[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]
PATRIOT ACT OVERSIGHT: INVESTIGATING
PATTERNS OF TERRORIST FINANCING
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON
OVERSIGHT AND INVESTIGATIONS
OF THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTH CONGRESS
SECOND SESSION
__________
FEBRUARY 12, 2002
__________
Printed for the use of the Committee on Financial Services
Serial No. 107-53
U.S. GOVERNMENT PRINTING OFFICE
78-125 WASHINGTON : 2002
________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; (202) 512-1800
Fax: (202) 512-2250 Mail: Stop SSOP, Washington, DC 20402-0001
HOUSE COMMITTEE ON FINANCIAL SERVICES
MICHAEL G. OXLEY, Ohio, Chairman
JAMES A. LEACH, Iowa JOHN J. LaFALCE, New York
MARGE ROUKEMA, New Jersey, Vice BARNEY FRANK, Massachusetts
Chair PAUL E. KANJORSKI, Pennsylvania
DOUG BEREUTER, Nebraska MAXINE WATERS, California
RICHARD H. BAKER, Louisiana CAROLYN B. MALONEY, New York
SPENCER BACHUS, Alabama LUIS V. GUTIERREZ, Illinois
MICHAEL N. CASTLE, Delaware NYDIA M. VELAZQUEZ, New York
PETER T. KING, New York MELVIN L. WATT, North Carolina
EDWARD R. ROYCE, California GARY L. ACKERMAN, New York
FRANK D. LUCAS, Oklahoma KEN BENTSEN, Texas
ROBERT W. NEY, Texas JAMES H. MALONEY, Connecticut
BOB BARR, Georgia DARLENE HOOLEY, Oregon
SUE W. KELLY, New York JULIA CARSON, Indiana
RON PAUL, Texas BRAD SHERMAN, California
PAUL E. GILLMOR, Ohio MAX SANDLIN, Texas
CHRISTOPHER COX, California GREGORY W. MEEKS, New York
DAVE WELDON, Florida BARBARA LEE, California
JIM RYUN, Kansas FRANK MASCARA, Pennsylvania
BOB RILEY, Alabama JAY INSLEE, Washington
STEVEN C. LaTOURETTE, Ohio JANICE D. SCHAKOWSKY, Illinois
DONALD A. MANZULLO, Illinois DENNIS MOORE, Kansas
WALTER B. JONES, North Carolina CHARLES A. GONZALEZ, Texas
DOUG OSE, California STEPHANIE TUBBS JONES, Ohio
JUDY BIGGERT, Illinois MICHAEL E. CAPUANO, Massachusetts
MARK GREEN, Wisconsin HAROLD E. FORD Jr., Tennessee
PATRICK J. TOOMEY, Pennsylvania RUBEN HINOJOSA, Texas
CHRISTOPHER SHAYS, Connecticut KEN LUCAS, Kentucky
JOHN B. SHADEGG, Arizona RONNIE SHOWS, Mississippi
VITO FOSSELLA, New York JOSEPH CROWLEY, New York
GARY G. MILLER, California WILLIAM LACY CLAY, Missouri
ERIC CANTOR, Virginia STEVE ISRAEL, New York
FELIX J. GRUCCI, Jr., New York MIKE ROSS, Arizona
MELISSA A. HART, Pennsylvania
SHELLEY MOORE CAPITO, West Virginia BERNARD SANDERS, Vermont
MIKE FERGUSON, New Jersey
MIKE ROGERS, Michigan
PATRICK J. TIBERI, Ohio
Terry Haines, Chief Counsel and Staff Director
------
Subcommittee on Oversight and Investigations
SUE W. KELLY, New York, Chair
RON PAUL, Ohio, Vice Chairman LUIS V. GUTIERREZ, Illinois
PETER T. KING, New York KEN BENTSEN, Texas
ROBERT W. NEY, Texas JAY INSLEE, Washington
CHRISTOPHER COX, California JANICE D. SCHAKOWSKY, Illinois
DAVE WELDON, Florida DENNIS MOORE, Kansas
WALTER B. JONES, North Carolina MICHAEL CAPUANO, Massachusetts
JOHN B. SHADEGG, Arizona RONNIE SHOWS, Mississippi
VITO FOSSELLA, New York JOSEPH CROWLEY, New York
ERIC CANTOR, Virginia WILLIAM LACY CLAY, Missouri
PATRICK J. TIBERI, Ohio
C O N T E N T S
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Page
Hearing held on:
February 12, 2002............................................ 1
Appendix:
February 12, 2002............................................ 39
WITNESSES
Tuesday, February 12, 2002
Byrne, John J., Senior Counsel and Compliance Manager, American
Bankers Association............................................ 28
Emerson, Steven, Executive Director, The Investigative Project,
Washington, DC................................................. 25
Herrera, John A., Vice President for Latino/Hispanic Affairs,
Self-Help Credit Union; Board Chair, The Latino Community
Credit Union, on behalf of the Credit Union National
Association and World Council of Credit Unions................. 30
Lormel, Dennis M., Chief, Financial Crimes Section, Federal
Bureau of Investigation........................................ 11
Neubert, Jeffrey P., President and CEO, The New York Clearing
House Association, L.L.C....................................... 26
Warren, Mary Lee, Deputy Assistant Attorney General, Criminal
Division, U.S. Department of Justice........................... 9
Zarate, Juan C., Deputy Assistant Secretary, Terrorism and
Violent Crime, U.S. Department of the Treasury, accompanied by
John Varrone, Assistant Commissioner, Office of Investigations,
U.S. Customs Service; Richard Newcomb, Director, Office of
Foreign Assets Control, U.S. Department of the Treasury; and
James F. Sloan, Director, Financial Crimes Enforcement Network.
