RECOMMENDATIONS

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As a general matter, we wish to reaffirm the principal recommendations of our initial report, reproduced here in Appendix A." With our new "findings" in mind, we wish to make the following additional recommendations:

1. U.S. policymakers should seek to build a new framework for U.S.-Saudi relations. The Task Force recognizes the broader context of the complex and important bilateral relationship in which the terrorist financing issue is situated. The U.S.-Saudi relationship implicates many critical U.S. interests, including energy security, Iraq, the Middle East peace process, and the broader war on terrorism. And although most of us are not regional experts, we do have experience working on issues of bilateral concern and we feel competent to offer a perspective on U.S.-Saudi relations based on the manner in which Saudi financial support for terrorism-one of the most important issues in that relationship has been addressed or avoided by both countries.

a. For decades, presidents of both parties built U.S.-Saudi Arabia relations upon a consistent framework understood by both sides: Saudi Arabia would be a constructive actor with regard to the world's oil markets and regional security issues, and the United States would help provide for the defense of Saudi Arabia, work to address the Israeli-Palestinian conflict, and not raise any significant questions about Saudi Arabian domestic issues, either publicly or privately. For decades, this unarticulated framework held despite its inherent tensions. It broadly served the interests of both the U.S. and Saudi Arabian governments.

b. Since then, however, al-Qaeda, a terrorist organization rooted in issues central to Saudi Arabian domestic affairs, has murdered thousands of Americans and

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Some of our initial recommendations have been overtaken by events or otherwise require modification owing to the passage of time. In our initial recommendations, for example, we suggested that banks should build specific anti-terrorist financing compliance components and avail themselves of public and private sources of information that identify persons or institutions with links to terrorist financing. As is suggested by our current recommendation seven, the most viable means by which banks can identify persons or institutions that may have links to terrorist financing is for the government to provide relevant information to banks. Extensive work by banks, in coordination with the government, has not yielded any specific anti-terrorist financing compliance tools that will assist banks in identifying persons or institutions related to terrorist financing. Similarly, banks have not been able to rely solely or effectively on public and private sources of information as such information is extremely diverse and often times either inaccurate or not sufficient to provide any meaningful assistance.

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conspires to kill even more. Thus changing circumstances have called into question at least one key tenet of the historical framework for U.S.-Saudi relations. When domestic Saudi problems threaten Americans at home and abroad, a new framework for U.S.-Saudi relations must be struck, one that includes focused and consistent U.S. attention on domestic Saudi issues that previously would have been "off the table."

c. This evolution is already underway, as evidenced by new tensions in the bilateral relationship since 9/11. We believe that U.S.-Saudi relations can and should come to resemble more closely U.S. bilateral relations with other large, important regional powers with which the United States has a complex pattern of bilateral relations and where domestic issues are always "on the table," often to the consternation of the other party. China and Russia (and before it, the Soviet Union) have been forced to confront domestic issues they would otherwise ignore in the context of their bilateral relations with the United States. Consistent U.S. demands for human rights and political and economic freedom in these places may only have or have had a marginal impact on the course of events, but they are a fundamental expression of U.S. interests and values. And just as U.S. demands on China and Russia have become a challenging but fundamentally manageable (and constructive) aspect of our diplomacy, so too will U.S. demands regarding Saudi "domestic" issues like terrorist financing and the global export of Islamic extremism."

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d. More immediately, both U.S. policymakers and the American people should fully recognize the significance of what is currently taking place in Saudi Arabia. After the bombings this April, Prince Bandar, the Saudi ambassador to the United States, declared that "it's a total war with them now." Some Bush administration officials have privately characterized the current state of affairs as a "civil war" and suggested that the appropriate objective for U.S. policy in this context is to

In this regard, we agree with the approach proposed in May 2003 by the U.S. Commission on International Religious Freedom for reformulating the U.S.-Saudi relationship: "As with other countries where serious human rights violations exist, the U.S. government should more frequently identify these problems and publicly acknowledge that they are significant issues in the bilateral relationship." See also the Commission's 2004 report and statements. We believe that such a declaratory approach should extend beyond human rights issues to include specifically the issues within the mandate and expertise of this Task Force.

help the current regime prevail. We agree, but we also believe that this

perspective does not go far enough.

e. Under this view, the domestic Saudi problem is conceived primarily in terms of

the presence of a certain number of al-Qaeda cells and members in Saudi Arabia. When they have been discovered and dispatched, the problem will be over and the "civil war" will be won. In our view, the current al-Qaeda problem in Saud Arabia will not be won by eliminating a certain number of terrorists; rather, victory will only be achieved when the regime finally decides to confront directly and unequivocally the ideological, religious, social, and cultural realities that fuel al-Qaeda, its imitators, and its financiers all over the world. Therefore, the appropriate goal for U.S. foreign policy is for the Saudi regime to win their civil war-and to change responsively and fundamentally in the process.

