Turkey, the Gray Country

Posted on December 7, 2014December 7, 2014 by Denise Simon

Nothing says politics like the Obama administration not only tolerating terrorists but dancing with them. The same goes for rogue nations like Qatar and Pakistan. We have proven failed countries like Libya, Somalia, Iran and Mexico. But then far beyond our own State Department, it goes to the White House and then to the Democrats likely nominee for president, Hillary Clinton, after all it was she just a few days ago that told us we must empathize with our enemies. This is something that John Kerry is doing presently, they refer to it as smart power. This is common on this administration when it comes to the Palestinian Authority and Hamas.

But it is time to take a longer look at Erdogan and Turkey.

Erdogan is playing a double game. (Reuters) – Turkey has told three unnamed banks to “cooperate” in its fight against financing terrorism and in identifying dirty money, Turkey’s state news agency said on Sunday.

“There are three banks that do not cooperate with the Financial Crime Investigation Board (MASAK) efficiently in the detection of dirty money and in the fight against terrorism. We have warned them,” Finance Minister Ahmet Simsek was quoted as telling the Anadolu news agency, adding that he was unable to name the banks because of privacy concerns.

Sounds great huh? Hold on….

TURKEY’S HAND IN THE RISE OF THE ISLAMIC STATE CROSSES TO TERRORISM

Southeastern Turkey has now become a jurisdiction for terrorism finance, weapons smuggling, illegal oil sales, and the flow of fighters to Syria. This pipeline serves the interest of several terrorist organizations, including Jabhat al-Nusra (JN) and the Islamic State (IS).

It is unclear whether Ankara is explicitly assisting these groups, or whether JN and IS are merely exploiting Turkey’s lax border policies. Either way, it is clear that Turkey seeks to bring down the regime of Bashar al-Assad in Syria with the aid of irregular fighters.

Ankara opened its border to Syrian rebel forces, namely the Free Syrian Army, in the early stages of the uprising in 2011. But when Assad did not fall, the makeup of the Syrian opposition began to change. Radical groups such as the al-Qaeda-affiliated Jabhat al-Nusra and the Salafist Ahrar al-Sham emerged in 2012. Within a year, jihadist groups dominated the Syrian opposition. Border towns in southeastern Turkey were effectively a rear guard for some of the rebel units, while foreign fighters streamed into Syria from Turkey. All of this served as a crucible for the rise of the Islamic State.

The meteoric ascendance of IS has led to a full-blown crisis in Iraq and Syria. After conquering large swaths of territory in both states, IS declared a caliphate. The group’s brutality, highlighted by the beheadings of journalists, has prompted the United States and a broad coalition of Arab States to intervene with military force.

“We have warned them and now we expect them to build much more effective cooperation with us. They considered our earlier warnings, and I am sure they will cooperate more now,” he added.

Last year Turkey’s parliament approved a long-awaited anti-terrorism financing law, which allows alleged “terrorist” accounts to be frozen without a court order and provides for a variety of penalties including imprisonment for those found to be abetting terrorism.

Before Oct. 15 Turkey was on a “grey list” of countries drawn up by the 36-member Financial Action Task Force (FATF), a money-laundering watchdog, for failing to implement the legislation required by its members, despite being pressed to do so for years.

The IS crisis has put Turkey and the U.S. on a collision course. Turkey refuses to allow the coalition to launch military strikes from its soil. Its military also merely looked on while IS besieged the Kurdish town of Kobani, just across its border. Turkey negotiated directly with IS in the summer of 2013 to release 49 Turks held by the terrorist group. In return, Ankara secured the release of 150 IS fighters, many of whom returned to the battlefield. Meanwhile, the border continues to serve as a transit point for the illegal sale of oil, the transfer of weapons, and the flow of foreign fighters. Inside Turkey, IS has also established cells for recruiting militants and other logistical operations. All of this has raised questions about Turkey’s value as an American ally, and its place in the NATO alliance.

Turkey’s Syria policy also has negative repercussions domestically. The presence of extremists threatens Turkey’s internal security, as well as its economic stability, given Ankara’s dependence on foreign investment and tourism. Additionally, the turmoil in Syria has greatly complicated Turkey’s relationships with the Kurds and exacerbated the government’s battles with domestic opponents.