U.S. Department of the Treasury................................ 7
APPENDIX
Prepared statements:
Kelly, Hon. Sue W............................................ 40
Oxley, Hon. Michael G........................................ 43
Clay, Hon. William Lacy...................................... 44
Crowley, Hon. Joseph......................................... 45
Gutierrez, Hon. Luis V....................................... 47
Byrne, John J................................................ 160
Emerson, Steven (with chart)................................. 122
Herrera, John A.............................................. 168
Lormel, Dennis M............................................. 102
Neubert, Jeffrey P........................................... 153
Warren, Mary Lee............................................. 80
Zarate, Juan C............................................... 51
Additional Material Submitted for the Record
Kelly, Hon. Sue W.:
Letter to Secretary of the Treasury Paul H. O'Neill.......... 42
Lormel, Dennis M.:
Written response to questions from Hon. Joseph Crowley....... 119
Written response to questions from Hon. Luis Gutierrez....... 121
Varrone, John:
Written response to a question from Hon. Spencer Bachus...... 50
Additional Material Submitted for the Record
(Continued)
Warren, Mary Lee:
Written response to questions from Hon. Joseph Crowley....... 97
Written response to questions from Hon. Luis Gutierrez....... 100
Zarate, Juan C.:
Written response to questions from Hon. Joseph Crowley....... 67
Written response to questions from Hon. Luis Gutierrez....... 77
Written response to questions from Hon. Sue W. Kelly......... 72
PATRIOT ACT OVERSIGHT: INVESTIGATING PATTERNS OF TERRORIST FINANCING
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TUESDAY, FEBRUARY 12, 2002
U.S. House of Representatives,
Subcommittee on Oversight and Investigations,
Committee on Financial Services,
Washington, DC.
The subcommittee met, pursuant to call, at 2:00 p.m. in
room 2167, Rayburn House Office Building, Hon. Sue W. Kelly,
[chairwoman of the subcommittee], presiding.
Present: Chairwoman Kelly; Representatives Tiberi,
Gutierrez, Crowley, Clay, Bereuter, Grucci, and Bachus.
Chairwoman Kelly. This hearing of the Subcommittee on
Oversight and Investigations will come to order. I want to
thank all Members of Congress who are present today. Without
objection, all Members present will participate fully in the
hearing, and all opening statements and questions will be made
part of the official hearing record.
On September 11th, the world we live in fundamentally
changed with the horrendous acts of terrorists. After putting
aside the initial shock, the Nation quickly responded to
President Bush's call to join in the fight against the
evildoers responsible for the attack.
In the Financial Services Committee, we acted swiftly to
construct consensus legislation to ensure our law enforcement
has the best tools possible to identify the patterns of
financing used by terrorists and hence stop the terrorists
before any future acts could occur. With this Act, we seek to
prevent terrorists from using our money system as an unwilling
accomplice of their evil acts.
President Bush signed the USA PATRIOT Act into law October
26th. With his signature, he ended not only the prologue of
this subcommittee's efforts to combat money laundering
operations which many benefit many terrorists, but also it's
the beginning of things that we need to continue to consider.
This hearing is just part of a long-term agenda that this
subcommittee has to ensure that we do all in our power to break
up terrorist cells by making use of our financial system to
raise every red flag possible. In this effort, the anti-money
laundering provisions of Title III of the PATRIOT Act are a
good step in the right direction. However, much more will be
necessary before we reach our goal of eradicating the threat of
terrorism. In this effort, we will remain vigilant to balance
our efforts to ensure that we do not infringe upon the rights
and liberties of Americans.
This is, of course, a narrow line to walk. And that's why
our education as to questions of money laundering and terrorism
financing must be continuous. I believe we have an excellent
opportunity here today to further our knowledge of these latest
developments in the war against terrorism. In the past 5
months, we have had an unprecedented investigative effort by
law enforcement to identify, freeze and seize terrorist assets.
We have never had as many law enforcement officers focused on
the same goal. And from this, we have learned countless lessons
about the familiarity of the terrorists with our laws and their
sophistication in avoiding any suspicion.
In their effort to blend in, the terrorists responsible for
the September 11th attack opened bank accounts, used money
orders, wire transfers and credit cards. We also know that the
terrorists also relied on fraud and ID theft, and they continue
to do that today. They obtain drivers licenses, hazardous
material licenses and open bank accounts. One issue I found
particularly intriguing is the issue of ``hawalahs.'' This is
an Arabic word which means ``word of mouth.'' Hawalah is an
international underground economic system by which financial
operators in different locations honor each other's financial
obligations by making payments wherever needed. In essence,
hawalah continues because people look for ways to avoid taxes
and tariffs in their efforts to send funds to other countries.
And we also know that it's a way of moving cash without any
trace.
