Treasury's War Read online

  Ultimately, the hunt for Saddam’s assets revealed crates full of cash, hundreds of Hussein front companies in the Middle East and Europe, a web of thousands of accounts, and the farce of the Oil for Food program. All told, we identified over $5 billion in assets, returning almost $3.5 billion to Iraq, and stopped the flow of millions more in suspect assets. More importantly, we had further shaped the international environment to reject the flow of corrupt capital and to view high-end corruption as part of the swamp of threats to the integrity of the financial system.

  Treasury had reshaped the financial battlefield—attacking Al Qaeda’s finances, isolating bad banks, and conditioning the international financial system to reject rogue capital. As focused as the government was on terror and Iraq, we knew the Treasury tools and this new power would also be used to confront other authoritarian regimes that opposed the United States and its allies, including Syria, North Korea, and Iran.

  Treasury’s vision of financial warfare was continuing to evolve. In Iraq, we had seen the danger of a kleptocracy undaunted by traditional sanctions. In our ongoing fight against the flow of illicit capital, we recognized that we would need to draw clear lines between the legitimate financial world and the rogues who sat outside it and tried to misuse or circumvent the financial system. Soon enough, Treasury would have the opportunity to marshal the tools and experience we had accumulated to attack these rogues in ways they never expected.

  8

  RESURRECTION

  Since the creation of the Department of Homeland Security, our team at Treasury had fought hard to make its presence known. Having survived a period of institutional turmoil, we had begun to flourish, seeing results from our new initiatives on bad banks and Iraqi assets. Though others sometimes misunderstood the work we were doing, we were confident of its importance and centrality to national security. By employing legal and economic tools, we were creating a new kind of financial warfare in the service of American interests. It was time we reconceived how our team should be organized.

  First, we had to address the weaknesses inherent in the department. Most glaring was Treasury’s lack of intelligence capabilities. In spite of its post-9/11 relationship with SWIFT, Treasury remained something of a passive consumer of intelligence. Its intelligence office was little more than a message center that delivered packets of information from the intelligence community to offices in the Treasury. This was a nineteenth-century model in dire need of an update for the twenty-first century.

  Together with Aufhauser, we developed the concept for a new office that would correct these problems and amplify the work already underway. Aufhauser would soon craft the framework for the new office, which we simply called the “white paper.” He laid out three pillars of a revitalized function at the Treasury Department: an empowered policy office; a financial crimes enforcement arm; and a new intelligence function. The paper envisioned a reconstituted, more muscular Treasury office capable of reshaping the US government’s prosecution of financial warfare. Aufhauser insisted that he be the one to draft this white paper, and it was important that he did. The paper needed the credibility of the Treasury’s general counsel behind it to gain traction.

  The first prong of our reimagined Treasury team—an empowered policy office—would build on what we were already doing in the Executive Office of Terrorist Financing and Financial Crimes (EOTF/FC). We would continue our work using financial diplomacy to set and build standards for the legitimate financial system and to execute financial warfare campaigns. This office would also include the work of the Office of Foreign Assets Control (OFAC)—which administered sanctions programs—and of the Financial Crimes Enforcement Network (FinCEN)—which served as the ligament of information sharing between regulated financial institutions, law enforcement, and other departments. And it would include the Treasury’s Executive Office for Asset Forfeiture (TEOAF), which was responsible for handling the hundreds of millions of dollars of seized assets that our law-enforcement efforts produced.

  The second prong would be a new Treasury financial crimes enforcement office. Treasury may have retained some law-enforcement capability, in the form of the Internal Revenue Service–Criminal Investigative Division (IRS-CID), but Aufhauser and I believed that this wasn’t enough. Treasury needed a law-enforcement capacity focused specifically on financial crimes. This would give Treasury additional leverage and an ability to drive law-enforcement tools and focus on criminal and enemy nodes and networks of financial relevance. We envisioned Treasury agents with Treasury badges investigating money laundering, counterfeiting, sanctions evasion, and various other financial crimes.

