>> Hi, and welcome to the second part of our interview with Juan Zarate, a former prosecutor Department of Treasury official, and a Bush administration counter-terrorism adviser. Of course you you know, flat going for it even more you still see that tension in President Obama's speech, for example, to the National Defense University. and his effort to do outreach to the Muslim world relaying to his Cairo speech. On one hand wanting to. reach out to people to say we have shared values. We want to have progress, better life, economic progress, education and all those things that universally people want, while, at the same time, feeling the need to conduct this aggressive and often militaristic effort to go after the enemy. And it's very complicated to send those dual messages at the same time in a way that not only people in the United States but all around the world, the many people from outside the United States will be taking this course, you know, can understand and identify with. >> No, you're absolutely right and, and it's clear that the Obama administration, in some ways, wanted to constrain the language, the militant language, and so they shifted from the notion of a war on terror broadly, which they thought brought too much baggage with it and certainly had the implication that we were at war with a broader community than, than we were, and constrain it to the notion of a war on Al Qeada. which allowed them to say look this is constrained. We're going to be aggressive against the Al Qaeda core leadership and their movement. This isn't about a broader sensibility of, of, of who we're at war with. I was just going to say I think there was an appreciation over time post 9/11 to the importance of the messaging, to the importance of being very clear. about who we were at war with. And I think President Bush actually, in retrospects, in retro, in retrospect, gets a lot of credit for being very clear that we're, we weren't at war with Islam. trying to demonstrate great respect for the religion of Islam. For Muslims. the visits to the mosques the, the establishment of the White House iftars. The placing of the first Koran in the White House. The first envoy to the OIC. All that came from President Bush. The problem I think was as you, you just said, David, I think there's a fundamental tension in A policy where you're having actually going out and kill elements of the, of this group that you're at war with and sometimes the collateral damage that comes with that and then this message of respect and of of peace which sometimes doesn't mesh very easily. And I think The Obama administration has struggled with that. The Bush administration struggled with that. It, you know, admittedly with the, the overlay of Guantanamo and Abu Braid and those things which dominated the perception of what American policy was about. So I think that's a, that's a fundamental tension for any administration and, and certainly you've seen that in the Obama administration as well. Why I'm spending so much time on this because the students has as their final project to consider that it's September 2012 and that they are they are going to be, they're giving a, a, a speech or and they're a high-level policymaker either within their own country or the United States and they're going to be giving a speech. Or an interview on television and they're having to craft a message as to how, explaining why this conflict came about and, and charting out a, a, a guide post for the future. So I hope they'll listen carefully to our conversation here and when they're trying to frame that assignment themselves. [INAUDIBLE] If I can offer two suggestions to the, the class actually that quite relevant to the debates that are happening on September 12th and frankly still relevant today. wrote an Op Ed that appears in the Washington Post today that touches on some of this. But, there were a couple of debates that were happening on September 12th that were very important and, impactive. One was What is the nature of the enemy? Who is it that we're actually fighting? What, what is this network? And actually that question grows more complicated over time and I would say it's probably more complicated today than it was on September 12, 2001. But that was a fundamental question for the government, you know? How do we define the enemy? If we're going to go to war with people And it's not a country. How do we define that, that battle and what are the contours? Secondly, given that it's not a traditional conflict, how do you define the rules of the game? If this isn't going to be a classic battle between states how do you define not only who were at, who, who we're at war, we're at war with. But what are the contours of that battle? geographically where does that reach? Is it just Afghanistan where they were? Is it where they have any cells that may pop up? How does that define, is that, that defined geopgrphically? And then in terms of time scope. How long does this last? When does it end? that will impact in questions on how long you keep detainees in custody. how long Guantanamo or Abagra remains open. So, those are fundamental questions on September 12th, and they persist in terms of being fundamental policy questions today. >> Well, thank you for that one and let just for a moment dig a little bit deeper into what you were doing and tell us how it is that, you know, in the post September 11th world how in the treasury department you took advantage of the new paradigm and then ultimately new authorities that you got from congress to make treasury and financial tools an effective weapon in a sense. a non-militaristic weapon but a weapon none-the-less against terrorists and other rouge actors. >> Well thank you, David. I, I think this is a great sort of untold story of this period because it wasn't just that the president was looking toward the use of military power solely to deal with this problem. He was looking, again, at his tool kit. Say what, what tools do we have in the U.S. Government to actually go after this problem? And he looked at the Treasury and he looked at the data in front of him and said, look we have to deal with the financial underpinnings of this movement, both short and long term. We've got to figure out was of disrupting it. And you, Treasury, have the ability to do that given your authorities under sanctions, your authority to regulate for money laundering, authority to regulate the financial community both bank and non-bank financial sectors. And frankly, an ability to do this internationally with finance