Such activities have no apparent victim other than the
Government, and it involves people who can be legitimate
businessmen in every other way. But everyone involved in the
transaction profits. And such transactions are extremely
difficult to detect.
The PATRIOT Act contained a number of provisions that seek
to combat hawalahs, and I will be most interested in hearing if
any of the investigative efforts have brought us closer to
closing down illegal hawalahs. It's my understanding that the
November 7th action taken against Al Barakaat has provided a
great deal of information on the modern operation of hawalahs.
We will also hear from law enforcement and industry on this
issue and explore potential new patterns that they may have
identified as terrorist financing schemes. This subcommittee
thanks you all for your appearance here today. We understand
the sensitive nature of the information that we're discussing,
and with that in mind we have hope that we will continue to
have a dialogue with you to address our concerns that the
PATRIOT Act is enough to allow you to do the job which Congress
intended when we enacted the PATRIOT Act.
I would like to let Members of the subcommittee and their
staff know that it is my intention to enforce the 5-minute
rule, and I would appreciate their cooperation in this.
I also want to say that with this panel, we have a new
sound system in this room. You have the power over your own
microphones. You have to turn them on and turn them off. So if
we can't hear you, it's your responsibility to make sure we
can.
Now I will recognize my good friend from Chicago, Luis
Gutierrez, the distinguished Ranking Member of this
subcommittee for his opening statement. Mr. Gutierrez.
[The prepared statement of Hon. Sue W. Kelly can be found
on page 40 in the appendix.]
Mr. Gutierrez. Chairwoman Kelly, thank you for holding this
hearing today. I would like to commend Senator Sarbanes for
moving this legislation in the Senate and Chairman Oxley and
Ranking Member LaFalce for their leadership in the House.
This afternoon, we will hear testimony about the financial
aspects of the ongoing war on terrorism and about the
implementation of anti-money laundering provisions incorporated
in the PATRIOT Act, a bill which I and other Members were proud
to support. This landmark legislation will give our country the
necessary tools to fight terrorists by blocking the schemes
used to finance their horrific crimes.
Treasury Secretary O'Neill recently said that $104 million
had been frozen since the September attacks. However, we do not
know whether this sum represents most or just a small
percentage of the pool of the potential money that could be
used to finance terrorist attacks. Although we have made
progress, we have much work to do.
To eliminate Al Qaeda, we need the appropriate law
enforcement tools and personnel to continue the financial
assault on terrorism made possible by the PATRIOT Act. Our
fight against terrorism financing is a broad-based effort
extending beyond the Al Qaeda network. It means nothing to
build a concerted effort between financial institutions and law
enforcement agencies at home without instituting similar
actions abroad. The help of other nations is therefore
essential.
We need expeditious compliance with the new laws. Many of
these regulations are scheduled to be implemented throughout
this year. But it is imperative that Treasury acts quickly and
effectively in their search for terrorists and their co-
conspirators.
Before I conclude, I would like to touch on another related
issue that is of great concern to me. While I strongly support
the increased protections against terrorist activity which the
USA PATRIOT Act created, I would like to urge some caution and
common sense when it comes to promulgating regulations that
address some areas. I am particularly concerned with the
implementation of some of these rules as they pertain to
verification of identification, which may pose a great risk to
immigrants trying to enter our banking system. Currently,
approximately 28 million foreign-born people live in the United
States, the majority of whom are making enormous contributions
to America's stability and security, economic and otherwise.
I hope, and I think we all agree, that law enforcement
officials will use financial data to focus on those people,
native or foreign-born, who truly pose a threat to our country,
rather than those, including immigrants, who are making us
safer and stronger as a Nation. If banks are required to
compare clients' names with a list of known terrorists, how
will accuracy be guaranteed? There are many common names on the
list, and the possibility exists for incorrect matches. How
will banks respond if a customer's name matches the list? How
will they go about verifying the customer's identity? I am very
concerned that the answers to these questions could have a
detrimental effect on immigrants and could pose an additional
burden on immigrants' ability to receive and/or interest in
receiving and seeking valid banking services.
One's inability to enter the banking system results in a
higher cost of borrowing, a lack of access to home mortgages
and other basic services, and a range of other problems.
Without access to banking services, the unbanked are forced to
turn to payday lenders and check-cashing vendors, who in most
cases charge outrageous fees for services. In the last 5 years,
check-cashing outlets have doubled, and their revenues exceeded
$2 billion in the year 2000. It often means vulnerability to
crime, robberies and other abuses to which many immigrants are
subjected mainly because they are unable to enter the financial
services sector due to their immigration status. Worse yet,
these victims may never report these incidents for fear of
deportation. They come here seeking a better life through their
hard work, and I must note, their taxes. These people are
making better lives for all of us in America. And at the same
time, they are also working to make life better for the people
in their home countries; for relatives who use that money for
basic necessities such as food and shelter.
During the past 20 years, remittances to Latin America, for
example, have increased not only in volume, but as a share of
the national income and total imports. This year, approximately
$9 billion will be sent to Mexico via remittances, representing
Mexico's third largest form of foreign income. However, such
transfers are costly due to the large range of fees, many of
which are hidden. Unfortunately, this group of immigrants
usually can't use alternatives to remittances offered by banks
because of prohibitions on individual's ability to open
accounts without tax identification numbers and/or Social
Security numbers. Giving immigrants access to banking will not
make the United States weaker. It will enrich communities here
and in other countries, creating steady income and jobs for
people who might otherwise migrate to the U.S. to find work.