  When the Department of Homeland Security was established, I proposed that Treasury be left with “1811s” from the relevant departing agencies to focus on financial crimes enforcement. That idea died a quick death, with decision makers having little appetite for pursuing even more bureaucratic changes. It was felt that another law-enforcement body in Treasury would compete with the myriad other law-enforcement agencies in the federal government. Yet we did not wish to create another FBI or undermine the new Department of Homeland Security. We wanted a US government law-enforcement focus on illicit financial flows to be integrated into the one department whose central concern was money. A law-enforcement effort would complement the multiple tools Treasury already had at its disposal in targeting illicit financial networks—freezing orders, regulatory actions with banks, and financial intelligence.

  The third prong of the new architecture of Treasury would be a full-fledged intelligence office. There was a genuine need for Treasury to be able to manage, develop, and use its own intelligence products. The dependencies in Treasury on the intelligence community were deep; it was clear that if the department was to control its own use of financial intelligence, it needed a real intelligence shop that could task, manage, and analyze financial information. The office would manage the Terrorist Finance Tracking Program with SWIFT and work to integrate the financial intelligence within the Treasury’s orbit internally and with other intelligence agencies. Importantly, this office would convert intelligence into information that the Treasury could use to wield its various powers and authorities. The Treasury Department and the discipline of financial intelligence had grown up, and there needed to be a home for this function at the Treasury.

  This office would use Treasury information, tools, authorities (official and unofficial), and relationships around the world (with finance ministries, central banks, and other members of the financial community) to focus entirely on financial crimes, illicit networks, terrorist financing, and other matters relating to finance that affected national security. It would not be orphaned within the department, but instead would be one of three offices and functions within the Treasury that warranted an undersecretary. This way of structuring the office would send a clear signal that this was an office with the full support of the Treasury and Capitol Hill and give it a senior seat at the table on national security issues. This office would give institutional permanence to Treasury’s role in national security—apart simply from the campaign to counter terrorist financing.

  The white paper became the blueprint for the new office. Art Cameron, a savvy career legislative affairs professional at Treasury, took the white paper with him to Capitol Hill. The Senate Banking Committee, led at the time by Senator Richard Shelby, a Republican from Alabama, maintained jurisdiction over Treasury’s many functions tied to banking. Shelby and the committee had shown a keen interest in Treasury’s role in sanctions enforcement and the campaign against terrorist financing since 9/11. The committee’s focus was driven in large part by anti-money-laundering experts, such as senior staff members Steve Kroll and Steve Harris. Kroll had been the general counsel for Treasury’s FinCEN and understood the importance of financial intelligence and of Treasury’s capabilities. In the post-9/11 world, Kroll, Harris, and their colleagues would become critical to Treasury’s work and relationship with Congress because they understood how important it w
as to the anti-money-laundering and national security mission.

  Cameron would bring me up to the Hill to discuss the idea of a new office and our functions in relation to DHS. In general, there was steep resistance in Congress for anything new that seemed to duplicate what DHS was now doing. We had to explain that this was to be an office built on the inherent Treasury authorities and powers we were already wielding. We just needed more firepower. Slowly but surely, the idea began to gain traction.

  Cameron saw an opening in the fact that Senator Shelby was not only the chairman of the Banking Committee but a key member of the Senate Permanent Select Committee on Intelligence. Perhaps Shelby would be the key to getting new legislation on the Hill through the intelligence committee, rather than through banking. This hunch turned out to be correct. Creating the new office through the intelligence committee would prove less controversial and more easily managed. Cameron worked with Shelby’s staffers to insert Treasury’s new “Office of Intelligence and Analysis” (OIA) into the draft intelligence authorization bill. This was the start. OIA would be the intelligence arm of the office outlined by Aufhauser’s white paper.

