Programs and Events

Press Roundtable with Stuart A. Levey, Under Secretary of the Treasury for Terrorism and Financial Intelligence, and John C. Rood, Assistant Secretary of State for International Security and Nonproliferation

Thursday, July 12, 2007
Berlin, Germany

Transcript

Acting Press Attaché Dr. Daniel Mattern:  Good morning, I think we should get started.  We have with us this morning the Under Secretary of the Treasury for Terrorism and Financial Intelligence, Stuart Levey, who has agreed to participate in this roundtable for 30 minutes, on the record.  When you ask your questions, please identify yourselves and your organization.  To start off, Under Secretary Levey will talk a little bit about what he is doing here in Germany.

Under Secretary Levey:  As Daniel said, I'm the under secretary for terrorism and financial intelligence.  I'm here in Germany as part of a three-country tour through Europe with Assistant Secretary of State John Rood, who is our government's lead counter-proliferation official.  Let me first give you a few minutes of background and then we can take some questions.

Essentially, my job in our Treasury Department is to look at a range of threats to our national security; it's a new position in our Treasury Department created in 2004 as part of our government's reorganization and look at how to better organize after the attacks of September 11th.  The theory here about creating this position in our finance ministry is that there really is a role for finance ministries on a number of these security issues, the primary reason being that there is a financial underpinning for most of the serious threat that we face.  It starts with the idea of drug money-laundering, as an obvious example, but also counter-terrorism.  We do a lot of work on terrorist financing, obviously.  The motivating factor for creating the office in the first place is the issue of terrorism and it's obviously an issue much in the public attention in Germany right now and across Europe in light of the recent attacks in the UK, and I engage with my counterparts on terrorist financing issues as a regular matter. 

As I mentioned at the outset, I'm here with Assistant Secretary Rood, who's our government's lead counter-proliferation official.  One of the things we've been looking at very closely over the last year of so is the financial underpinning of proliferation and working on what we call proliferation financing, trying to raise awareness of the fact that there's also a financial network to proliferation and that the same tools that we apply against terrorists also have an applicability to the financial networks of proliferators.  So John and I have teamed up to pursue that issue in multilateral fora around the world.

The key issue in the proliferation field that we're all concerned about is the question of Iran and the financial measures that we've been applying to try to persuade Iran to change course and handle this issue in the context of negotiations after suspending their uranium enrichment.  So we're here in Europe this week, we're in the UK, in France, and here in Germany to share information with our counterparts and compare notes on the issue surrounding Iran as well as all the other issues that I mentioned at the outset.  So that's the background.  I don't know if you want to also say a few words, John.

Assistant Secretary Rood:  The only thing I'll add is, at the State Department, as Stuart mentioned, I'm responsible for counter-proliferation policy as well as some of the other security issues that are relevant.  I think in the proliferation area, the role of proliferation finance has really, I think, become known and is being embraced by more and more governments.  After all, so many of the activities are either fuelled by funds or so many of the middlemen in companies, their motivation is more to make money, it's not an ideological one.  Therefore introducing the restrictions on proliferation financing, ways to effectively counter that, that can make a substantial different.  And, as I said, since Stuart has been active at this, supported by the State Department and others, we've seen a real growth in the recognition of the value of this set of tools by nations, and that's why it's been so fruitful, I think, this trip - for us to be in the UK and France and now here in Germany consulting with our closest allies about what really are the major security issues of the day.  He's touched on Iran, that just has profound implications for us, what is occurring in Iran in terms of security and that of our allies, and the future of things that we care very much about like the nuclear non-proliferation regime.  So I won't belabor the point but allow you time for your questions and respond to what is on your minds.

Question:  Let me shoot first, since time is so short.  As you talk about Iran, are there other Iranian banks you're targeting, because we had the case of Bank Sepah … (inaudible) … and secondly, are financial sanctions the policy you believe is most effective in combating terrorism?  Thank you.

