THE WAR ON TERROR: John B. Taylor began serving as the head of international finance at the Treasury Department just three months before September 11 changed everything. In this excerpt from his new book, Taylor tells the story of the small band of warriors he led in the financial war on terror. I was in a hotel room in Tokyo on September 11 when the first plane hit the World Trade Center. I had just flown to Japan as part of a large Treasury delegation that included Secretary Paul O’Neill. We were there to initiate a new bilateral economic agenda designed to help Japan pull out of its decade-long economic slump. Like most people, I watched the 9/11 tragedy on television. As soon as I heard the news, I walked down the hall from my room to another room that served as our delegation’s control center, where others started gathering. When the first tower started collapsing, I looked up from the screen to see faces of horror and disbelief. We immediately canceled our meetings in Japan, and by the next morning—still September 11 in the United States—we were on a C-17 military jet flying back to the United States. To get back faster, we had an aerial re-fueling over Alaska. The pilot invited me to watch the refueling from the cockpit, and it was amazing—the most impressive combination of advanced technology, hand-eye coordination, precision teamwork, and raw nerve that I had ever observed. As we flew into the lower 48 states, there were no commercial flights to be seen. The plane’s radar screen was nearly blank. That remarkable nighttime aerial refueling would mark a watershed for me and my responsibilities. It was the beginning of a much closer cooperation and coordination with the Defense Department and the U.S. military. It was also the start of many completely new experiences that I could never have expected when I signed up for a job in Treasury. I suppose I could have gotten a little spooked being in that cockpit, but I felt very calm, kind of resigned to a new purpose where I would be forging new teams to handle new tasks and relying on the expertise and experience of others—as they would be relying on mine. I slept well that night on the steel deck. Months later, when I flew on other military planes—C-130 transports in Afghanistan, Blackhawk helicopters in Iraq—I would always feel just as calm, even at times when it looked like I was in harm’s way. A New Urgency The pace of activity in Treasury and the White House accelerated sharply after 9/11. I was constantly being called to meetings in the White House Situation Room, sometimes twice a day, beating a path that led out of my Treasury office through the guard booth at the East Gate, into the East Wing, through the mansion, past the Rose Garden, into the West Wing, and down the stairs to the basement where the Sit Room was located. We were concerned about more attacks around the country, perhaps biochemical or even nuclear, and what that might mean for the economy. We had to deal with a host of new international finance issues, including developing financial support packages for Pakistan and other frontline states, which would play an important role in the Afghanistan war. My staff worked long hours to prepare detailed reports on the international economic impact of the attacks. But the most intense work was on terrorist financing. President Bush decided right away that disrupting the financing of terrorists would be a very high priority in the new war on terror. Condi Rice, who as director of the National Security Council managed interagency coordination, made it clear that Treasury would be responsible for this task. As head of Treasury’s international division, I would be in charge of the international part of the operation. I knew Condi Rice very well, and this would not be the last time she would make it clear that Treasury should play a big role in the financial aspects of the war on terror. Of course, I agreed to take on this new assignment, but I knew little about disrupting the flow of funds; my whole approach to international finance was to encourage the flow of funds. Under U.S. law, the president had the authority to call on U.S. financial institutions to freeze the accounts of terrorists. Before 9/11, the law had not been used very aggressively. An important meeting of Treasury officials was held on Monday, September 17, 2001. Our first priority was to end the indifference of higher-level Treasury policymakers and to stress the high priority of the mission, following President Bush’s lead. From the start, we all wanted to make it very clear that there were two purposes of the fight against terrorist financing. The first purpose was to freeze terrorist assets and thereby disrupt the flow of funds to the terrorists and thwart future terrorist attacks. Once the bank account of a terrorist or a financier was frozen, the terrorists could not withdraw or use the money. The second purpose was to trace the flows of terrorist funds and thereby get information about terrorists and their plans, which was also an important means of preventing further attacks.
Combating terrorist financing requires especially
tight coordination among many diverse government agencies with expertise in
intelligence, law enforcement, financial regulation, and international
financial diplomacy. To accomplish this coordination, it was essential to
avoid destructive “turf battles” between agencies or
departments. I encouraged my staff to share information with other parts of
government with this mantra: “Convey information, don’t contain
information.”