Washington now needs to work with Ankara to address the extremism problem on its southeastern front. This will require high-level diplomatic engagement that must address head-on the security challenges that Turkey has helped spawn. However, Washington must also address Turkey’s valid concerns, including long-term strategies for ending the Assad regime and how to increase support for the moderate opposition in Syria. The United States also has an opportunity to work with its NATO allies to help Ankara erect an integrated border protection system along the Syrian border to contain the current security and illicit finance threats. If Ankara is unwilling to tackle these challenges, Washington may need to consider other measures, including sanctions or curbing the security cooperation that has long been a cornerstone of this important bilateral relationship.

Tug of War Over Qaddafi’s Wealth

Posted on December 7, 2014December 7, 2014 by Denise Simon

Did it really take all this time to discover the location of the wealth of Libya, hidden by Qaddafi? Well no, it has taken this long to understand who is part of the wrangling for control.

Muammar Gaddafi was able to build his massive personal wealth thanks to a violent and domineering control over Libya’s natural resources. Specifically their rich supply of oil. Libya has the largest supply of oil in Africa and the tenth largest in the world. Gaddafi used Libya’s oil to print money for 40 years! During that time he spread his money around the globe through family members, Swiss bank accounts, real estate and investments. Estimated at $200 billion, he had enough to give $30,000 to each of Libya’s 6.6 million citizens.

At the beginning of the Lybian conflict, authorities discovered and seized roughly $67 billion of Gaddafi’s wealth hidden in bank accounts around the globe. England, France, Italy and Germany seized another $30 billion and the Obama administration found a staggering $37 billion in the United States. Investigators suspect that Gaddafi hid an additional $30 billion around the world.

Muammar Gaddafi had made over $200 billion from Libya's rich oil supply

As more investigations take place, it looks like Gaddafi had money stashed or invested in almost every major country in the world including the United States, Europe, the Middle East and Asia. In addition to bank accounts, Muammar owned a stake in the Italian soccer club Juventus and the car company Fiat. He also was a minority of London’s Financial Times. Gaddafi had luxury homes around the world including the huge estate pictured below. Surprisingly this house is located in the United States. In Englewood, New Jersey of all places! His house includes a huge swimming pool, tennis court and even a shooting range…

Muammar Gaddafi had a home in Englewood, New Jersey, USA

Investigators from U. N. Security are still waiting on many countries to resolve what Gaddafi might have within their borders. Several neighboring African nations refused to freeze Gaddafi’s accounts because of their fear and loyalty to the ruthless leader. Now that he’s dead, we should see even more money come to light. On top of all this, it’s believed that Gaddafi had billions of dollars worth of gold hidden in Libya, which has yet to be discovered.

Did Mummar Gaddafi’s $200 billion make him the richest person of all time? To find out how he stacks up, click this article:

The 25 Richest People Who Ever Lived – Inflation Adjusted

Gaddafi had a secret fortune of over $200 billion hidden around the world

So, where is the wealth of the failed and rogue leader and country? Ah, SA. But it will likely be embargoed for a long while after all the forensic accounting and criminal activity is matched to a comprehensive investigation. Oh yes, one more thing, our own U.S. Treasury and Secretary of State John Kerry is actively engaged in the process. It is a sure bet many other global leaders and the United Nations will complicate resolutions as their names are also likely attached.

Johannesburg – The South African government and President Jacob Zuma have been caught in the middle of an international wrangle over as much as R2 trillion in US dollars as well as hundreds of tons of gold and at least six million carats of diamonds in assets belonging to the people of Libya.

What could be the world’s largest cash pile is stored in palettes at seven heavily guarded warehouses and bunkers in secret locations between Joburg and Pretoria.

The Libyan billions have led to a Hawks investigation into possible violation of exchange controls as well as international interests from the UN and the US.

It has also led to heightened interest in the local and international intelligence community as well as the criminal underworld.

Those interested in the Libyan loot include several high-ranking ANC politicians, several business leaders, a former high court judge and a number of private companies.

The R2-trillion held in warehouses is separate from several other billions, believed to be in excess of R260 billion, held legally in four banks in South Africa.

Other legal assets include hotels in Joburg and Cape Town.

The Sunday Independent has seen official South African government documents which confirm that at least $179bn in US dollars is kept, illegally, in storage facilities across Gauteng.

Soon after Muammar Gaddafi’s death in October 2011, the new Libyan government embarked on a large-scale mission to recover legal assets in South Africa, the rest of Africa, the US and Europe.