Currently, Wells Fargo, First Bank of the Americas, credit
unions and other financial institutions offer programs to help
more immigrants become part of the banking system by accepting
identification cards issued by the Mexican consulate and
offering free checking services to those affected by
regulations.
I hope that in implementing the PATRIOT Act regulations,
Treasury takes these concerns into consideration. I know that
Congress, when drafting this bill, did not intend to further
alienate a group of people who already are largely separated
from our banking system. We, as legislators, have no greater
duty than to protect our country and our people from future
terrorist acts. To do so, we need speedy, yet careful,
implementation of the PATRIOT Act. But in achieving that goal,
we need not forget the needs of those who rightfully seek
access to the important financial services that most of us take
for granted.
Thank you again, Chairwoman Kelly, for holding this
important hearing, and I appreciate having the opportunity to
share my views on these important issues of vital importance to
our Nation.
[The prepared statement of Hon. Luis Gutierrez can be found
on page 47 in the appendix.]
Chairwoman Kelly. Thank you very much, Mr. Gutierrez.
Mr. Bereuter, have you an opening statement?
Mr. Bereuter. Madam Chairwoman, yes I do. Thank you very
much for letting me sit in on the subcommittee since I'm not a
Member of this subcommittee. I find that the topic of your
hearing today is very important, and also, has overlapped with
my service on the House Permanent Select Committee on
Intelligence. And since I have a committee conflict later and
may not have a chance to ask this question, I wanted to ask it
in effect in advance in my opening statement.
And I would address it particularly to Ms. Warren and Mr.
Lormel and say that this subcommittee and the Congress had made
a great effort to increase the efficiency of the country's
financial intelligent unit, FinCEN. However, I am aware that as
Treasury and Justice Departments work to meet the reporting
requirements of Section 906(b) of the USA PATRIOT Act, there
may be a behind-the-scenes tug of war over the fate of the
Foreign Terrorist Asset Tracking Center and possibly about
FinCEN's role as an agency neutral central repository of
financial information that can be used to investigate both
terrorist financing and money laundering.
I am concerned that if parallel financial intelligence
databases are set up, the U.S. Government will both spend money
unnecessarily and decrease investigative and enforcement
effiency. And so I'm hoping that in your testimony you might
supplement it by assuring if you can that the FBI or the
Department of Justice are not trying, frankly, to hijack or
usurp the role of FinCEN.
And Mr. Lormel, in your testimony, particularly on page 4,
you devote a great deal of discussion to the activities of the
Financial Review Group, which you say has developed, quote: ``a
centralized financial database,'' and developed predictive
analysis models to deal with terrorist financing. And frankly,
I thought that was the job of FinCEN. So then can you explain
how having parallel computer systems, if I read it correctly,
is not expensive, duplicative and inefficient? These are things
I hope you might be able to address in your comment,
particularly those of Mr. Lormel and Ms. Warren.
Thank you, Madam Chairwoman.
Chairwoman Kelly. Thank you, Mr. Bereuter.
Mr. Crowley, welcome. Have you a statement?
Mr. Crowley. Yes I do, Madam Chairwoman.
Chairwoman Kelly. Please proceed.
Mr. Crowley. Thank you, Chairwoman Kelly and Ranking Member
Gutierrez. This hearing will permit us to have an important
discussion on a critical element in the war against terrorism.
The USA PATRIOT Act is a landmark piece of legislation. It
provides the law enforcement and intelligence communities, as
well as the financial services industry, with tools required to
help stop terrorists before they are able to act. No law,
regulation, or policy that addresses finance has ever had as
significant an impact on America's security as this legislation
is likely to have. Aggressive, but intelligent, implementation
is critical for the legislation to succeed.
I am concerned that the Administration may not be acting
quickly enough or allocating sufficient resources to have a
significant impact on the financing of global terrorism. The
United States must work with our European allies and other
partners in the war against terrorism to shut down the
operations of groups like Al Qaeda and Hamas. We must also
ensure, however, that they have the information required to act
swiftly and decisively.
It was recognized that our European allies may have
different views on the Israeli-Palestinian peace process, but
we should not permit them to use divergent political views as
an excuse to refrain from cracking down on terrorist groups.
We must crack down on illegal hawalahs which terrorists use
to move funds around the world without a trace. However, we
must also recognize the important role that legitimate hawalahs
play in communities of immigrants, like mine, who lack the
resources to pay exorbitant transfer fees and whose families
overseas have no access to formal banking. These legitimate
institutions must be permitted to continue to operate within
the bounds of the law.
I am eager to hear from the Administration's panelists how
the Administration plans to use the tools given to it by the
USA PATRIOT Act. I am interested also to learn from the other
panelists how the financial industry and immigrant communities
are likely to be affected by this Act.
And, Madam Chairwoman, I just also want to state that I
will also in all likelihood be pulled away for a resolution on
the floor that I am sponsoring. So if you would forgive me when
that time comes, and will the panelists also as well. Thank you
very much. I yield back.