Under Secretary Levey:  In terms of Iranian banks, state-owned banks in particular, we are very concerned about the activity of Iran state-owned banks.  The regime does use its banks to pursue not only its proliferation ambitions but also its funding of terrorism.  As you may know, we in the United States have taken action against Bank Saderat for its role in funneling money from the Central Bank of Iran to terrorist organizations – not just to Hezbollah but also to Hamas, the Palestinian Islamic Jihad, and the PFLPGC.  I focus on those because those are three terrorist organizations that are recognized as such by the EU and therefore distinguishable from Hezbollah.  The key point that I want to stress is that Iran not only uses its banks for that purpose, but also its banks engage in deceptive practices in order to engage in that business.  So, for example, we have seen on a very widespread basis the practice where Iranian state-owned banks will try to persuade other financial institutions to hide their involvement in transactions and keep their name off of transactions in order to pursue them.  This is one of the things that Bank Sepah engaged in and even the Central Bank of Iran engages in.  In terms of what will be targeted in a future resolution, I think for reasons that you'd understand we're not going to signal that sort of thing.  But I think it is fair to say that we're looking very closely at the activity of Iranian state-owned banks and that we believe that the risks of doing business with those banks are quite clear.  The risks exist in all currencies, not just in terms of U.S. dollar-business - and the fact of that heightened risk has been recognized by private sector banks around the world, I think something that has been clear even here in Germany.

In terms of your second question, in terms of sanctions and whether this is the best way to proceed, I think Under Secretary Burns - I was reading some comments that he made yesterday.  I think he said it just right: Iran has left us no choice but to pursue sanctions.  We've given them every opportunity to change course, suspend the enrichment of their uranium and then proceed in negotiations, including with the United States.  They've rejected that at every turn, and so I don't there is any choice but to continue to impose sanctions.  We do think that it's quite possible to be successful through a sanctions regime.  I noticed just earlier this week, I think, the oil minister in Iran was complaining about how the impact we've had in the banking sector was keeping, was harming oil projects in Iran.  This is the kind of thing which we hope will generate the kind of debate in Iran where the regime will change course and realize that the wiser course is to pursue the path of negotiations and therefore suspend the enrichment of uranium.

Question:  You're boss, Secretary Paulson, gave a speech recently where he complained that even among allies there's a lack of political will to help the U.S. in setting up financial sanctions.  I was wondering whether you could say whether you think Germany is one of these countries that lack political will in this field.  And the other thing would be, is there any thought in the U.S. to start using U.S. legislative possibilities like the Iran-Libya Sanctions Act to go against foreign companies who still engage in business with Iran?

Under Secretary Levey:  Let me take the second part first.  There absolutely is enthusiasm in our Congress apparently and has been ongoing for some time to strengthen the Iran Sanctions Act and to reduce the discretion of our executive branch in terms of the application of those sanctions under the Act.  Our administration's position has been that the best course is to try to keep the focus on Iran and to try to avoid those sorts of sanctions which could have the tendency of making it harder to proceed in a coalition together and that could create tension between the U.S. on the one hand and our closest allies on the other.  Having said that, I think whether or not the administration is able to persuade the Congress remains to be seen.  One of the things that we think is important is that, if we can demonstrate the effectiveness of the coalition, that'll make things a lot easier, but there's no guarantee that the Congress won't act.  As I said, the administration has been trying to persuade them to preserve the discretion that we currently have.

The other question:  I think our relationship with Germany has been excellent.  Secretary Paulson personally has had an excellent relationship with his counterparts here and even with the chancellor.  We've worked very, very well together.  I think his (…inaudible…) more generally that we think there's an evolution of the role of the finance ministries around the world.  As I mentioned at the outset, there's a security role to be played, and we can't just view life as business on the one hand and security on the other.  There is, given the nature of the kinds of threats that we're facing with terrorism and proliferation, a melding of those things; these threats are operating within our financial systems and finance ministries have a responsibility to both protect the global financial system from that kind of illicit activity and also use the tools that we can develop together to combat it.

