Grassley, the committee chairman, and Baucus, its senior Democrat, cited concerns about the agency's performance, including evidence of sloppy record keeping, failure to provide required information to Congress, and reliance on voluntary compliance by banks to impose sanctions against suspected terrorists.
Though an internal investigation in 2002 recommended the agency make changes to ensure it has the legal authority to test banks' compliance with sanctions, it has not taken steps to do so, according to the letter obtained by the Associated Press.
"This leaves [the agency] in a position of not knowing what it does not know," the two senators wrote. "While many financial institutions report their own violations when they are detected, we do not have the luxury of assuming that all financial institutions do this."
"The dangers of terrorism financing operating unhindered are too great to take a passive approach," the letter said.
Tara Bradshaw, spokeswoman for the Treasury Department, said Wednesday she was unfamiliar with the lawmakers' complaint, and the agency's director, Richard Newcomb, was out of town and unavailable for comment.
The agency is an obscure office that plays a key role in the war on terrorism. It is charged with freezing the bank accounts and other financial assets of countries, companies, and individuals who are deemed enemies of the United States.Newcomb was the focus of a Treasury inspector general's investigation in the mid-1990s, which confirmed several instances in which Newcomb met outside the office with representatives of companies under investigation by his agency and took uncoordinated enforcement actions that potentially compromised criminal investigations.In 2002, the Treasury inspector general issued a report questioning the agency's effectiveness in the war on terror. Some concerns cited by Grassley and Baucus stem from that report, but the two lawmakers also questioned why the agency did not block the assets of several people designated by allies as terrorist financiers and publicly reported.
In one case, the United Nations and European Union in 2001, before the Sept. 11 suicide hijackings, had ordered their members to freeze the assets of several high-ranking Al Qaeda leaders, including bin Laden's brother-in-law and a security coordinator. The agency did not.
More recently, a newsletter divulged that three people listed in a December 2002 UN report as terrorist financiers were not blacklisted by the agency, even though some of the financiers' groups were blocked -- leaving a potential loophole for terror financing.
