By Glenn Kessler
Washington Post Staff Writer
Thursday, June 14, 2007
The Treasury Department tried to persuade other nations to target an Iranian bank involved in financing missile deals but ultimately took unilateral action because such nations lacked the necessary legal tools and "political will," Treasury Secretary Henry M. Paulson Jr. will disclose today in a speech on the department's worldwide campaign to target financial institutions connected to illicit activities.
In the speech, to be delivered to the Council on Foreign Relations in New York this morning, Paulson will press other countries to pass laws that target terrorist financing and to implement sanctions already on the books.
"Everyone acknowledges that we must find effective ways to deal with these threats, short of military measures," he will say, according to a copy of his prepared remarks. "Yet other nations are not moving quickly enough to accomplish that goal."
Treasury officials have long been frustrated with how difficult it is to persuade other countries to take the lead in acting against suspected entities. Paulson's remarks appear intended to spotlight both the U.S. campaign and the lagging efforts of the rest of the world.
The United States has hundreds of people devoted to implementing and enforcing financial sanctions, while many other countries appear to view sanctions as political acts, with little attention given to subsequent enforcement. In the 27-nation European Union, in which decisions are made by consensus, a single country can block a designation. That is why Hezbollah, which the United States considers a terrorist group, is not listed as a terrorist group in Europe. And many countries, particularly in South America and in the Middle East, have not passed laws against the financing of terrorists.
In the speech, Paulson will detail the administration's strategy of using financial measures against terrorists and rogue governments, drawing on an in-house financial intelligence unit and using laws passed after the Sept. 11, 2001, attacks. Treasury actions, which borrow from lessons learned during the targeting of Colombian drug cartels over the past decade, can have worldwide impact "because the U.S. is the key hub of the global financial system; we are the banker to the world," Paulson will say, according to the text of his remarks.
The Treasury secretary will note that sharing information -- such as documents and financial records -- strengthens the case against suspected entities and frequently persuades other financial institutions to cease doing business with them. It also emboldens other countries to join in multilateral sanctions, thus turning a unilateral U.S. tool into a multilateral effort. The speech will provide new details on Treasury's efforts against terrorists, North Korea and Iran.
Paulson's speech will laud U.S. actions taken against a Macau-based bank accused of laundering money for North Korea. But many experts believe the Treasury campaign complicated diplomatic efforts to end North Korea's nuclear programs. Treasury officials have struggled for two months to find a way to transfer $25 million in previously frozen funds back to North Korea. Russian officials confirmed yesterday that a Russian bank is prepared to help transfer the money, perhaps as early as this week.
On Iran, Paulson plans to say that the Treasury "shared extensive information" with U.S. allies about Iran's Bank Sepah and that "one of our allies had independently corroborated the information we shared." The bank has branches in France, Germany and Italy, and a subsidiary in Britain. Many suspect transactions passed through the Rome branch. But none of those countries took action against the bank.
"Our allies, who confront risks at least as great as those confronting the United States, must find the political will" to pass laws and institute regulations, Paulson will say, adding that they "may not deal a knockout punch, but they can and will produce results and change behavior."