[The prepared statement of Hon. Joseph Crowley can be found
on page 45 in the appendix.]
Chairwoman Kelly. Thank you very much, Mr. Crowley.
At this point, if there are no more opening statements, I
would like to introduce the witnesses on our first panel.
Before us we have the Honorable Juan Zarate, the Deputy
Assistant Secretary for Terrorism and Violent Crimes for the
Office of Enforcement in the U.S. Department of the Treasury.
We welcome you, Mr. Zarate. Accompanying Mr. Zarate we have Mr.
John Varrone, the Assistant Commissioner for the Office of
Investigations in the U.S. Customs Service, and along with him,
we have also Mr. R. Richard Newcomb, who is the Director of the
Office of Foreign Assets Control for the U.S. Department of the
Treasury; and James F. Sloan, who is the Director of the
Financial Crimes Enforcement Network in the U.S. Department of
the Treasury.
Then we will hear from the Honorable Mary Lee Warren, who
is Deputy Assistant Attorney General for the Criminal Division
of the U.S. Department of Justice. Welcome. And finally, we
have Dennis Lormel, who is the Chief of the Financial Crimes
Section of the Criminal Investigations Division for the FBI.
We start now with Mr. Juan Zarate. Thank you very much, Mr.
Zarate, for joining us. Without objection, all your written
statements will be made a part of this record. I am going to
recognize each of you for 5 minutes. Obviously there are
certain time constraints on Members of the subcommittee. They
will be moving in and out as floor action dictates. But the
lights in front of you, if you haven't done this before,
indicate how much time you have. The green light is that you
are in the first 4 minutes of your testimony. The yellow light
means that that's the warning light. You have 1 more minute.
And when it's red, I would hope that you would then summarize
anything you have left in the testimony knowing that your
testimony will be made, the written testimony, all of it will
be made a part of the record.
So we will begin now with you, Mr. Zarate.
STATEMENT OF HON. JUAN C. ZARATE, DEPUTY ASSISTANT SECRETARY,
TERRORISM AND VIOLENT CRIME, U.S. DEPARTMENT OF THE TREASURY
Mr. Zarate. Thank you, Madam Chairwoman, and again I
apologize for the snafu in terms of getting you the written
testimony before the hearing.
Madam Chairwoman and distinguished Members of the
Subcommittee on Oversight and Investigations, thank you for
inviting me to testify today about the measures the Treasury
Department has taken to disrupt terrorist financing, the
lessons we have learned to date about patterns of terrorist
fundraising and money movement, and how the provisions of the
recently enacted and seminal USA PATRIOT Act are helping us in
our mission.
With me today, as Madam Chairwoman indicated, are three
individuals who are assisting the Treasury Department in their
counterterrorist financing efforts: James Sloan, Director of
FinCEN; Richard Newcomb, Director of the Office of Foreign
Assets Control; and John Varrone, Assistant Commissioner, U.S.
Customs Service. Thank you for having all three of us here to
address you, all four, that is.
Before I begin my remarks, I would like to thank this
subcommittee and Congress in general for your support in our
efforts to uncover and uproot the sources of terrorist
financing. The passage of the USA PATRIOT Act has served as an
important step in allowing us to prosecute this war on
terrorist financing aggressively and in a unified manner. In
that respect, I also want to thank, as Deputy Secretary Dam did
2 weeks ago, our sister agencies and departments, including the
intelligence community, for their unprecedented levels of
cooperation in these efforts.
Madam Chairwoman, before I speak to the issues raised in
your invitation letter, I would like to read to you a portion
of the Al Qaeda manual that I think is instructive to our
discussion today. The manual, as you may know, was discovered
during the search of an Al Qaeda member's home in England and
was introduced in evidence during the embassy bombings trial in
New York. The third lesson in the manual, entitled
``Counterfeit Currency and Forged Documents'', discusses
financial security precautions that Al Qaeda members should
take to secure their operations. It reads as follows:
1. Dividing operational funds into two parts. One part is
to be invested in projects that offer financial return, and the
other is to be saved and not spent except during operations.
2. Not placing operational funds all in one place.
3. Not telling the organization members about the location
of the funds.
4. Having proper protection while carrying large amounts of
money.
5. Leaving the money with non-members and spending it as
needed.
Madam Chairwoman, as you can see, this is an enemy that
understands the need to cover their financial tracks while
simultaneously fueling funds into new acts of terror. Because
we are facing an enemy with faceless tentacles planted around
the world, we must employ all our assets to track and disrupt
the financing of Al Qaeda and other terrorist groups of global
reach.
That is precisely why after September 11th the President
directed the Treasury Department to lead the Nation's war
against global terrorist financing. We have followed the
President's orders and marshalled the Treasury Department's
unique financial forensic expertise and experience in financial
and electronic crimes as well as our contacts with the
financial community both here and abroad and our unique ability
to take immediate action to freeze terrorist-related assets.
Treasury, in close partnership with the State Department,
the Defense Department, the Department of Justice, the Federal
Bureau of Investigation, the intelligence community, and many
other parts of the Federal Government, has been dealing with
the terrorist financing issue on multiple levels. Allow me very
briefly to highlight the efforts the Treasury Department has
taken along with these sister agencies to tackle the global
problem.