In South Africa, the focus of the Libyans has been on assets brought into the country legally as well as illegally.

Last year, the Libyan government put in place a separate process to identify and repatriate the illegal assets in South Africa.

Investigations by The Sunday Independent on the illegal assets have led to allegations that:

* The US dollar loot was ferried to South Africa in at least 62 flights between Tripoli and South Africa. The crew of the planes were mainly ex-special forces from the apartheid era. The crew are understood to have deposed affidavits clarifying their role in an effort to avoid criminal charges.

* The money, gold and diamonds were moved to South Africa. Most of it was kept here and some was moved to neighbouring southern African countries. Most of the assets were taken out of Libya after Zuma got involved in an AU process to persuade then Libyan President Gaddafi to step down after an Arab-spring-like uprising to force him out of office.

Gaddafi was killed as he tried to flee Tripoli.

The Libyan government has formed a special board, the National Board for the Following Up and Recovery of Libyan Looted and Disguised Funds, to recover the assets. Now two companies have presented themselves to the South African government, claiming they were mandated by the national board to recover the funds.

The two companies are the Texas-based Washington African Consulting Group (WACG), led by its chief executive Erik Goalied, and Maltese-based Sam Serj, led by its chief executive, Tahah Buishi. Both companies claim to be the only legitimate representatives of the Libyan government.

Goalied has dismissed Sam Serj as impostors who want to stage the “biggest heist in the world”.

He said they were using fake documents and had used a number of South Africans, with the lure of lucrative commissions, to get the South African government to comply. Goalied has formalised his allegations about Sam Serj in an affidavit that he has submitted to the National Prosecuting Authority, who have passed it on to the Hawks.

He told The Sunday Independent that on September 26 he met with the Libyan Prime Minister Abdullah al-Thani in New York, where both parties reconfirmed that the WACG should work with the South African government. “The assets are important but the bigger goal is to resolve this smoothly so that relations between South Africa and Libya can improve,” he said.

Goalied said the Libyans did not necessarily want the loot to be sent back to Tripoli. They wanted full and legal control of the assets which, he added, could be used for investments and other job-creation projects that would benefit both countries.

Last month, Goalied wrote to Zuma asking for co-operation and assistance in resolving the assets saga. The Presidency wrote to him this week, acknowledging his letter.

The Presidency has referred The Sunday Independent’s queries to the Treasury. The Treasury, in turn, referred The Sunday Independent to a statement issued last June in which the government called on those with knowledge of Libyan assets in South Africa to come forward. Hawks spokesman Paul Ramaloko declined to confirm the probe.

The Sunday Independent has also established that Goalied has also written to UN Secretary-General Ban Ki-moon and US Foreign Secretary John Kerry asking for assistance. The UN adopted Resolution 438 which forces countries that have Libyan assets to return them.

The second company – Sam Serj – has already been in South Africa to discuss the return of the assets.

Sam Serj chief executive Buishi claimed his company was the only legitimate entity with a mandate to find and recover assets that belong to the people of Libya.

Buishi said his company has been contracted by the Libyan government to trace and recover assets looted by Gaddafi and those close to him.

He said the assets had been traced to South Africa, Libya’s neighbour, Tunisia, and several countries in Europe.

“We have been contracted by the Libyan government and are working with the South African government to recover the looted assets.

“We had a good meeting during our last visit with the then-minister of finance, Pravin Gordhan.

“We are working with the South African government. Hopefully, there will be a delegation to South Africa to repatriate the assets or come to some sort of arrangement.

“We want to work with the South African government to not only recover the assets but to find ways of re-investing them in South Africa.

“We want the assets to be identified as belonging to the Libyan people.

“Politically, we are trying to help the new Libya integrate with the rest of the African continent. Libya is a very big and rich country and together with South Africa can play a strategic role in Africa,” Buishi said.

Several sources told The Sunday Independent that the Libyans have complained to the UN and have placed South Africa and Zuma on terms, threatening to lay charges of theft with the International Criminal Court if the assets were not returned promptly.

The Sunday Independent understands that the money was brought in by a company, which has hired former SADF special forces and is keeping the warehouses where the money, gold and diamonds are being kept under 24-hour surveillance.

Other cash assets, running into hundreds of millions of rand, are being kept in accounts in South Africa’s major banks.

Several sources have confirmed that the ex-apartheid era special forces pilots and soldiers have deposed affidavits that are designed to protect them from, among others, money-laundering charges.