  By the winter of 2003, all of the behind-the-scenes work was done. Now we needed the secretary of the treasury’s official sign-off. John Duncan, Treasury’s assistant secretary for legislative affairs, walked into the secretary of the treasury’s office on the third floor to make the pitch. Well-respected as a wise man of Washington’s political world, Duncan was in charge of all of Treasury’s congressional interactions and relations. He was Cameron’s boss and had helped to manage expectations on the Hill and in the Treasury as to what was achievable. When Duncan talked, people listened. This time, he explained with calm clarity the opportunity presented in the intelligence authorization bill and asked Secretary John Snow whether he supported the creation of a new intelligence office at the Treasury Department.

  Secretary Snow was aware that this was not a project being driven out of the White House or the administration, but instead by Congress. Indeed, there was little appetite within the White House to create yet a new organization within the Treasury. Even within Treasury, which had suffered cuts as a result of the Homeland Security transition, there was little enthusiasm for a bigger office committed to isolating rogue financial behavior. There was a risk of upsetting the White House and other members of the president’s cabinet by not coordinating this decision. But Congress had presented the option, and there was no time for the usual protracted policy review. Snow knew that Treasury and the administration would be worse off if he said no, left with the legal responsibility but not the capability to fulfill its mission, despite all the good work already being done.

  For Snow, it wasn’t a difficult decision. After listening to Duncan and his chief of staff, Chris Smith, and asking some questions about how committed the Congress was to this mission, he looked at Duncan and Smith and said, “Let’s go for it. This has my support.” With that simple direction, Duncan had what he needed. Duncan and Cameron would give Senator Shelby and his team on the Hill the green light to move forward with the new office.

  On December 8, 2004, Congress created Treasury’s new Office of Intelligence and Analysis, to be overseen by an undersecretary and run by an assistant secretary. This would make the US Treasury Department the first finance ministry in the world to have an arm with an active intelligence function. It would be part of a new Treasury office, which had not yet been given a name, that would oversee all three prongs of the new office we had envisioned. OIA was the intelligence cornerstone.1

  The new legislation specified that the new assistant secretary should “build a robust analytical capability on terrorist finance by coordinating and overseeing work involving intelligence analysts in all components of the Department of the Treasury, focusing on the highest priorities of the Department, as well as ensuring that the existing intelligence needs of the OFAC and FinCEN are met; and . . . provide intelligence support to senior officials of the Department on a wide range of international economic and other relevant issues.”2 We had looked around the intelligence community for someone to create this new intelligence capability at Treasury while integrating Treasury into the broader intelligence community. We ultimately turned inward to Janice Gardner. Gardner, a Japanese American and well-respected longtime CIA analyst, had been serving as Secretary Snow’s intelligence briefer and principal liaison with the CIA for a couple of years. She knew the Treasury and had been paying close attention to what we were building. We respected and trusted her. Gardner agreed to resign from her position in the CIA and join the senior leadership at the Treasury Department.

  By the time her successor, senior professional Leslie Ireland, another longtime CIA analyst, took over in 2010, the Treasury’s OIA was producing original intelligence reports and analysis. In addition, the assistant secretary of the treasury had become the director of the National Intelligence Manager office for the entire intelligence community for “threat finance.” The Treasury Department was now leading in the financial intelligence game. It had come full circle.

  We would combine this new intelligence office with the existing Executive Office for Terrorist Financing and Financial Crimes that I was running, and my position would be elevated to the assistant secretary level. We would now have a robust office dedicated to attacking the financial networks of our enemies. This would become the hub for the new brand of financial warfare. Snow would later reflect that this was the most important decision he made during his tenure at the Treasury Department.