Led in part by the Office of Foreign Assets Control, along
with the Department of Justice and the Department of State, we
have identified and designated 168 individuals and entities as
terrorist-related entities pursuant to the President's
September 23rd Executive Order. In this process we have
identified, among other entities, front companies, charities, a
bank, and a hawalah conglomerate that served as the financial
support networks for Al Qaeda and other global terrorist
groups.
We have shut down the operations of these entities in the
United States and abroad. And since September 11th, the U.S.
and other countries have frozen more than $104 million in
terrorist-related assets. Since the attacks, the U.S. alone has
blocked over $34 million.
The process of identifying and investigating targets is
ongoing, and we are currently investigating other financial
entities, businesses, groups and persons for listing. We also
created Operation Green Quest, which is a new multi-agency
financial enforcement initiative intended to augment existing
counterterrorist efforts in order to focus on terrorist
financing. This task force is led by the Customs Service, and
includes the IRS, Secret Service, the ATF, OFAC, FinCEN, the
Postal Inspection Service, the FBI, DOJ, the Naval Criminal
Investigative Service, and we are dealing with other agencies
as well.
Green Quest brings together the extensive financial
expertise of the Treasury Bureaus along with the exceptional
experience of our partner agencies. Green Quest's work, along
with the Department of Justice, has led to 11 arrests, 3
indictments, the seizure of nearly $4 million, and bulk cash
seizures--cash smuggling--of over $9 million. Green Quest,
along with the FBI and other agencies, has also traveled abroad
to follow leads, exploit documents recovered, and to provide
assistance to foreign governments.
We have also been committed to the FBI's Financial Review
Group, which is a seminal part of the focus on terrorist
financing. Immediately after the attacks, we deployed our
Treasury assets to the FRG to deal with the September 11th
attacks and the financing surrounding those attacks.
I see that my time is rapidly approaching.
Chairwoman Kelly. Is gone.
Mr. Zarate. It's gone. Let me just address a couple of
things, if I can, Madam Chairwoman. To address the questions in
your letter, in our investigations and in our actions, we've
identified, as I mentioned, several means and methods that
terrorists have used to funnel money, one of which is
charities. On two different occasions we identified and
designated charities under the President's Executive Order and
we have found that charities are used both here and abroad as a
way of siphoning money to terrorist groups.
Second, Madam Chairwoman, you mentioned the Al Barakaat
operation. Al Barakaat was a significant blow, we believe, to
bin Laden's ability to move money internationally. Al Barakaat
was a money remitting system that operated abroad as a hawalah
system to move money into Somalia through Dubai. The Al
Barakaat operation was located in upward of 40 countries. We
worked closely with our foreign partners in addition to the
United Arab Emirates to shut down Al Barakaat's operations, and
we feel that we have done so. And it is a success story, quite
honestly, with respect to shutting down a means that Al Qaeda
was using to move funds.
Very briefly, Madam Chairwoman, as I mentioned, the USA
PATRIOT Act is an essential tool for us at this point. The
information-sharing provisions, the provisions that allow us to
target specific risks in the financial markets with respect to
abuse of our financial system, as well as coordinating efforts
with the financial industry, are essential elements to our
efforts with respect to tracking terrorist financing.
Madam Chairwoman, I would be more than happy to answer any
questions, and I thank you for your time and your interest and
certainly your support in our efforts.
[The prepared statement of Hon. Juan C. Zarate can be found
on page 51 in the appendix.]
Chairwoman Kelly. Thank you very much, Mr. Zarate.
Next we would like to hear from Mary Lee Warren.
STATEMENT OF MARY LEE WARREN, DEPUTY ASSISTANT ATTORNEY
GENERAL, CRIMINAL DIVISION, U.S. DEPARTMENT OF JUSTICE
Ms. Warren. Thank you, Madam Chairwoman. And thank you,
Ranking Member, Mr. Gutierrez, and other Members of the
subcommittee.
I am honored to appear before the subcommittee to outline
Justice's progress on the financial front on the ongoing war on
terrorism. I appreciate this opportunity and will try and give
you a brief summary of our efforts, including information
developed by the Financial Review Group, an interagency task
force supporting FBI's Counterterrorism Division, as well as
the Department's actions taken so far under the USA PATRIOT
Act.
We are grateful for the USA PATRIOT Act and your quick
action after the September 11th events. We intend to and
already are using it vigorously and I believe responsibly.
In offering a brief summary of the Department's work--of
course, I am not at liberty to disclose ongoing criminal
investigations or information that might compromise those
investigations--but, I can give a brief overview of the areas
and ways in which we are working.
Through financial analysis, we continue our work to
reconstruct the web of planning and finance that supported the
September 11th terror attacks. At the same time we are trying
to work to detect other threats to our national security,
whether by persons affiliated with Al Qaeda or with other
groups. We have found that in almost all areas of the criminal
law, following the money is the way to determine what has
happened. It also provides evidence of the conspiracy itself,
of its membership, and of its criminal activities, evidence
that we use in court.
As you know, the Attorney General has the responsibility
for investigating all acts of terrorism in the Federal system,
and looking into terrorism financing is a critical part of our
larger anti-terrorism strategy to seek out and eliminate those
terrorist organizations attempting to destroy us.