UPDATE: No Access to 2,500 Documents IRS to WH

Posted on November 29, 2014December 3, 2014 by Denise Simon

Update: 12/3/14 It seems that Treasury Secretary Jack Lew has intervened with the court’s decision forcing release of these documents. The White House is also working over-time to ensure the Judge’s ruling is impeded. This is more law-FARE.

Here is the link for more on this developing matter. Collusion and obstruction are being realized.

http://www.washingtonexaminer.com/feds-balk-at-releasing-docs-showing-irs-sharing-tax-returns-with-white-house/article/2556890#.VH9yMn7mYv0.twitter

It begins with a FOIA lawsuit, then comes a ruling, then comes the Inspector General. It should be noted that those guilty is actually per document, per count. Congressional hearings are scheduled.

September 30, 2014 Mary Beth Hutchins, 202-400-2721

Cause of Action Defeats Treasury IG Tax Office in FOIA Lawsuit

Court Rules that TIGTA Must Process FOIA Request Regarding Investigations Into

Tax Records Improperly Shared with the President

WASHINGTON –The U.S. District Court for the District of Columbia ruled Monday that the Treasury Inspector General for Tax Administration (TIGTA) must process an October 9, 2012 Cause of Action Freedom of Information Act (FOIA) request seeking documents about investigations into unauthorized disclosures of taxpayer information to the Executive Office of the President.

Cause of Action’s Executive Director Dan Epstein said:

The court has ruled that the federal government cannot hide behind confidentiality laws to prevent Americans from knowing if our President has gained unauthorized access to their tax information. This is a decisive win for all Americans and for government transparency and accountability. The public already knows the President uses FOIA to shield his targeting of the press and this ruling prevents the President from using FOIA to shield his targeting of taxpayers.

Revealed: 2,500 new documents in IRS / W.H. harassment cases

In a shocking revelation, the Treasury Inspector General has identified some 2,500 documents that “potentially” show taxpayer information held by the Internal Revenue Service being shared with President Obama’s White House.

The discovery was revealed to the group Cause of Action, which has sued for access to any of the documents. It charges that the IRS and White House have harassed taxpayers.

In an email from the Justice Department’s tax office, an official revealed the high number of documents, suggesting that the White House was hip deep in probes of taxpayers, likely including conservatives and Tea Party groups associated with the IRS scandal.

In requesting a delay in the delivery date of the documents, Justice told Cause of Action, “The agency [Treasury Inspector General for Tax Administration] has located 2,500 potentially responsive documents and anticipates being able to finish processing 2,000 of these pages by the December 1 date. It needs the additional two weeks to deal with the last 500 pages to determine if they are responsive and make any necessary withholdings.”

Cause of Action, which calls itself “Advocates for Government Accountability,” wasn’t surprised by the number of documents. It had filed suit to win access to them and a federal judge shot down Treasury’s earlier bid to hide the documents.

“This disclosure, coming only after Cause of Action sued TIGTA over its refusal to acknowledge whether such investigations took place, and after the court ordered TIGTA to reveal whether or not documents existed, signals that the White House may have made significant efforts to obtain taxpayers’ personal information,” it said in a statement to Secrets.

The disclosure follows the agency’s recovery of 30,000 “lost” emails from former IRS executive Lois Lerner, the central figure in the IRS-Tea Party scandal.

Cause of Action said the latest finding renews their “concerns about the decaying professionalism of, and apparent slip into partisanship by, IRS’s senior leadership.”

Below is the full email from Treasury:

My client wants to know if you would consent to a motion pushing back (in part) TIGTA’s response date by two weeks to December 15, 2014. The agency has located 2,500 potentially responsive documents and anticipates being able to finish processing 2,000 of these pages by the December 1 date. It needs the additional two weeks to deal with the last 500 pages to determine if they are responsive and make any necessary withholdings. We would therefore like to ask the court to permit the agency to issue a response (including production) on December 1 as to any documents it has completed processing by that date, and do the same as to the remaining documents by December 15. I note that the court’s remand was for a “determin[ation],” which the D.C. Circuit has recently explained can precede actual production by “days or a few weeks,” but we would prefer to simply agree on a date for turning over any of the remaining 500 documents that may be responsive.

18 page lawsuit is here in full text.

