- The Washington Times - Monday, January 8, 2007

Widespread voluntary cooperation by international banks is helping the United States isolate drug traffickers, terrorists and other outlaws from the international finance system, a top Treasury official said.

As a result, Washington’s efforts to financially isolate supporters of international terrorism and other outlaws are “much, much more powerful,” said Stuart Levey, Treasury undersecretary for terrorism and financial intelligence.

Treasury last month listed nine persons, an electronics company and a shopping center in South America as specially designated global terrorist entities for providing support to Hezbollah. That designation under a post-September 11 counterterrorism executive order bars transactions with Americans and freezes any U.S. assets of the entities.

Cooperation by foreign banks “represents, I think, a very significant step in protecting the integrity of the international financial system, making it harder for those who want to abuse it to have access to it,” Mr. Levey said.

Banks are assessing “legal, compliance, operational and reputational risks in a more holistic, global manner,” said an executive at a major European bank who did not want to be named.

The executive, who works to counter money laundering, stressed that the industry is acting on several factors, not just the U.S. government.

These factors include the United Nations, the European Union and other regulatory regimes, as well as a reluctance to conduct business in support of terrorism or other international dangers, he said.

Officials from other banks would not comment.

Mr. Levey cited measures taken against North Korea, Iran and the Hamas-led Palestinian government as examples “because in all three of these circumstances, we’ve seen the private sector, particularly financial institutions, go way beyond what they’re required to do to adhere with United States law.”

The U.S. government named North Korean entities in the proliferation of weapons of mass destruction.

In 2005, it named Banco Delta Asia in Macau as a “primary money laundering concern,” whose “special relationship” with North Korea aided criminal activities of agencies of the North Korean government and front companies.

Mr. Levey said the move “has led to what has really put the pressure on North Korea and their illicit activities: banks questioning whether they want to do business with the North Korean government, which has cut North Korea off from the international financial system.”

“The private sector has greatly amplified the formal legal effect of naming this one bank in Macau,” he said.

A similar process is beginning with Iran, which Mr. Levey called “the central banker of terror.”

In September, Treasury cut off Iran’s Bank Saderat from the U.S. financial system, saying the Iranian government used the bank “to transfer money to terrorist organizations, including Hezbollah, Hamas, the Popular Front for the Liberation of Palestine-General Command and Palestinian Islamic Jihad.”

Mr. Levey said financial institutions and other legitimate business have been re-evaluating their business with Tehran.

He said that some financial institutions are refusing to issue letters of credit to Iranian businesses.

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