Our first step was to designate a list of terrorists and then issue an executive order requiring U.S. financial institutions to freeze any bank account or other asset held by anyone on the list. As soon as the order was issued, the U.S. banks would be notified electronically; they would then scan all their accounts and freeze the designated assets. Hopefully, the first list could be finalized in a few days and the first freeze could occur in a week. Assembling the list of names would be the job of Treasury’s Office of Foreign Assets Control (OFAC), working with intelligence experts in the FBI and the CIA, but also checking with the State Department on foreign policy repercussions. Because we wanted to move as fast as possible, the first list would include mainly Al Qaeda and associated terrorist groups. Over time, there would be more lists and the total would grow as more and more terrorists were identified. Turning to the international front, I argued that international coordination was essential to the success of the operation. Without international coordination, terrorists could thwart the effectiveness of a freeze in the United States by moving their money to other countries. No mechanism for coordination existed at the time, so I had to set one up quickly from scratch. In the days following the September 17 meeting, I worked with the banking and financial diplomacy experts on my international staff to do so, but it was essential to integrate fully the international and domestic parts of the operations, which OFAC staff would work on. The International Strategy In developing the international part of the strategy, I decided to focus on two goals. The first goal was to achieve a very high participation rate of countries that would join the United States in freezing terrorist assets. If we could get more countries on board, then we would reduce the chance that terrorist funds could slip through the global financial system and we would increase the chance of tracing the money. Second, we wanted to come as close as possible to a nearly simultaneous freeze, with many participating countries freezing a terrorist’s assets together. To implement this strategy, we would create a broad international coalition by reaching out diplomatically to other countries and developing an effective monitoring system to keep track of how countries were doing. The monitoring system was essential for knowing when to exert diplomatic or other pressure on countries that were not cooperating. I knew that creating a coalition would require starting with the G7 countries and then fanning out to others. So I organized a conference call with my G7 counterparts on September 20 to explain the situation. I told my colleagues that combating terrorist financing would be part of the U.S. response to the 9/11 attacks and that as soon as next week we were going to begin to freeze the assets of certain individual terrorists. I asked them to do the same in their countries. I was pleasantly surprised that they all readily agreed and even volunteered to help bring other countries on board.
Later that same day, President Bush made his famous post-9/11 speech to a joint session of Congress, with Tony Blair and Rudy Giuliani in the gallery. He said explicitly that, as part of the new war on terror, “We will starve terrorists of funding.” And I recalled my phone call that morning as he thanked some of our G7 allies so warmly. The spirit of cooperation and support around the world ran deep in those days, and the positive responses I received on the morning conference call reflected that. Although the G7 call was an excellent start, we still had to create an action plan for the weeks ahead, detailing how the international and domestic parts of the plan were integrated. I wanted the detailed action plan completed before the announcement of the first freeze in the United States, which had now been scheduled for Monday, September 24. I knew this was asking a lot of Treasury staff to have this done so rapidly, but a written plan with timelines was essential for the success of the new operation. In the end, everyone rose to the occasion and the plan was finished before the start of the action on Monday. Launching a Strike on the Global Terror Network On Monday, September 24, 2001, President Bush issued the executive order naming 27 individuals and terrorist organizations, including Al Rashid Trust, a Pakistan-based financial group that provided financial support to Al Qaeda, and the Wafa Humanitarian Organization, an Islamic charity that also funneled money to Al Qaeda. The order instructed U.S. financial institutions to freeze all their assets.
President Bush announced the freeze in the Rose Garden, and his words sent an important message to terrorists and to my team. Listening to him, I realized that a new breed of warriors—global financial warriors—was about to enter the fight against the terrorists. He said: Today, we have launched a strike on the financial foundations of the global terror network. Make no mistake about it, I’ve asked our military to be ready for a reason. But the American people must understand this war on terrorism will be fought on a variety of fronts, in different ways. The front lines will look different from the wars of the past. . . . It is a war that will require the United States to use our influence in a variety of areas in order to win it. And one area is financial. The second list, containing another 39 names, was released on October 12, and by the end of 2001 there would be 7 lists and a total of 162 names. For the second list I notified my G7 counterparts in advance of our announcement; as a result, we were able to simultaneously freeze assets with other countries. This prenotification process was applied in all subsequent listings and would eventually expand beyond the G7, especially in certain key cases where many of the assets were known to be in a particular country. For example, Pakistan froze the assets of the Al Rashid Trust very soon after the first executive order went out.
In these early days, we also made calls to many
finance ministers asking for their cooperation. They generally agreed with
our requests, and I was struck by the warmth and positive attitude
expressed in these conversations, especially by ministers in poor countries
in Africa or Latin America who had never talked to a high-level U.S.