UN Just Got the Memo on Ansar al Sharia

Posted on November 29, 2014November 29, 2014 by Denise Simon

The United Nations has something call Blue Sheets which are immediate notices of concern as they often reference threats. The UN also has their own list of terror cells, organizations and individual terrorists by name.

The State Department also authors a SETL, Security Environment Threat List and the United Nations is part of the distribution list. Libya has been included on more than one SETL. For reference, this is what action is required by virtue of a SETL.

While the United States was quite slow for unknown reasons to list Ansar al Sharia on the terror list until February of 2014, the United Nations did not add Ansar al Sharia until this month, November 2014. Why you ask? Ah, the short answer is diplomacy.

Alas, it appears that after years, Libya has been officially recognized by the United Nations, so now what is the solution? None on the horizon.

UN Security Council adds Libya Islamists to terror list

United Nations (United States) (AFP) – The UN Security Council on Wednesday added to its terror list a Libyan Islamist group accused of involvement in the 2012 attack on the US mission in Benghazi that killed the ambassador and three other Americans.

The council blacklisted Ansar al-Sharia for its ties to Al-Qaeda, slapping an arms embargo, assets freeze and global travel ban on the extremists at the request of Britain, France and the United States.

The measure targets Ansar al-Sharia Benghazi and its sister group Ansar al-Sharia Derna, which both have links to Al-Qaeda in the Islamic Maghreb (AQIM) and other violent radical outfits.

In October, Ansar al-Sharia Derna pledged allegiance to the Islamic State (IS), the Islamist group that has seized control of territory in Iraq and Syria.

French Ambassador Francois Delattre said the decision would provide a boost to efforts by UN special envoy Bernardino Leon to broker a deal between Libya’s many militias and the government.

“This is an important decision because it draws a clear line between, on the one hand, jihadists with whom there can be no dialogue, and on the other, those Libyan groups — Islamist and others — that must take part in talks launched by special envoy Bernardino Leon,” Delattre told AFP.

Since 2012, the Benghazi wing has operated several training camps mainly to help armed groups in Iraq and Syria and to a lesser extent in Mali, according to the request filed by the three countries.

Twelve of the 24 jihadists who attacked the Algerian In Amenas gas complex in 2013 trained in the camps of Ansar al-Sharia in Benghazi, Libya’s second city, documents said.

More recently, the group has conducted several attacks on Libyan security forces, it added.

Ansar al-Sharia Derna also took part in the September 2012 attack on the US mission and is operating camps in the northeastern Derna and Jebel Akhdar regions to train fighters for Iraq and Syria.

A third sister group, Ansar al-Sharia Tunisia, was added to the UN terror list in September.

French Foreign Minister Laurent Fabius told a meeting on the sidelines of the UN General Assembly in September that the group should face sanctions as part of efforts to prevent Libya from sliding further into violence.

The UN effort to broker a deal with various militias and the government on restoring order in Libya led to a 12-hour humanitarian ceasefire in Benghazi earlier on Wednesday.

Libyan authorities have struggled to assert control across a country awash with weapons and powerful militias after the ouster of longtime dictator Moamer Kadhafi in a 2011 revolt.

Libya’s internationally recognized government has been forced to take refuge in the country’s far east to escape a mainly Islamist coalition which seized control of Tripoli at the end of August.

***

Due in part to oil investments in Libya, the West takes extreme measures when it comes to Libya, while it is a failed state with no standing government.

So it takes experts to declare Libya is a rogue state? Just what experts exactly? Logical analysis is fleeting.

Islamic State has toehold in lawless Libya, experts say

TRIPOLI, Libya — With Libya engulfed in chaos, the town of Derna in the east of the largely lawless country is emerging as a new stronghold for the Islamic State jihadist group, experts say.

The North African state has been wracked by instability since the overthrow of autocratic leader Moamer Kadhafi in 2011, providing a fertile ground for Islamic extremists.

IS fighters have already swept across Iraq and Syria, and their leader Abu Bakr al-Baghdadi recently boasted of vows of allegiance from militants in Libya, Egypt, Algeria, Yemen and Saudi Arabia.

Some Western observers consider Derna, a town of 150,000, to be the home of a third IS franchise in North Africa, after Jund al-Khilifa in Algeria and Egypt’s Ansar Bayt al-Maqdis declared their support earlier this year.

“The Islamic State is in Derna. It’s well documented. There’s no doubt,” said Othman Ben Sassi, a former member of the now-disbanded Transitional National Council, the political arm of the rebellion that overthrew Kadhafi.