  The public affairs professionals got into the game, with Rob Nichols, Tony Fratto, and Molly Millerwise Meiners offering ideas for the new office’s name. This was no longer the old “Enforcement” office. Nor were we attempting to build a law-enforcement agency to compete with the Department of Justice. And it was more than the Executive Office for Terrorist Financing and Financial Crimes. The name needed to imply an intelligence function as well as the role we had already staked out in national security. Nichols and Meiners felt that the office had to have “Terrorism” in its title, since it was born out of the campaign to counter terrorist financing and would continue to lead the charge for Treasury against Al Qaeda. I had wanted the office name to signal that it was doing more than just countering terrorism—and thus advocated for inclusion of the terms “Financial Crime” or “Financial Integrity.” These were seen as too vague. The name also needed to highlight the Treasury intelligence function.

  The name we settled upon was “Office of Terrorism and Financial Intelligence” (TFI). It was clean and simple, even if it didn’t capture everything the office was doing or would accomplish in the coming years. Now all Treasury needed was an undersecretary—and soon enough, the secretary found someone who seemed a solid fit—Stuart Levey.

  Levey was a well-respected lawyer who worked as the principal associate deputy attorney general, an important position in the Office of the Deputy Attorney General. In the early days after 9/11, he had overseen immigration issues, terrorist tracking, and other thorny legal issues for the Department of Justice. He did so with great professionalism and without much fanfare. A couple of years later, he took on the portfolio of terrorist financing for the Department of Justice, which gave him an insight into Treasury’s role and capabilities.

  Levey had not always been sympathetic, and frequently he had gone to battle against me and the Treasury in interagency meetings or policy decisions. He was always fair, but he was also tough. He had built a reputation as being smart and reliable. Even when we fought, I liked his grit and good faith.

  In particular, Levey had never liked the Treasury’s perceived intrusion into the FBI’s role as the lead on terrorism investigations in the United States. The existence of the Treasury law-enforcement initiative Operation Green Quest, led by Customs and assisted by the IRS-CID and the Secret Service, had been a thorn in the side of the FBI. The FBI did not like the competition and confusion that a separate law-enforcement effort seemed to create.
With Green Quest moving aggressively on cases against illegal money-service businesses, charities of concern, and tax avoidance by suspect individuals like Abdurahman Muhammad Alamoudi, there was real competition in town. Levey heard the complaints, and he didn’t like the apparent interference with the FBI or the potential crossed wires on intelligence operations.

  Once the decision had been made to move Customs and the Secret Service to the Department of Homeland Security, the fate of Operation Green Quest was sealed. The Department of Justice did not want to replicate the law-enforcement fights it had with Treasury with a new behemoth department with parallel law-enforcement powers and resources. Levey set out to kill Green Quest—a legacy of Treasury’s traditional enforcement efforts. He negotiated a deal with the new leadership of the Department of Homeland Security that gave the FBI explicit primacy over any cases that touched upon terrorism or terrorist financing. Levey had delivered for the FBI. The signature law-enforcement effort launched by the Treasury after 9/11 was no more.

  When the White House’s Presidential Personnel Office called Levey in early 2004, asking him to consider becoming the undersecretary of the treasury, he was somewhat skeptical. Hadn’t Treasury’s authorities and efforts largely been transferred to the Department of Homeland Security? Hadn’t he just put a stake through the heart of one of Treasury’s signature counter-terrorist-financing efforts? He didn’t quite know what was being created, or whether it was intended to compete with the Department of Justice. In some ways, his healthy skepticism made him the ideal candidate.

  Levey started making calls, and he spoke with me and others about what the new office was and what we intended to do with it. I explained to Levey that our mission was about leveraging Treasury’s tools and capabilities in the national security issues facing the country. Treasury’s ability to design and execute broader financial campaigns to protect the United States and to isolate rogues in the financial system could not be done anywhere else. And this was about more than just freezing the assets of terrorist suspects in the United States or initiating investigations. This was about leveraging Treasury’s authorities, information, and powerful suasion capabilities to prompt the international financial system to reject business dealings with rogue actors of all stripes. This was a new power that could be wielded to great effect.