Treasury official before. Treasury spokesperson Michele Davis wasn’t
far off the mark when she exclaimed at the time, “We’re talking
to everyone under the sun.” Many useful alliances in combating terrorist financing were forged during these first few weeks of phone calls. One was with Sultan Bin Nasser Al-Suwaidi, the governor of the Central Bank of the United Arab Emir-ates. He knew the intricacies of financing Dubai’s futuristic skyscrapers as well as he knew the tricks of transferring money from the back alleys of Dubai’s gold district to the mountains of Afghanistan. I respected him for his willingness to lead regional initiatives to crack down on illicit money transfers. Another important new friend of the United States on the finance front was Shaukat Aziz, then finance minister of Pakistan, who knew volumes about the secretive methods of transferring funds in and out of South Asia. The War Room In order to follow up and keep track of the commitments in other countries, I created a special terrorist finance unit at Treasury. I had the unit report directly to me, but viewed it as a resource to all of Treasury and insisted that it work closely with the State Department on diplomatic issues. I had people from OFAC and State detailed to the unit. This new unit came to be called the “War Room” (aka the Task Force on Terrorist Financing). I made it clear to all members of the War Room that their mission was to respond to President Bush’s call to make the fight against terrorist financing a significant part of the new war on terror. The actual War Room was next to my office, and about the same size, but a dozen people along with computers, phone banks, work tables, and copying machines managed to squeeze in. Maps and charts showing progress lined the walls. The War Room’s main task was to get as many countries as possible to freeze terrorist assets simultaneously with the United States. Its main means toward that end was a country-by-country computerized tracking system. The system produced charts and tables showing how many freezes France or China or Saudi Arabia or any other country had joined in, how much they froze, and so on. The information came from a variety of sources, including personal contacts and reviews of thousands of incoming embassy cables. Developed in a matter of weeks, it was the only complete tracking system available in the world. Armed with this tool, the War Room team supported our financial diplomacy strategy.
What were the results? A total of 172 countries and jurisdictions issued freezing orders, 120 countries passed new laws and regulations on terrorist financing, and 1,400 accounts of terrorists were frozen worldwide. The total value of frozen accounts was about $137 million, much of that in the fall of 2001. But more important than these numbers was how the international effort furthered the second goal: tracing and identifying terrorists and preventing terrorist attacks. Visitors to Treasury were frequently interested in visiting the War Room. I especially recall giving a tour to Jeremy Greenstock, who was then responsible for terrorist financing at the United Nations and later special British envoy to Iraq. He was most impressed with how rapidly the operation was set up and said he wanted the United Nations to develop a similar capacity (although it never did). The extraordinarily high spirits and enthusiasm of the band of brothers and sisters who worked in the War Room were apparent to every tourist who entered. Over the two years of its existence, 22 people—global financial warriors, one and all—served in the War Room. Unprecedented Cooperation The degree of international cooperation that occurred immediately following 9/11 was simply extraordinary. At the time I said this was the best example of international cooperation in the field of finance since the establishment of the Bretton Woods institutions at the end of World War II. I still hold this view, and it is now shared by outside evaluators. This cooperation did not occur by accident. The international strategy and its implementation—from President Bush’s leadership to the G7 action plan to the hard work of the dedicated experts in the War Room—were essential. In addition to the thousands of terrorist accounts and the millions of dollars frozen, using the international finance system to trace and obtain intelligence about terrorists became an effective weapon in pursuing terrorists and preventing attacks. In public policy it is the bad events that do not happen that are frequently the biggest accomplishments. Adapted from Global Financial Warriors: The Untold Story of International Finance in the Post-9/11 World, by John B. Taylor, published by W. W. Norton & Company. Available from Rowman and Littlefield is Warrant for Terror: The Fatwas of Radical Islam and the Duty to Jihad, by Shmuel Bar, copublished with the Hoover Institution. To order, call the National Book Network at 800.462.6420 or visit www.rowman.com. John B. Taylor is the Bowen H. and Janice Arthur McCoy Senior Fellow at the Hoover Institution and the Mary and Robert Raymond Professor of Economics at Stanford University. He was previously the director of the Stanford Institute for Economic Policy Research and was founding director of Stanford's Introductory Economics Center. He has a long and distinguished record of public service. Among other roles, he served as a member of the President’s Council of Economic Advisors from 1989 to 1991 and as Under Secretary of the Treasury for International Affairs from 2001 to 2005. He is currently a member of the California Governor's Council of Economic Advisors. |
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