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US Treasury Dept. Under Fire for Not Effectively Fighting Terror Financing - 2004-04-29

U.S. Treasury Department officials came under fire from lawmakers on Capitol Hill Thursday for not doing enough to fight terrorism financing.

The Treasury Department, along with the Federal Bureau of Investigation and bank regulators, are investigating accounts controlled by Saudi diplomats at a Washington-based bank.

Investigators are looking into whether large cash transactions in the Saudi accounts at Riggs Bank are linked to terrorism financing.

The Saudi government has denied any wrongdoing.

U.S. Treasury regulators accuse Riggs of failing to notify the government, as required by law of the suspicious Saudi transactions. The bank could face fines.

At a Senate Banking Committee hearing, Republican chairman Richard Shelby of Alabama, suggested to Deputy Treasury Secretary Samuel Bodman, who testified before the panel, that his agency's regulators deserve some of the blame.

"I am concerned that Treasury's enforcement offices were unable, unable MR. Secretary, to determine that Riggs failed to file numerous suspicious activity reports," he said. "This I believe is evidence of a regulatory system that does not function effectively."

Mr. Bodman admitted there is room for improvement. "I think it is fair to say we have a weakness, or at least a potential weakness, in the system that needs to be investigated that I have committed to this committee to do and I will endeavor to report back to you once I have done that," he said.

Mr. Bodman said there has been some progress in stemming terrorism financing, including the blocking of more than 1400 accounts and millions of dollars in assets linked to terrorist groups. He also noted the Treasury Department last month set up an Office of Terrorism and Financial Intelligence to coordinate efforts.

Meanwhile, the head of the Senate Finance Committee, Republican Senator Charles Grassley of Iowa, has sent a letter to the commission investigating the September 11th terrorist attacks on the United States asking the panel to look into Saudi transactions totaling tens of millions of dollars at Riggs Bank and Fleet Boston Financial Corporation.

The Wall Street Journal said the letter cites Saudi Embassy payments for Saudi individuals' flight training and payments to Islamic groups suspected of supporting terrorism.

Fifteen of the 19 hijackers in the 2001 attacks were Saudi nationals.

A Saudi representative says the embassy welcomes the inquiry, saying the Saudis have, as he put it, "nothing to hide."