The jihadist group is exploiting “the absence of state authority and porous borders,” he added.

Statements and images have for several weeks circulated on extremist forums claiming to depict gatherings of “Libyan jihadists” belonging to IS — prompting concern in Washington.

“We have seen reports that violent extremists (in Libya) have pledged allegiance to IS and are looking to associate themselves with it,” said State Department spokesman Jeffrey Rathke.

Libyan authorities have struggled to control militant groups as well as powerful militias which ousted Kadhafi, and the internationally recognized government has been forced to take refuge in the far east of the oil-rich country.

‘Ideological fight’
Derna and large areas of Benghazi, Libya’s second city, have served as strongholds for radical groups including Ansar al-Sharia, which is classified by the UN as a terrorist organization.

In April, an offshoot of the group announced it had implemented Islamic sharia law in Derna.

The self-proclaimed “Shura Council of Islamic Youth” has reportedly opened Islamic courts and established a religious police force in the town.

Dozens of masked members have appeared in military fatigues, regularly parading in pick-up trucks brandishing rocket launchers and heavy machine guns and toting the black and white flag used by jihadists.

In August the Shura Council posted a video online appearing to show the public execution in a Derna football stadium of an Egyptian man accused of murder.

But the group has yet to formally pledge allegiance to IS, and analysts say there are divisions within its ranks.

“Several extremists in Derna are attracted to IS. But the majority of senior jihadists in Libya are former al-Qaeda members and there is an ideological fight between IS and al-Qaeda partisans,” said a Libyan expert on jihadists who did not want to be named.

The UN this month branded Ansar al-Sharia a terrorist organization owing to its affiliation with al-Qaeda’s North African franchise.

“The decision was based on reliable intelligence,” the Libyan expert said. “Ansar al-Sharia has closer ties to al-Qaeda than to any other group.”

‘Islamic emirate’
According to Claudia Gazzini, Libya analyst at International Crisis Group, some Derna factions have pledged allegiance to IS, but it is unclear which ones and how much support they enjoy.

“There is a misguided tendency to automatically associate the establishment of Islamic courts and the killings of soldiers with an IS agenda,” she said.

Derna was already considered by many analysts to be a de-facto “Islamic emirate”, entirely free from state control, before the reported claims of allegiance to IS.

The town has long been suspected of harboring and training foreign fighters who then go on to fight in Iraq and Syria, where IS has declared a “caliphate” and imposed its harsh interpretation of Islamic law.

“There are factions in Derna who reportedly swore allegiance to IS in the search for a group that could unify the Muslim community,” said a former Libyan official who also asked not to be named for security reasons.

“But ideological differences between jihadist groups and the international coalition offensive against IS means these factions have so far opted for discretion, or have gone to fight in Iraq and Syria,” the former official added.

According to one resident of Derna, life in the town goes on largely as normal — for most people.

“You go out, you do your chores, you visit friends. No one bothers you,” the resident said.

“But if you are a policeman, a soldier or a lawyer, you’re dead.

Money, People, Bribes, Politicians and Islamic State

Posted on November 29, 2014November 29, 2014 by Denise Simon

The U.S. Treasury maintains a sophisticated global banking network that tracks money for laundering, destinations, use, recipients and interim banks. But why is the top person in charge of tracking dark money not using the tools when it comes to the increasing wealth of Islamic State? The answer is chilling.

Corruption Currents: Islamic State Receives Millions in Ransom Payments

By Samuel Rubenfeld

Bribery:

Brazil’s bribery probe of Petrobras SA is threatening the firm’s debt financing. A suspect in the scandal turned himself in. (Bloomberg, AP)

The former chief executive of a Virginia defense contractor pleaded guilty to providing gratuities to a federal contracting official, and the company agreed to pay a $300,000 fine. (Washington Post)

Fewer Filipinos are giving bribes, according to a survey, but opposition politicians doubted the findings. (Philippine Star, Philippine Daily Inquirer, ABS-CBN News, Manila Standard-Today)

Tom Fox navigates resource reductions, spots the Chamber of Commerce defending the FCPA and discusses doing business in India. The FCPA Blog notes a purge of ad men in China and reports on recent remarks from the SFO director. The FCPAProfessor runs a guest post about challenges in pursuing bribe-takers.

