1997 Congressional Hearings
Intelligence and Security

Today we begin consideration of H.R. 748, the "Prohibition on Financial Transactions with Countries Supporting Terrorism Act of 1997," which I have cosponsored with Mr. Schumer, the ranking member of this subcommittee. This bill expands the scope of a key provision in last year's antiterrorism bill, section 321, by eliminating overly permissive regulations promulgated by the Administration last year and specifically listing exceptions to the prohibition.

Background
In my view, the forces of militant extremism in the Middle East and Africa are among the greatest international dangers currently facing America and its vital interests. The deadly threat posed by international terrorists must not be underestimated.

We have all seen the pictures of bloody slaughter caused by these violent criminals. Yet, if hatred and cold-heartedness were all that these killers needed, the world would be even more endangered than it already is. But terrorists need more than desire. They need support; they need infrastructure. And that's why the presence of terrorist supporting countries is so harmful to the world community.

A handful of pariah states -- Cuba, Libya, North Korea, Iran, Iraq, Syria and Sudan -- have been designated by the State Department, pursuant to section 6(j) of the Export Administration Act, as terrorist sponsoring countries or "Terrorism List Governments." No one should discount the significance of this designation. Without the support of these countries, terrorists would literally not have a home, much less the active assistance of government officials.

There should be no higher priority for the United States in the battle against terrorism than the elimination of foreign government support for terrorists. This is why section 321 of last year's antiterrorism bill is a vital tool in this battle.

Section 321
This section was successfully offered as an amendment to the antiterrorism bill by Mr. Schumer and myself. The clear and unambiguous language of the provision states, in part, "Whoever...knowingly or having reasonable cause to know that a country is designated...as a country supporting international terrorism, engages in a financial transaction with the government of that country, shall be fined under this title, imprisoned for not more than 10 years, or both." The term "financial transactions" is defined very broadly to include transactions involving monetary instruments and financial institutions.

This language was drafted with a dual purpose in mind. First, by prohibiting financial support from terrorist countries to U.S. persons, it attempts to prevent the long-arm of terrorism from reaching the shores of the United States through domestic entities. The need for this prohibition came to light last year when the Rev. Louis Farakhan traveled to Libya and received a personal pledge of significant financial support from Col. Moammar Gadhafi, an infamous supporter of terrorism.

The second and broader purpose of the provision was to prohibit all financial transactions by U.S. persons with these countries, regardless of where these transactions took place. This would have the effect of cutting off terrorist sponsoring governments from the economic benefit of doing business with U.S. companies.

Since five of the seven terrorism list governments are already subject to economic sanctions as a result of executive order, the immediate impact of the ban related particularly to Sudan and Syria.

31 CFR Part 596

In the course of drafting this amendment last year, we were advised by the Administration that the broad wording of the prohibition could have unintended consequences, particularly in the area of diplomacy. We agreed to authorize the Department of the Treasury, in consultation with the State Department, to issue regulations which provided some exceptions to the ban. We intended these regulations to exclude various innocuous transactions that occur in the course of diplomatic activities and other related official matters.

Instead, in August of last year, the Treasury Department published regulations in relation to section 321 which essentially reversed the effect of the new prohibition. These regulations permit all financial transactions with Sudan and Syria, other than those which pose a risk of furthering domestic terrorism. The regulations prohibit U.S. persons from receiving unlicensed donations and from engaging in financial transactions with respect to which the United States person knows or has reasonable cause to believe that the financial transaction poses a risk of furthering terrorist acts in the United States.

Thus, these regulations completely ignore the second purpose of the prohibition. They ensure a "business as usual" policy and represent a step backwards in the effort to isolate Syria and Sudan. The regulations could also permit transactions with the other terrorism list nations if the current executive orders should ever be lifted.

H.R. 748
Which brings us to H.R. 748. This bill closes the loophole created by the Administration's regulations and prohibits all transactions other than those that are specifically connected to diplomatic activities. The bill strips the executive branch of the authority to issue regulations exempting transactions from the prohibition. It establishes instead a legislative exception only for transactions "incident to routine diplomatic relations among countries." By this we mean only those transactions which arise when officials of this country or representatives of a terrorist supporting country travel or engage in activities for diplomatic purposes. For example, a cab ride from Kennedy airport to the United Nations building would not be included. Similarly, an American diplomat traveling to Syria on official business would not be included.

Many will argue that H.R. 748 is too restrictive. In addition to witnesses from the Administration, we will hear today from those who believe that H.R. 748 would be unnecessarily restrictive in certain respects. Among the concerns that will be expressed are those relating to the relief of human suffering in terrorist list nations and the impact of the legislation on currently existing business investments. I look forward to the discussion on these and other issues.

I yield now to my friend and ranking member, who is the original cosponsor of H.R. 748, Mr. Schumer.