Question:  Could you go into a bit more detail about the tools that you have to put your foot down, to begin with.  And are we looking at a lack of intelligence or do we not know enough about the channeling of money towards terrorism, or is it a lack of tools to effectively stop it?

Under Secretary Levey:  Your question's more about terrorism?

Question:  Yeah, well …

Under Secretary Levey:   Yeah, no, that's fine.  Perhaps the best tool we have in terms of fighting, the best financial tool we have in terms of fighting terrorism is the intelligence that we can gather from financial information.  Financial intelligence is highly reliable, for a lot of obvious reasons.  The kind of information you get from financial intelligence is exactly the kind of information that security forces really can use, it's got names: it's got dates, it's got phone numbers, it's got addresses.  This is the kind of information that can generate real leads, so one thing that we have found that has been highly effective is the use of financial information to help map out networks, particularly when you combine it with other information that we sometimes have available to us, where you'll have people talking to each other and not using their real names, but then you're able to put the information together with financial information and map out the network.  So, one of the tools that is effective is financial intelligence, but in order to make the most of it there has to be robust sharing of it among allies and so forth.  These are the sorts of issues that we work on all the time.  In terms of the most obvious sort of, the most obvious tool that we have is the ability to designate individuals and entities that are supporting terrorism and isolate them from the financial system.  That is a very powerful tool, both because you have impact on that one individual or entity that is engaging in the terrorist financing but also because when it comes to the funding of terrorism, it is possible to have deterrents.  I don't think that the guy who wants to strap on the suicide belt is susceptible to traditional deterrence, but that's not true with the deep-pocket donor who wants to both fund terrorism on the one hand and on the other hand live in polite society and have a high social standing.  That person is either exposed, or fears that he will be exposed for funding terrorism; he may well have changed his ways.  And we've actually seen the power of deterrence from these kinds of tools - the fear of being designated at the United Nations for terrorist financing, in the case of al-Qaeda, or being designated in the EU or in the United States for funding other terrorist organizations.  So, those are the two obvious tools that I think have real impact.

Question:  How cooperative do you find the banks, because they tend to be secretive and, you know, how prepared are they really to share the information with you?

Under Secretary Levey:  You know, I didn't do this before 9/11 so I can't really compare.  But I can tell you that, especially when it comes to terrorism, it really is a global coalition, virtually, I mean a virtually global coalition.  And banks in the private sector in general have been incredibly cooperative on terrorism and, to come back to the other question, on the Iran issue, and it's the same reason.  Banks of course want to make money but they don't want to be involved in illicit activity, and they're very protective of their reputations, so they very much do not want to be handling the business of terrorists, they want to make sure they're not handling the business of proliferators, they want to make sure they're not involved in other illicit activity that Iran may be engaged in.  They have been very, very cooperative as a general rule, because they’re on the one hand protective of their reputations and secondly because the people who are making these decision as banks are just a committed to fighting terrorism as someone like I am.  They're good corporate citizens and they really don't want to be involved in that kind of conduct.

