Improving Risk Assessment Processes within the State Department: Lessons from Foreign Terrorist Organization Practices
Trump announces new FTO listings
Note: When President Trump announced new additions to the Foreign Terrorist Organization (FTO) list during his March 4, 2025 State of the Union address, my ears perked up: my colleague, fp21 academic fellow Dr. Michael Becker, has just completed a report evaluating the FTO process.
Curious to learn more about the FTO process? The timing of this article is perfect. Michael discovers a number of pathologies in the current FTO process and makes some recommendations about it how it could be improved by adopting more advanced risk management processes. His analysis offers an excellent example of what expert foreign policy could look like in practice. Check it out below.
-Dan
Improving Risk Assessment Processes within the State Department: Lessons from Foreign Terrorist Organization Practices
By: Michael Becker, Ph.D.
In July 2018, the government of Japan executed Shoko Asahara along with several followers. He was the founder of Aum Shinrikyo, a group that carried out chemical weapon attacks in Japan in the 1990s. These executions marked the end of an organization that had not posed a threat to the United States in decades, if indeed it ever had. But despite the group’s collapse beyond a reasonable doubt, it remained on the State Department’s list of Foreign Terrorist Organizations (FTOs) from 1997 until 2022, when it was removed as part of a package of de-listings.
Today, the United States Department of State designates nearly 70 groups as FTOs, but the list does a poor job of reflecting U.S. national security interests. Many groups seem to remain on the FTO list far beyond their “shelf life,” such as Aum Shinrikyo and the Basque group ETA. Other times, groups are added to the FTO list that do not represent the most pressing American national security priorities. For example, in the run-up to the September 11, 2001 terrorist attacks, the United States could have been focusing on addressing the threat from Al-Qaeda and related groups. Instead, it added two Western groups to the FTO list: the New Irish Republican Army and the United Self Defense Forces of Colombia. To take another example, the 1990s designation decision of an anti-Iranian regime organization was characterized by a Clinton administration official as a “goodwill gesture” toward Iran, even though the group had already largely ceased to threaten direct American interests.
A faulty FTO designation process is harmful to U.S. national security in several ways. When an organization is listed as an FTO, multiple organs in the State Department and elsewhere in the United States government are obligated to conduct costly monitoring, interdiction, and disruption operations. Focusing attention on groups that pose little or no threat is a poor use of resources. Additionally, the existing process is too slow to recognize groups of genuine concern. For example, despite indications of its involvement in the 1992 Aden hotel bombing (which targeted U.S. Marines) and the 1993 World Trade Center bombing, Al-Qaeda was not designated until October 1999, two years after the current FTO process was created.
The problem with the FTO process is not poor judgment – of course, specific mistakes are clearer in hindsight: identifying and addressing threats is difficult, and reasonable people can disagree ex ante. The challenge is instead a procedural one, the result of a legalistic process more focused on compliance than risk mitigation.
The Trump administration has signaled a possible change in FTO designation practices. On January 20, 2025, President Donald Trump issued an executive order instructing cabinet officials to consider designating certain drug cartels as FTOs. The administration has also redesignated the Houthis as an FTO, reversing a decision by the Biden administration, which itself had rescinded an FTO designation instituted by the first Trump administration. While the ultimate effects of these decisions remain to be seen, in this essay I argue for a more systematic reform to State Department policy in this area. Specifically, I focus on the current FTO designation process, identify shortcomings, and suggest reforms with a view to improving both counterterrorism and the practice of American foreign policy writ large. In brief, I propose that the FTO process implement systematic risk analysis practices and more granular designation labels. This shift would introduce additional flexibility in the initial designation of an organization while at the same time making it easier to de-list outdated threats.
The current process
The broad structure of this process was outlined in a 2015 Government Accountability Office report. Typically, the process begins with an assessment by the Bureau of Counterterrorism and other bodies within the State Department, which monitor the past and projected future activity of any group deemed a potential threat. Next, there is a consultation process involving stakeholders from multiple agencies and departments. This step, called an “equity check,” increases the number of actors who must agree in order for a designation to occur, and exerts effects on the list’s composition which I discuss later.
According to the State Department, the initial designation requires that a foreign group be deemed to:
engage in terrorist activity, as defined in section 212 (a)(3)(B) of the INA (8 U.S.C. § 1182(a)(3)(B)), or terrorism, as defined in section 140(d)(2) of the Foreign Relations Authorization Act, Fiscal Years 1988 and 1989 (22 U.S.C. § 2656f(d)(2)), or retain the capability and intent to engage in terrorist activity or terrorism.
