how far we have come since that pivotal September day in our nation's history just five years ago, we continue to battle terrorism on every front, using every tool at our disposal. I want to thank you and the scholars at AEI for the contributions you have made to this vital effort.

While we can point to progress since 2001, there is no doubt that the world remains a dangerous place. Just since the beginning of the summer, the world has witnessed North Korea launch multiple ballistic missiles, seen a war in the Middle East sparked by Hizballah's aggression, learned of a foiled terrorist plot to blow up ten U.S.-bound aircraft using materials disguised as common household products, and seen the Iranian government's continued defiance of the international community.

If we step back and evaluate the threats we face, terrorism looms large. Not only must we defeat al Qaeda's and other terrorists' plans, we must also address the multifaceted problems and threats posed by state sponsors of terror Iran, Syria, and North Korea. North Korea, the world's foremost proliferator of ballistic missile technology, continues to aggressively pursue greater nuclear weapons capabilities and continues to develop ballistic missiles of increasing sophistication and range. Iran lies at the dangerous intersection of terrorism and weapons of mass destruction, defying the international community in its quest for nuclear weapons and providing financial and material support to terrorist groups, like Hizballah. Syria is a willing partner in Iran's scheme, allowing Iranian weapons to pass through its territory into Lebanon and permitting Hizballah's leaders to operate out of Damascus. And, as the UK terror plot demonstrates, al Qaeda and its sympathizers remain intent on killing innocent civilians, hoping to instill fear throughout our democracies and, in turn, undermine our will to promote democracy in the Middle East and protect our and our allies' vital interests in the region.

We all understand that there is not one approach to dealing with these challenges - North Korea is different from Iran, Iran is different from Syria, Syria is different from loose terrorist networks like al Qaeda - and that tackling them is not by any means an easy task. But addressing each of these challenges requires leadership, persistence, and ingenuity - applying old capabilities and authorities in new ways and, where needed, developing entirely new tools. Today, I want to discuss: 1) the Treasury Department's expanded role in fighting terrorism, weapons of mass destruction proliferation, and other pressing security threats; 2) the power of targeted financial measures, particularly when coupled with government partnership with the private sector, in combating these threats; and 3) how governments and financial institutions can work together to confront the challenge presented by the Iranian regime.


Counterterrorism and security policy has traditionally been the province of foreign affairs, defense, intelligence, and law enforcement officials - not Finance Ministers. But finance ministries worldwide are now working closely with the traditional security ministries to meet the government's first responsibility: ensuring the safety of its citizens. Promoting a safe, sound, and secure financial system will enable us to work toward that end.

As our government took stock of all of its tools to combat terrorism and the Executive Branch was reorganized after September 11, President Bush, members of his Cabinet, and the Congress recognized that the Treasury Department had unique authorities that could contribute to the fight. Although many of the Treasury's law enforcement functions were transferred to the Departments of Homeland Security and Justice in 2003, the Treasury quickly assumed a new role in U.S. national security policy as we began to apply these unique authorities in creative ways. This was the genesis of the office I oversee, the Office of Terrorism and Financial Intelligence.

Our mission is to marshal the Treasury Department's policy, enforcement, regulatory, and intelligence functions in order to sever the lines of financial support to international terrorists, WMD proliferators, narcotics traffickers, and other threats to our national security. There are financial networks that underlie all of these threats. Those networks are sources of valuable intelligence; they are also vulnerabilities we can exploit.

While combating terrorism finance is a top priority of my office, we have made progress on other fronts as well. Using a wide range of tools, we have helped shut down the networks of Colombian and other foreign drug kingpins; targeted Iranian, Syrian, and North Korean companies involved in WMD and missile proliferation; financially isolated key Syrian regime members; and struck a deep blow to the North Korean government's illicit financial network.

The intelligence component of our efforts is particularly important. For the first time in U.S. history - and likely the first time worldwide - we set up an intelligence analysis office, the Office of Intelligence and Analysis within the Treasury Department to bring the knowledge of the intelligence community to bear on the evolving threat of illicit finance. Having an intelligence analysis office at the Treasury is a tremendous innovation. Money trails don't lie. Financial intelligence is uniquely reliable; it allows us to track threats, as well as to deter and disrupt them.

The authorities that the Treasury has at its disposal are among the rare tools short of military force that we can use to exert leverage when traditional diplomatic options are exhausted. They allow the U.S. government to bring concentrated pressure to bear on an otherwise unresponsive threat, demonstrating to the world that failure to abide by internationally-accepted norms of behavior bears real consequences. With the Treasury Department's recent actions, the Iranian regime is beginning to see that first-hand

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Dealing with Iran - a country that is much further integrated into the international financial system - presents a more complex challenge.