Assistant Secretary Rood:   Just to add to what Under Secretary Levey said, I was thinking, in some of the areas where we've also seen this be effective is that the governments are working together a lot more in the financial area.  There are UN Security Council resolutions, 1540 for example, that require governments to criminalize a lot of proliferation activities, and part of the suite of activities that governments have looked at criminalizing is obviously the financing of these sorts of illicit proliferation activities, and so private financial institutions are getting more encouragement from governments and governments also have a reputational risk, if you will, that they are, they don't want their institutions on their territory to be facilitating these kinds of activities.  We've had good cooperation in the Proliferation Security Initiative, for example.  There are over 80 countries that are now members of that - to try to impede proliferation and deal with it, and financing is one of the areas that countries are looking to there.  And because you have this international legal basis in the Security Council resolution 1540 and you've seen governments now putting in place increasingly domestic legal institutions, there's a certain risk of exposure also that motivates the private sector to be more cooperative, and that's the, this is the sort of thing we want to tap in to because, as Stuart mentioned, there are people who are at the tail-end, either the proliferator or the terrorist, the actual individual with the suicide-vest or the person working at the nuclear facility.  This is a very large network and we shouldn't underestimate the number of people it requires in order to enable that sort of behavior, and what motivates that and therefore what will be effective in countering that behavior.  And financial tools play a significant role, and I would say that if you take a good step back, this is still a rather immature field.  Stuart's really, I think, been at the vanguard for some time - there are increasingly more people joining it, but as a whole it's an extremely immature field.  Hopefully when we sit down around this table in five years we'll say again how substantial the progress has been and then in ten years, and so on, because I think particularly for governments like ours that are, in Germany and the United States and so on, that are very rule-based, have a highly evolved legal system that regulates financial dealings, I think this is a natural fit for us to be looking at this toolset increasingly to meet the most pressing security challenges.  And we do, particularly in dealing with vexing problems like Iran, we want to expand our set of options as to what we can do about it, because some of the obvious ones are not necessarily palatable.

Question:  I have a strategic question, because I get the impression that the proliferation issue has now a high priority, maybe even a higher priority, than terrorism finance - so-called classical terrorism finance, when you think about al-Qaeda networks and so forth - and I wonder, this maybe a naïve question, aren't you taking on too much, because the case in the United Kingdom, with this trio, has shown clearly how difficult it is to find, to detect, the al-Qaeda affiliates?  And isn't that, so to speak, the immediate threat and the higher threat?  Should you focus your efforts and these things because we hear that, even there, we have a lack of resources, and therefore I wonder, do you have this on your mind occasionally?  Is it a fair question or is it total crap?

Under Secretary Levey:  It's a very good question, and maybe I'll take you to my budget hearing (laughter).  I could really use you

Question:  Well, I will come …

Under Secretary Levey:  I think, you know, we do a lot of discussion with our allies right now on Iran and other proliferation issues, and I don't want to leave you the impression that terrorism is not still a top priority.  Of course it is, and it's a threat not only in the UK, it's very much a threat here in Germany and I think the people who work on the terrorism issues have no illusions that it is not a threat, and people are very committed to doing everything they can to fight al-Qaeda, al-Qaeda affiliates and so forth.  You're right, it's challenging, it's very challenging, and the exploitation of intelligence and the sharing of intelligence is really critical: we have to be rigorous about it, we have to be aggressive in doing it, and we have to act very quickly in terms of countering these kinds of threats.  The danger I think is, as your question alludes to, is that we have to be right all the time and we have to, in order to disrupt terrorists, we can't be wrong ever.   So, there is a great deal of effort on this.  I do want to make the point though that, if you take a step back and say what is the greatest threat to the kinds of civilization that both of our countries enjoy, it is the combination of terrorism and proliferation.  The greatest threat is the possibility of a terrorist organization having access to these sorts of weapons and that's why, I think, you see John and I working so closely together because we really need to combine forces to make sure that that doesn't happen, and to try to put in place the kinds of legal regimes that John was just talking about to make sure that people can act on the proliferation side, and on the terrorism side.  We have to do both of those things if we are going to be successful in averting that most dangerous threat.