Within days of September 11th, the Attorney General,
exercising this authority, established the Financial Review
Group within the FBI's Counterterrorism Division. We include,
as Mr. Zarate said, important help from the Treasury Department
and all of its components. We also have enormous support from
the National Drug Intelligence Center. Many sections of the
Criminal Division of the Department of Justice as well as
Assistant United States Attorneys also assist in that
operation.
And over the past several months, we have been able to
compile and analyze financial information gathered by Federal
agents working domestically and internationally as well as
information from the U.S. Attorneys offices from across the
country in the course of their ongoing terrorism
investigations.
By having this central repository for relevant evidence--
all those bank records, travel records, credit card and retail
receipts--for in-depth financial and forensic analysis, we have
been able to integrate and use that information with the other
terrorism evidence that we collect and being able to cross that
information has helped to spur the larger investigations along.
I don't believe it's duplicative of what the Foreign Terrorist
Asset Tracking Center does or of FinCEN. Indeed, we rely very
heavily on FinCEN's assistance in our work.
At the same time that the Attorney General established the
Financial Review Group, he also established a task force of
prosecutors to work with the Financial Review Group.
Prosecutors from Washington as well as from across the country.
They work in a network with the Financial Review Group in this
large anti-terrorism strategy. They also work with the FBI's
Joint Terrorism Task Forces across the country in a coordinated
effort to collect and analyze and disseminate information.
We are using computerized ``data mining'' to learn more
about the information that we already have, to learn about
terrorist acts in the past and to try and predict those that
might harm us in the future.
We have learned ways that the terrorists use fraud in
credit cards and licenses, as the Chair noted, and we are
proceeding against them. We have collected an enormous amount
of material, as reported in the larger statement, and our
analysis continues. One thing that I would like to mention is
just in terms of the September 11th investigation, we do have
some charts that show money that came into the terrorists from
the United Arab Emirates through wire transfers, passing
through a New York bank to a Florida bank to the terrorists, in
this instance, the one who crashed Flight 175 into the South
Tower of the World Trade Center, Marwan Al-Shehhi, and Mohamed
Atta, the one who crashed the American Airlines Flight 11 into
the North Tower of the World Trade Center.
The next chart shows the movement of the money out. They
cleared their accounts and transferred the money back to the
United Arab Emirates just before September 11th--September 8th,
9th and 10th, clearing those accounts. These charts show only a
very few of the transactions that we are studying. The work, of
course, is continuing.
I look forward to a later time when it may be appropriate
to provide the subcommittee with additional information from
these now still ongoing criminal investigations of the
September 11th events and much more widely.
In terms of implementation of the USA PATRIOT Act, we have
already brought charges in the Commonwealth of Massachusetts
for operating an illegal money transferring business. We have
seized for forfeiture assets attributed to terrorists. No one
has come forward to claim that money, not surprisingly. We have
used the correspondent bank forfeiture provision of the new Act
and many others. We are working with Treasury in terms of their
heavy obligations of promulgating regulations in the various
areas provided by the Act.
Again, I express our appreciation for the support the
subcommittee and the committee have demonstrated for the
Administration's anti-money laundering efforts, and I look
forward to opportunities to continue to work with the committee
and its staff as we implement the USA PATRIOT Act. If there are
any gaps that we find or repairs that need making or any
uncertainties that emerge, we look forward to identifying those
with the subcommittee so that we can continue our work. Thank
you.
[The prepared statement of Mary Lee Warren can be found on
page 80 in the appendix.]
Chairwoman Kelly. Thank you very much, Ms. Warren. We look
forward to working with you also.
Next we have finally on this panel, Mr. Dennis Lormel.
STATEMENT OF DENNIS M. LORMEL, CHIEF, FINANCIAL CRIMES SECTION,
CRIMINAL INVESTIGATIONS DIVISION, FEDERAL BUREAU OF
INVESTIGATION
Mr. Lormel. We in the Bureau appreciate the opportunity to
participate today. I have submitted a written statement, as Mr.
Bereuter has alluded to, and hopefully, sir, we can address
your concerns, because I don't think you have it in the right
context in terms of that whole thing, and hopefully I will have
time to address that.
In terms of what we have done to date, we have taken a two-
track approach in our investigation. We have conducted a
comprehensive financial investigation of the 19 hijackers. We
have gone beyond the 19 hijackers to the support mechanisms,
and collateral to that, we have established a template for
future investigations in terms of developing proactive,
preventive and predictive terrorist financial investigations.
To accomplish this, we have to rely on--and it's not just
an FBI-driven initiative, it's a coalition, as my colleagues at
the table will attest to and you've heard, we're all partners
in this endeavor, be it through our Financial Review Group or
Customs' Green Quest and OFAC, we're all working together.
Clearly, each of those other agencies and the whole gamut of
agencies that work financial investigations are part of our
initiative.
We are conducting a broad-based and multi-faceted
investigation. In one area, we are trying to conduct predictive
and preventive-type analytical investigative means. And in that
regard, we're conducting data mining projects, which includes
the SAR database, which obviously is administered by FinCEN,
and working with FinCEN, we are extracting certain algorithms
and anomalies and clearly working hand-in-hand with FinCEN. Our
database, sir, is one that is meant to be a financial terrorist
database, more encompassing than just focused on the terrorist
aspects, and certainly meant to work in conjunction and augment
the other agencies.