Fraud:

A grand jury found that fraud persists in programs meant to bring New York contracts to businesses owned by women and minorities. (NY Times)

Money Laundering:

An Indian regulator tightened regulations targeting money laundering. (Economic Times)

The founder and former president of a community bank was sentenced to two years in federal prison for bank fraud and money laundering. (AP)

A senior executive FIFA’s ticketing and hospitality partner could be jailed if he returns to Brazil to await trial for charges including money laundering, racketeering and illegally selling World Cup tickets. The executive denies the charges. (Bloomberg)

Iran and China agreed to fight money laundering together, Iranian media reported. (FARS)

A Thai court extended detention for family members accused of helping their “big brother,” a former top police official, launder bribes. The two denied the allegations. Thai police say the “big brother” confessed to the charges, including soliciting bribes for job appointments and allowing illegal gambling and oil smuggling. (Bangkok Post, AP)

Sanctions:

Republicans are fuming about the Iran nuclear talks extension. Both sides are racing to sign a deal before the new, Republican-controlled Congress takes office. Oman has played a low-key but important role in the negotiations. (National Journal, NY Times, Guardian, ABC News, BuzzFeed)

The extension in talks leaves a U.N. atomic agency probe in limbo; it needs more money to continue the investigation. (Reuters, Reuters)

A European court awarded damages, for the first time, in a sanctions case. (European Sanctions)

Terrorism Finance:

The Islamic State has received between $35 million and $45 million in ransom payments in the past year, a U.N. report said. (AP)

How can a bank know if it’s holding money for a terrorist? (Top Broker)

General Anti-Corruption:

China’s corruption watchdog launched a series of inspections of state-owned enterprises and government bodies, state media reported. (Reuters)

FIFA’s general secretary said the body will need years to repair its reputation. (NY Daily News, AP, Reuters)

The first tennis official to be banned for life from the sport for corruption said he’s innocent and is being used as a scapegoat. (Bloomberg)

What do you do when corruption is treated as part of the business process? (HR Reporter)

Corrupt politicians only suffer when there are local media organizations to report on it. (Nieman Lab)

***

No Blacklist Yet for Islamic State Banks

Why the United States isn’t using its biggest financial weapon against banks in the Islamist militant group’s territory.

In June, the Islamic State of Iraq and al-Sham (ISIS) militants inspired fear and awe when they swept into Iraq’s second-biggest city, Mosul, and reports spread that they looted the city’s banks and walked away with more than $400 million.

Those claims were later contested, but the group’s reputation for being not only savagely violent, but also incredibly wealthy, was already set. In July, the Financial Times reported that armed guards from the Islamic State, as the group later renamed itself, were stationed outside the banks, but that the banks’ coffers had not been pillaged.

Over the summer, the United States continued blacklisting members of the group and its supporters, but not the financial institutions in territory under Islamic State control. The Treasury Department traces its efforts against the group and its predecessor, al Qaeda in Iraq, back to 2004. In August, the United States froze the assets of three key terrorist financiers, one of whom allegedly helped funnel money through Kuwait to ISIL, as the U.S. government calls the group.

In September, 11 more names of individuals were added to the list for allegedly helping move funds and fighters to facilitate terrorist organizations from Iraq to Indonesia. Still, the banks that were so brazenly overrun in Mosul and those in the rest of Islamic State-controlled territory were never named. The reasoning behind that decision illustrates how fraught the U.S. fight to disrupt the Islamic State’s funding has been, as even the best U.S. tools for fighting terrorist financing are ill-suited to the task.

The Islamic State evolved out of earlier extremist groups in the region and improved upon their financial models as it grew. Instead of relying mostly on outside donations, the Islamic State earns most of its money through criminal activity — from oil smuggling to kidnapping — within the territory it controls, which makes it less reliant on the formal financial system. The group’s ability to make money in the illegal financial sector using cash for dealings in stolen oil and antiquities means it is less vulnerable to the biggest weapon the United States uses to go after its enemies’ finances: shutting down the banks, accountants, and middlemen that keep the money flowing.

On Thursday the Obama administration will face questions from Republican lawmakers about U.S. attempts to undercut the Islamic State’s funding. Treasury Department anti-terrorism finance chief David Cohen is set to testify before the House Financial Services Committee.

Texas Republican Jeb Hensarling, the committee chairman, said the hearing would “examine the adequacy of international banking policies to combat the new challenges that the Islamic State and groups like it present.”