Assistant Secretary Rood:   There is some commonality in what we're doing also in that you see the countries that are supporters of terrorism, also happens to be a high degree of commonality that they are the ones pursuing weapons of mass destruction programs.  And, for the same reasons that other troubling activities have unfortunately proven attractive to these governments, the possession of a weapon of mass destruction is something that is very attractive and there have been a lot of cases that fit into the character of the government. But I think implicit in your question is trying to rank-order threats and here I would say you do have to do that, but both terrorism and the dealing with profound security challenges like Iran's pursuit of a nuclear weapon, both occupy the top shelf in terms of our thinking.  We would like to ask some of the challenges we face in the world to cool down a little bit while we deal with others but we've got to deal with the things that are the greatest threat.  And I think that, in the case of Iran, we are in a period of time where they don't possess a nuclear weapon today where we think we can have some influence on the situation, hopefully prevent the sort of full emergence of a threat which would just substantially alter the calculus here in Europe, in Asia, in the United States, and for things that we care so much about like the nuclear proliferation regime.  So we are therefore very focused on trying to take action now.  We're not the only ones, we seen just a series now of Security Council resolutions - three passed unanimously - we've seen the European Union act.  This is not  I guess an unusual position to think that now is the time to really double-down and focus on this effort.

Question:  If you talk about the greatest threat being the combination of terrorism and proliferation, you would have to deal with Russia as well.  We were talking about the allies and how good you work together and how cooperative the working-together is.  How about Russia?

Under Secretary Levey:  I would let John handle that; he does a lot of work with the Russians.

Assistant Secretary Rood:  Well, we're working very closely with the Russians in a number of fields.  We would obviously like to continue to expand upon the cooperation, where we can improve it.  For example, in the proliferation area, at the last meeting between our two presidents, Presidents Bush and Putin, in Maine, shortly after that the two presidents released a statement, a declaration about nuclear nonproliferation and ways that the two of them and their countries hope to lead a group of countries to, if you will, polish up the NPT regime for the 21st century, and looking at ways not only to shore it up but to make the prospect of peaceful use of nuclear energy much more achievable to countries, to provide an attractive offer to states and have them choose to create a system in essence where the pursuit of peaceful nuclear energy is done and all the advantages are in pursuit of that in a peaceful manner which doesn't pose the kind of proliferation risks that today's system does, with countries having access to enrichment and reprocessing.  And the countries wouldn't forego their right, just the economic benefits and the other political benefits would be so great in an attractive offer, and that they would see a way forward in that sense.  So that's just an example where we're working closely with the Russians.  In the area of WMD terrorism we're also working closely with them.  We have initiative called the Global Initiative to Combat Nuclear Terrorism, and I just, along with Deputy Foreign Minister Kislyak, in Russia co-chaired a meeting of that group, the third meeting, in Astana, Kazakhstan.  There are now 52 nations which have joined this since our, about a year ago Presidents Bush and Putin announced this initiative and just in that period of time the United States and Russia have now built this to include, as I said, 52 nations, plus the EU and the IAEA as observers.  And the purpose of this initiative is to deal with the possible threat of nuclear terrorism, which I think is, would be, as we would say in the United States, a real game changer in the security field.  Even the most modest incident like that I think would substantially affect the way that we deal with various security challenges.  But what we've said there is that individual nations have programs but what we're trying to do is through a grouping of countries not only build the capacities of other nations but also through this cooperation build a larger whole.  So as an example, this isn't that sort of initiative where people just show up and give speeches; the idea is to have real activities that really include capabilities.  So the German government, as an example, has sponsored a set of activities to help other countries control their radioactive sources, to know where they're being employed, how do you regulate that trade, how do you deny access to it for others?  The German government's quite capable of doing that for itself, but there are other nations around the world that obviously don't have that same skill-set.  The French have offered activities, both to run training exercises, seminars, how do you deny the use of a radioactive device in a subway?  So this set of activities that we and the Russians kind of lead along with other nations we hope is going to lead to a real improvement in capabilities around the world.  So while we would obviously like to have more cooperation, better cooperation - that's always the goal - I would just point out that we're doing a number of things.

Acting Press Attaché Dr. Daniel Mattern:  I'm afraid we're out of time unfortunately and the Under Secretary has got to move on.

Under Secretary Levey: Thank you, thanks for having us.