The money, plus an additional $600 million frozen by Britain and 10 other countries, will be used to help defray the costs of rebuilding Iraq after Saddam Hussein's regime is toppled, Treasury Secretary John Snow said in announcing Bush's order.
Snow said the United States has also asked other countries to freeze Iraqi assets so they can be used to help with the rebuilding. And he said Treasury has launched "a worldwide hunt" for some $6 billion the United States believes Hussein, his family and aides obtained through kickbacks and illegal oil sales and have stashed in concealed accounts. This money would also be used for humanitarian aid in a post-Hussein Iraq.
Countries that don't cooperate could be "cut off from the U.S. financial system" under provisions of the Patriot Act, which Congress passed in response to the Sept. 11 attacks, a senior Treasury official said.
The $1.4 billion in principle and interest that will be confiscated from 17 U.S. banks will be transferred to an account in the New York Federal Reserve Bank, Treasury officials said. The money is in frozen accounts of the Iraqi government and of four entities controlled by Iraq: the Central Bank of Iraq, Rafidain Bank, Rasheed Bank and the State Organization for Marketing Oil.
There is a total of about $1.7 billion in the accounts, Treasury officials said. But about $300 million has claims on it by victims of terrorism who have won judgments against Iraq. That money will not be seized, they said.
Treasury officials said that even though many countries oppose military action against Iraq, they believe most nations would support an effort to seize Iraqi funds and channel them into rebuilding the country. One senior official said France and Switzerland were among countries that have not frozen Iraqi funds, but the official said it is possible they had no funds to freeze.
A congressional report from last year estimates that Hussein and those close to him have obtained more than $6 billion through trades and sales banned by UN sanctions imposed over the past 12 years, hidden in front companies.
Barring a country or its financial institutions from the U.S. system would entail cutting off corresponding bank accounts with U.S. banks. Foreign banks use such accounts to deposit money and do business here. The United States could impose the less severe punishment of publicly naming any country that doesn't cooperate. That tactic has worked well in trying to get Ukraine to be more aggressive in barring money laundering, the Treasury official said.
The banks holding frozen assets are Citigroup, Bank of America, Bank One, Wachovia, American Express, J.P. Morgan Chase, Bank of New York, Commercial Bank of Kuwait, Arab Banking Corp., Societe General, National Bank of Egypt, Deutsche Bank, UBS, HSBC, Banca Nazionale del Lavoro, Gulf International Bank and the Federal Reserve Bank of New York.
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