In remarks prepared for Thursday’s hearing, Cohen states that the United States is working with “Iraqi authorities, Iraqi bank headquarters, and the international financial community to prevent ISIL from using the scores of bank branches located in territories where it operates.

“The results of this work have begun to show,” Cohen’s remarks state. “We’ve seen a decline in financial activity in areas where ISIL operates, and banks under ISIL influence are losing their access to the international financial system.”

Cohen is also expected to say that U.S.-led airstrikes are taking a toll on the Islamic State’s oil smuggling operations. Since mid-June, the group reportedly has been taking in $1 million a day in illicit oil revenue, but Cohen says that the bombing has lessened the haul to “several million dollars a week” — an imprecise figure, to be sure.

According to Cohen, the United States is also trying to improve its ability to track the extremist group’s money: “We are working with our counterparts in the intelligence community to ramp up collection on ISIL’s finances.”

In addition, the United States is combing through financial data for potential connections to the Islamic State. The Financial Crimes Enforcement Network is assisting in the effort by looking at the data the agency collects in the United States and through the agency’s connections with international financial intelligence-gathering institutions, a spokesman for the agency said Tuesday.

The risk of the Islamic State using the banks to move money internationally has to be weighed against the possible effect on the local population if Treasury tries to cut off those institutions. In a speech last month, Cohen acknowledged that the United States was not using its biggest weapon — shutting banks out of the financial system — against the institutions that had fallen into the hands of the extremists for exactly that reason.

“Our interest is not in shutting down all the economic activity in the areas where ISIL normally operates,” Cohen said. “They are subjugating huge swaths of the population, millions of people, who are still trying to live their lives. And banks, as everybody knows, are important lubricants for the economy.”

Vanda Felbab-Brown, an expert on illicit money at the Brookings Institution, said there are more than humanitarian factors to consider; the United States also doesn’t want to anger locals and push them closer to the extremists.

“At the end of the day what will make a difference in debilitating ISIL will be how much the local population turns against the group,” Felbab-Brown said. “This very tempting desire to shut down the financial system will tremendously worsen the lives of people that are already living in desperation.”

Felbab-Brown said that Somalia taught the United States that lesson. The United States sanctioned al-Shabab in 2010 as a terrorist group, but the move also scared humanitarian organizations out of the country just as a devastating famine was bearing down. Although many blamed the resulting suffering and starvation on al-Shabab, concerns grew that the anger and frustration would push more people toward the militant group.

Felbab-Brown praised the Treasury Department’s careful approach.

“The good thing about Shabab and ISIL is that they’re very heavy-handed and tend to really overplay their hand in terms of violence to the local population,” Felbab-Brown said. Without interference, that violence often becomes intolerable and eats away at the group’s local political support.

“One has to judge very carefully the likelihood of making a difference,” Felbab-Brown said. “And what are the political effects of any policy.”

Dennis Lormel, who led the FBI’s terrorism-financing investigations after the Sept. 11, 2001, terrorist attacks, said the United States doesn’t want to give the extremists an opening to demonstrate leadership.

“If they come out because they have the money to fund social programs that help the local economy and help the people, then they’re going to tout that and they’re going to demonstrate that they care and that the West doesn’t care,” Lormel said. “And they’ll use that as a recruitment tool.”

Perhaps acknowledging the importance of keeping the local economy going, if only so the group can continue extorting money from it, the Islamic State reportedly reopened the banks in Mosul in September, three months after it took control of them. Local reports said the Sunni militants allowed certain account holders to take out money, subject to the approval of an Islamic State committee and a hefty fee off the top.

Some analysts speculate that Treasury could also be keeping the banks open in order to glean intelligence that could help paint a clearer financial picture of the group.

“It’s considered to be more useful to try to watch what’s going on rather than to take some hard, punitive action right away and disrupt the process before you understand how it works and leverage your understanding,” said Patrick Johnston, a counterterrorism expert with the Rand Corp.

Even if the banks were blacklisted, though, it’s not clear that would keep the group from using them.

“They actually could be quite useful for ISIL without even having any real ability to transact with any foreign entity,” Johnston said.

Johnston said the conundrum for the United States is that even if they were to be cut off from the international financial system, the banks could be used to store and transfer money within the group’s territory for much the same reasons of efficiency and security that make banks a preferable way to move money in other countries.

“It really shows the challenge ahead of Treasury as much as anything else,” Johnston said.