2. Saudi Arabia should fully implement its new laws and regulations and take additional steps to further improve its efforts to combat terrorist financing. Saudi Arabia should take prompt action to implement fully its new laws and regulations. It should deter the financing of terrorism by publicly punishing those Saudi individuals and organizations who have funded terrorist organizations. It should increase the financial transparency and programmatic verification of its global charities. And it should publicly release audit reports of those charities that are said to have been completed.

a. Saudi Arabia should ratify and implement treaties that create binding international legal obligations relating to combating money laundering and terrorist financing, including the 1999 United Nations International Convention for the Suppression of the Financing of Terrorism and the 2000 UN Convention against Transnational Organized Crime (Palermo Convention).

3. Multilateral initiatives must be better coordinated, appropriately funded, and invested with clear punitive authorities. The need for a new international organization specializing in terrorist financing issues, as recommended by our initial report, has diminished as a result of significant efforts being undertaken by a variety of international actors. The need for proper coordination and clearer mandates has increased for the same reason. Duplicative efforts should be minimized and resources reallocated to the most logical lead organization.

a. For example, coordinated efforts among the CTC, the CTAG, the IMF, and the World Bank will be necessary to assess and deliver capacity-building assistance with efficiency. Such assistance is critical. Substantial progress has been made in many countries to put in place legal authorities to criminalize terrorist financing and to act expeditiously to freeze funds. But in many places, a lack of technical capacity inhibits the ability of member states to comply fully with the U.S.-led multilateral sanctions regime. The vast majority of financial institutions in these states still lack the ability to identify and block-effectively, efficiently, or at all-designated financial or non-financial assets.

b. Given the profusion of actors, clear mandates are essential. As a general matter, we believe that the CTC should lead international efforts to coordinate the delivery of multilateral capacity-building efforts. Although somewhat outside its mandate, we also believe that the CTC should lead international efforts to develop universally acceptable evidentiary, intelligence-sharing, and enforcement standards acceptable to a large number of member states, the lack of which has also impeded the effectiveness of the U.S.-led multilateral sanctions regime.

c. We believe that the FATF should lead international efforts not only to articulate international standards relating to anti-money laundering and counterterrorist financing (AML/CTF), but also to monitor and assess implementation and compliance with those standards. In order to do so, the FATF will need an expanded mandate and budget, since it currently does not normally assess implementation. It will also need to be reinvested with the political authority to "name and shame" nations that fail to adopt or implement regimes that meet international standards, as described in our initial report. In this regard, it should work closely with the CTC and the UN Security Council, which have the authority to impose sanctions on member states that fail to comply with mandatory international legal obligations relating to terrorist financing.

d. FATF's resources should also be expanded to allow it to spearhead additional initiatives in the global campaign against terrorist financing, including those relating to the regulation of charities and hawala and, as described in our initial report, the creation and promulgation of global "white lists" of financial

institutions and charities that conform to the highest compliance standards, regardless of the legal environment in their home jurisdictions. Additional resources for FATF might be found by reprogramming resources from other international organizations performing similar or redundant assessment functions. 4. The Bush administration should formalize its efforts to centralize the coordination of US. measures to combat terrorist financing. Our last report criticized the organizational structure then being used to coordinate U.S. diplomatic, intelligence, regulatory, and law enforcement policies and actions. Although organizational in nature, this was a core recommendation of our last report, since from good organization comes good policy. Our understanding is that, in practice, responsibilities for this coordination have since shifted from the Treasury Department to the White House, as we recommended in our original Task Force report. However, while outgoing Deputy National Security Adviser Frances Townsend has led interagency efforts and critical delegations abroad, there has been no formal designation of which we are aware of her or her office's lead role. That should happen forthwith, in the form of a National Security Presidential Directive (NSPD) or otherwise. Given Townsend's imminent departure, the usual bureaucratic realities of Washington, and the unique complexity of the terrorist financing issue-compounded by dislocations caused by the birth of the Department of Homeland Security, the resulting elimination of the Treasury Department's historical enforcement function, and the Treasury Department's more recent announcement of the creation a new Undersecretary for Terrorism and Financial Intelligence-such clarity is needed. The unusually rapid turnover seen in senior White House personnel responsible for counterterrorism makes it even more critical that such a clear designation is made, so leadership on this issue becomes a matter of institutional permanence rather than a function of individual personalities and relationships. Moreover, such a designation will go a long way toward putting issues regarding terrorist financing front and center in every bilateral diplomatic discussion with every "frontline" state in the fight against terrorism—at every level of the bilateral relationship, including, on a consistent basis, the highest.

5. Congress should enact a Treasury-led certification regime on terrorist financing. Many countries have taken steps to improve their anti-money laundering and counterterrorist fighting regimes, but many have not. Certification regimes can be controversial and are