But this alone is not enough. An additional condition is that such “terrorist activity or terrorism must threaten the security of U.S. nationals or the national security (national defense, foreign relations, or the economic interests) of the United States.” The meeting of both of these conditions permits, but does not compel, a Secretary of State to list an organization. If a listing occurs, the Secretary informs Congress, and the designation takes effect (subject to litigation).
Before 2004, a given designation needed to be actively renewed every two years to remain valid. But under the Intelligence Reform and Terrorism Prevention Act of 2004, the Secretary is empowered to review designations every five years or when an organization files for review. Listed organizations may file for a review of their place on the FTO list after designation and every two years after review decisions thereafter. While federal law allows the Secretary of State to delist a group if they find that the rationale for a designation has changed or if national security demands it, in practice secretaries have tended to maintain the status quo for political and bureaucratic reasons.
Pathologies of the current process
Issues abound throughout the process of FTO designation. Even before the decision to list a group is made, during its initial screening, the State Department sticks to its well-known position that foreign policy is “more art than science,” and that “quantification can be dangerous.” Based on interviews with State Department officials, here, too, analysts are largely reliant on idiosyncratic “good judgment” rather than reproducible scientific methods. Modern risk analysis frameworks are entirely absent from this process.
Once a potentially threatening group has been identified, there are two ways things might go wrong. Statisticians categorize classification errors as “false negatives” and “false positives.” False negatives in the FTO context represent real threats that the nation is unprepared to address and mitigate, while false positives lead to wasted effort and resources on the part of government personnel. Generically, there is a tradeoff between these types of error, but because the current FTO process bifurcates the initial designation and re-designation decisions, the U.S. is currently risking both.
Near the beginning of the process, because of the equity check step, a large number of stakeholders across the federal government have an effective veto over a group’s designation, which they might exercise for any number of bureaucratic, political, or substantive reasons. For instance, there may be pressure not to list an organization with which the U.S. has an enemy in common. This process tends toward a “lowest common denominator” where, as a rule, only the groups everyone agrees are threatening are ultimately listed. Even if the Bureau of Counterterrorism’s initial vetting process recommendation is on the mark, there remains a danger of ultimately excluding organizations whose initial threat level does not generate unanimous alarm.
Another key challenge is that the process is currently driven by legal rather than analytical or strategic considerations; that is, whether lawyers associated with the State Department are satisfied that the statutory conditions for listing can be successfully defended in court. But while State Department policy should, of course, be consistent with the law, such “adversarial legalism” has tended to outsource too much of the policymaking process to lawyers rather than focusing on effective national security policy.
This state of affairs also helps explain why, once on the FTO list, groups tend to stay there for many years after they have ceased to be a threat. In part because of legal inertia, when organizations are ultimately de-listed, it is often in batches that bear little relationship to the threat they pose. Admittedly, maintaining dubious groups on the list may be understandable on political grounds: the State Department does not want to de-list an organization that later attacks the United States. Unfortunately, the expenditure of resources related to a group on the FTO list is potentially considerable (though difficult to measure precisely). A listing, justified or not, engenders a practically whole-of-government response, from observation and/or prosecution of persons associated with a group, to excluding immigrants linked to the group from the country, to a raft of financial monitoring and disruption actions concentrated in the Treasury and Justice Departments.
Of course, ex ante it is never certain that a group constitutes a false positive. “Black swans”—low probability, but high-impact events—are one of the central challenges of counterterrorism and foreign policy. But this reality does not obviate the need for effective risk management, it increases it: the federal government cannot address every conceivable threat, so it must allocate its resources carefully.
It should be noted as important historical context that much of the legislation governing FTO listing was crafted around the early 2000s, in the crucible of the response to 9/11. In this environment, policymakers can be forgiven for failing to design an optimal policy process from a risk management perspective. But, two decades later, some rethinking of FTOs is warranted.
A way forward
The FTO listing process is an excellent environment in which to explore improved risk assessment procedures at the State Department. In a departure from many other challenges in foreign policy, the FTO process has a clear, measurable goal: to prevent terrorist attacks against the United States, its allies, and its interests.
Some suggested solutions that should be explored:
Implement a systematic risk analysis procedure. Currently, the designation schema is binary and non-ordinal. A graded or multi-dimensional system should be implemented (internally, if not publicly) to allow for resources to be directed toward the most pressing threats.