Hizballah's recent aggression in the Middle East has focused international attention to Iran's role in supporting international terrorism. Iran has long been a state sponsor of terrorism. Tehran arms, funds, and advises Hizballah, an organization that has killed more Americans than any terrorist network except al Qaeda. The world witnessed the impact of that Iranian support this summer when Hizballah targeted a civilian population in Israel with sophisticated weaponry. That costs money. Indeed, Iran provides Hizballah with hundreds of millions of dollars each year, which is why I have said that Iran is the central banker of terror. It is remarkable that Iran has a nine-digit line item in its budget to support Hizballah, Hamas, and other terrorist organizations at the expense of investing in the future of its young people.

As we continue to deal with the challenge presented by Iran's pursuit of a nuclear weapons program, we must also confront its support for terrorism. We have taken several steps to do so this week.

First, while Iranian financial institutions are prohibited from directly accessing the U.S. financial system, they are permitted to do so indirectly through a third country bank for payment to another third country bank. Today, we have cut off one of the largest Iranian state-owned banks, Bank Saderat, from the U.S. financial system. Here is why: This bank, which has approximately 3400 branch offices, is used by the Government of Iran to transfer money to terrorist organizations. Iran uses Saderat to transfer money to Hizballah. Iran also uses it to transfer money to E.U. designated terrorist groups Hamas, the PFLP-GC and the Palestinian Islamic Jihad. For example, since 2001, a Hizballah-controlled organization received $50 million directly from Iran through Saderat. Hizballah uses Saderat to send money to other terrorist organizations as well. Hizballah has used Bank Saderat to transfer funds, sometimes in the millions of dollars, to support the activities of other terrorist organizations such as Hamas in Gaza. We will no longer allow a bank like Saderat to do business in the American financial system, even indirectly.

Second - just yesterday - we took action under our terrorism Executive Order against two financial companies, Bayt al-Mal and the Yousser Company, which function as Hizballah's unofficial treasury, holding and investing its assets and serving as intermediaries between the terrorist group and mainstream banks. Institutions considering dealing with these two entities are now on notice as to their true character.

On the nuclear front, the UN deadline for Iran to suspend its enrichment and reprocessing activities has come and gone, while Iran continues its program without pause. President Bush has made clear that, though we continue to work toward a diplomatic solution, there must be consequences for Iran's continuing defiance. In Iranian President Ahmadinejad, the world faces the dangerous combination of a leader dedicated to developing nuclear weapons and to materially supporting terrorists; a leader that has denied the Holocaust and called for Israel to be "wiped off the map"; a leader that has said of America: "God willing, with the force of God behind it, we shall soon experience a world without the United States."

History's lessons have taught us not to ignore actions and words like these. It is clear why the world should not tolerate a nuclear-armed Iran. The danger is that Ahmadinejad not only has an ideologically extreme vision of the future but that he might develop the weapons that make him believe that vision can be obtained.

Our actions this week are a sign of the costs that Iran's leaders will impose on the Iranian people if the leadership chooses to remain on its current path of defiance. The regime will end up isolating Iran from the world community, with reputable financial institutions becoming increasingly unwilling to handle Iran's business. The Iranian people deserve better than a government willing to sacrifice their economic well-being to pursue weapons they don't need and policies that result in the deaths of innocent civilians. They deserve better than a regime that allows unemployment and poverty to rise, and their basic rights to be tossed aside. Iranians deserve freedom and all it has to offer.

The United Nations is one avenue for imposing pressure on the Iranian regime - an avenue we continue to aggressively pursue - but like-minded states and even the global private sector may well decide to take additional measures outside of that context. We are already seeing private institutions - particularly those in the financial community - responding to this provocative behavior and reassessing their relationships with Iran. Earlier this year, the Swiss bank UBS cut off all dealings with Iran. HSBC and Credit Suisse have also limited their exposure to Iranian business. According to the banks, these were business decisions, pure and simple - handling Iran's accounts was no longer good business. As further evidence of the change in tide, a number of foreign banks are refusing to issue new letters of credit to Iranian businesses. And earlier this year, the OECD raised the risk rating of Iran, reflecting this shift in perceptions and sending a message to those institutions that have not yet reconsidered their stance.

This Sunday, I am traveling to Europe - others will be going to the Middle East and to Asia - to consult with government and private sector leaders on measures we should all be taking to protect ourselves from Iran's use of the international financial system to advance its dangerous policies. The next steps may involve sacrifice, but I think that people are beginning to recognize that the costs we face now pale in comparison to those we might face in the future if Iran does not change course.

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