ministries and central banks around the world. And so, it's interesting that the first sort of formal act in the way on terror after 9/11 was not the bombing in afghanistan or the invasion there, but was the signing of an executive order on September 23rd, 2001, that gave the sector of the treasury much more expansive powers, to freeze the assets of those who are involved in terrorism, those who were supporting terrorist groups, and those that were financially facilitating terrorists. And that was the beginning of a financial campaign against terrorist financing which really you know, I was fortunate to be a part of. And what we did there was to amplify the tools that we had to bring the bear, we used sanctions and targeted ways to identify individuals and entities that were engaged in terrorism or supporting it. we deepen the regulatory system, the USA Patriot Act has Title three as part of it. Its often ignored but it's the part that really deepened and broadened the anti money laundering system in some fundamental ways We've dealt some important international coalitions a to go after a the financing of a terror, and so at the end of the day what we're trying to do is build up a campaign just like you build a military campaign but build a financial campaign. To make it harder, costlier and riskier for Al qaeda to raise and move money around the world. and ultimately, it's succeeded. I think it doesn't mean we've stopped every dollar. And it doesn't mean it's not possible for Al Qaeda to support terrorist attacks and it certainly doesn't mean that a terrorist attack doesn't cost a lot of money. But we did impact, I think, the ability of Al qaeda. To do what they wanted strategically because we constricted their budget, in the way that money flowed. And that was a really important part I think, at least, I was involved in it. I'd like to think it's import-, important part of a new strategy for how you went after, not just terrorist's threats, but other threats facing the country. >> You know, let's make clear it wasn't really just about cutting off funding to Al Qaeda but also in a way influencing a the behavior of, of states and other entities. Because the idea was you could impose a price to some regard on states and corporations who were perhaps if not directly funding but maybe enabling Al Qaeda to, to gain access to financial channels. So these tools extend, and it wasn't just about depriving and starving the funding from Al Qaeda but actually influencing the actors around the world. >> Absolutely right. And you, you hit the nail on the head. I think. There were three components to this that were interesting and important strategically. One was, we incentivized and made important to the private sector the notion of reputational risk. The fact that banks and non-bank financial institutions did not want to be caught with terrorist funds in their bank accounts, or having been, you know, wired through their facilities, was an incredibly important incentive for the private sector itself to guard against these illicit financial flows, and so they closed accounts on their own, they stopped accounts, they reported things that were happening. So that was very important. In terms of countries, we had to shift the paradigm. >> Right. >> Recall that in the 1980s, for example, from the Arabian Gulf There was a lot of financial sort of, input from our allies into the Afghan Mujahideen, in the movement that was basically the precursor to many of the elements of al Qaeda, and al Qaeda core. We had to shift that paradigm to say look, this is no longer acceptable. This is now a threat to you, a threat to us, and we've gotta find ways of cutting off The, the traditional ways that have largely funded this movement in the past. That has to end. And so that led to some very important financial diplomacy with countries like Saudi Arabia, the UAE, and others in the Arabian Gulf and around the world. Then finally it was a way of figuring out how to deter actors. Without arresting them without you know threatening kinetic activity, you know, if people have commercial interests or financial interests they want to preserve those so if those are put at risk, that's one way of starting to impact, dissuade, deter possible elements of the network that can be convinced that it's not a good idea to be helpful to this Al Qaeda movement. So all of that helped in shaping the environment. >> And students around the world will soon have an opportunity to be able to read in more depth about this very important aspect of the war in general. Tell us just a little bit about that. >> Thank you David I appreciate the plug I'm publishing a book on September 10th 2013 called Treasury's War, the Unleashing of a new Era of Financial Warfare, so it takes from the discussion we're having here. Talking about sort of the, the foundational principles of this new paradigm post 9/11. The use of treasury tools powers to go after Al Qaeda's financing. And how that evolved into a whole new way of thinking about the use of financial power and influence to go after the financial underpinnings of America's enemies. And so the book talks about not just that but how we thought about. proliferation finance, how we thought about dealing with international organized crime. How these tools were used quite effectively, and continue to be used against North Korea and Iran. and frankly, the future of the use of these tools. How China is, has learned from the US, how Russia has learned. and what the future of financial warfare and influence may look like. And so, hopefully the book illuminates with some interesting stories, some great characters. David, friends of yours and mine that are in it, and I think it'll be both entertaining and hopefully helpful to students around the world. >> Well, I know this'll be an important contribution to the, to the literature, some of which we're able to study this course and we'll help fill out the full picture of all the different ways that this this enemy and this problem of, of global terrorism and also proliferation weapons of mass destruct destruction and things that threaten, you know, everyone around the world. is being is being waged. Juan Zarate, you've been very, very generous with your time. Not only talking to me but also trying to set up this Google chat which I'm glad we were able to do. >> I figured it out. [LAUGH] >> Figure it out. And I'm very grateful. Thank you so much for sharing your expertise with us. >> Thank you, David. It's a pleasure to be with you and all the best to you and your students.