This reform could take a number of different forms to account for important, but currently underappreciated, sub-dimensions of risk, such as the directionality of a threat (is it growing, receding, or static?), its probability (how likely is it that the group will conduct an attack?), capacity (how much damage could the group cause?), and relative risk (how does the threat posed by one group compared to another, or to some baseline non-terrorism threat). A group’s level on any one of these component scores could trigger specific policy consequences or contribute to an overall index that provides a broader picture of the threat it poses and what quantity and type of resource attention it merits.
As a part of this reform, the State Department should reform the equity check process so that attempted “vetoes” of a group’s listing are considered holistically in the risk assessment alongside the dangers of not doing so.
Systematic risk analysis (in contrast to an evaluation system that relies on often ad hoc reasoning) would also facilitate more effective evaluation and learning about past decisions. Following unfortunate, but inevitable, instances of terrorist attacks, the Counterterrorism Bureau can review its previous analytical findings and learn from its strengths and weaknesses. After more than two decades of experience since the current FTO system was put into place, there should be plenty of data from which to learn and improve.
Finally, I propose two reforms inspired by the academic literature on nudges and blame avoidance to limit unwarranted retention of non-threatening groups:
By default, unless overridden, a designation should sunset after a small number of years. A provisional “probationary” status with a more moderate level of scrutiny and resources could then follow to confirm that a group is transitioning away from threatening Americans, while preserving a pathway for rapid re-designation if necessary.
Although the public tends to overestimate the likelihood of international terrorism, we cannot expect political and agency leaders to disregard the public’s fears, to say nothing of the backlash following an attack. Nudges like changing default behavior can be effective by taking the decision to delist a group out of individuals’ hands, providing some political cover in the unlikely event that a de-listed group later does attack Americans. Such nudges have been successfully applied in other settings where “adding” is easier than “subtracting,” leading to unintended oversupply. This increased flexibility would also free up valuable personnel time that is currently dedicated to continually re-certifying existing FTOs.
By default, unless overridden, a probationary designation should sunset to a complete de-listing after a larger number of years
Here, it bears keeping in mind a possible tradeoff. On the one hand, the deterrent power of an FTO designation could be enhanced by some noise and stickiness in the process. On the other hand, at the margin, too much stickiness reduces the incentive to desist from terrorism, because groups already on the list remain there either way. Moreover, relative to the set of threats they must address, U.S. government resources are not so plentiful that they can be expended merely to send a signal.
Conclusion
The process governing the Foreign Terrorist Organization listing process contains a number of pathologies emblematic of broader challenges in the practice of American foreign policy. As such, it contains lessons for the State Department as a whole. For example, the current FTO process reflects outdated attitudes toward resource stewardship, deterrence, and risk assessment that pervade current American foreign policy. Setting priorities and expending resources effectively in a complex geopolitical environment depends on accurate assessments of risk.
FTO designation is only one arrow in the quiver of actions the U.S. government takes to mitigate terrorism. But the State Department list of FTOs is a public good widely looked to by academics, journalists, think tanks, and other institutions of government—at home and abroad—as the authoritative set of violent groups of concern. If the list is inaccurate or incomplete, the national security implications are especially troubling, but the effects extend beyond suboptimal counterterrorism.
The need for counterterrorism practitioners to prioritize the most pressing threats with their resources echoes a broader State Department need for retrenchment faced with the confluence of acute geopolitical challenges and fiscal tightening. Prudent resource use is, of course, a perennial concern, and even a perfect designation process is not a panacea. But as the international landscape appears particularly chaotic for the foreseeable future, the State Department must move to implement state-of-the-art risk assessment and mitigation plans to guard against novel threats from revisionist groups, states, and technologies. Once effectively implemented in the field of counterterrorism, such practices might also extend to other areas, such as pandemic prevention. Issues in counterterrorism provide useful object lessons because terrorism displays many of the features (stochasticity, lack of “return address,” feedback loops) that make other emerging threats so bedeviling.
About the author: Michael Becker, Ph.D. is an academic fellow with fp21: he is a political and data scientist who studies international security, political violence, and foreign policy. His research uses computational, statistical, and qualitative methods to elucidate topics such as the connections between communications and behavior by militant groups, the drivers of lopsided international conflicts, target selection by lone violent offenders, and the dynamics of civil wars. Michael received his Ph.D. from the Department of Politics at New York University.
As I recall, the Department resisted putting the Provisional IRA on the list during the late 1970s and early 1980s because it would have barred all contacts and communications with their leadership, blocking any efforts at helping bring about a peaceful resolution.