Real quickly, let me hit statistics. Some of the things
we've gotten. Through our investigation to date, we have
collected over 321,000 financial documents of over 10,500
individuals in terms of account information and the like, and
we've entered over 104,000 of those documents in our database,
which again, we are using for predictive analytical
capabilities.
I would like to add that on a daily basis, we share our
database downloads with Operation Green Quest, and we are
working in conjunction with each other in regard to the
information coming out of that and in terms of future
investigative leads.
When you look at the terrorist financing, we've got to look
at a number of levels here. You've got terrorist organizations.
There are terrorist organizational fundraising mechanisms,
which clearly we all have that interest in--terrorist
organizational funding expended in furtherance of terrorist
activities, and then terrorist-specific funding.
What I'd like to concentrate on for you is the terrorist-
specific funding at this point in terms of what we found. We've
done a pretty comprehensive review of the 19 hijackers. In my
statement, you will see a pretty good overview of financial
profiles, of account profiles, transaction profiles and so on.
And in that regard, the 19 hijackers were mission-specific. So
they are a mission-specific cell, if you would.
If you look at the Germans, they're a little different. If
you look at the Spanish, they operated differently. Looking at
the Spanish, they incorporated credit card fraud into their
activity. An interesting note is the 19 hijackers here pretty
much used true identity, and they pretty much used debit cards
as opposed to credit cards to facilitate their fraudulent
activities.
In terms of the cells in Malaysia and in terms of the cells
in Singapore, you'll find people that were more of a sleeper
oriented-type base where they had legitimate jobs and where
they had legitimate work activities, and any terrorist funding
would have been funneled in and meshed into the legitimate type
of funding and earnings.
I'm coming to the close on my statements, but in response,
sir, to your immediate concern on the Foreign Terrorist Asset
Tracking Center, I think part of the concern there, and it's
not that the Bureau or the Department are attempting to muscle
in, so to speak, on that, but the issue at hand is in light of
the PATRIOT Act and the acts after September 11th, if in fact
the FTAT is better housed at OFAC or handled in a different
fashion, maybe through CIA. And that is being addressed at the
deputy director level. And in fact, on Friday, there will be
meeting among the deputies to discuss this. It's an ongoing
topic.
We all clearly agree that there needs to be a collective
repository, and we need to have our collective capabilities and
assets aligned with each other to have the best impact and
certainly the most effective approach to the terrorist problem.
So clearly, and I hope it's not construed that the Bureau, the
Department or any of these agencies are trying to work against
each other. We are actually working very hard together.
Certainly we have interagency concerns that we work through. So
I'd hope, Mr. Bereuter, we can have a discussion and dialogue
to allay any concerns you may have. Ma'am?
[The prepared statement of Dennis M. Lormel can be found on
page 102 in the appendix.]
Chairwoman Kelly. Thank you very much.
With the unanimous consent of the subcommittee, I am going
to change the order of the questioning, because a number of the
Members are on very tight time schedules. They have a deep,
strong interest in the topic. And with that being said, with
the unanimous consent of the subcommittee, I'm going to allow
Mr. Bereuter to go first and give him 2 minutes for
questioning. Then we will go to Mr. Crowley for 2 minutes for
questioning so that he can be excused if he needs to go. Both
of these Members, then, I remind you that you can submit
written questions to our witnesses following that. We will pick
up Mr. Tiberi, who is also on a very tight time schedule. Then
we will go back to regular order.
So, with that being said, Mr. Bereuter.
Mr. Bereuter. Madam Chairwoman, Mr. Gutierrez, I very much
appreciate your special courtesy and other Members as well.
Mr. Lormel, you have the essence of my question and you
attempted to address it here, but the concerns are real. And
I'm not sure I'm taking it out of context. It's something that
probably we will need to have some further discussion and
reassurance on. But you did say, if I understood you correctly
just in your comments, your oral comments here, that the
database--and I assume you're talking about the Financial
Review database--will be focused on terrorist financing.
But that looks like exactly one of the functions that
FinCEN was supposed to proceed with. And while there may be an
interagency effort going on to examine where it best ought to
be located so that we don't have--hopefully, you have the same
objectives--duplicative database and duplicative functions in
general, the Congress and this subcommittee in particular has
tried to cultivate FinCEN before September 11th in effect for
this particular function. So I'm not sure why there is any
discussion about an alternative terrorist finance database and
analytical center. I'll leave it there and see how you'd like
to respond further if you have any at this point.
Mr. Lormel. One of the things we're attempting is to serve
as an operational support mechanism for our terrorism section
and in furtherance of those terrorist investigations, you know,
clearly we've collected evidence. We're certainly not
attempting to duplicate anything FinCEN is doing. And maybe
I'll ask Jim Sloan for some help. Because I don't see that we
are duplicating anything that FinCEN was intended to do. And
clearly, we are sharing information.
Mr. Bereuter. But aren't you also, if I may interrupt,
aren't you also attempting to create a database as a part of
it, wherein FinCEN was supposed to do that for money laundering
and terrorist purposes and other functions?
Mr. Lormel. Yes, we have. And clearly, ours is an
operational, investigative database. I think FinCEN's more I'll
say regulatory geared, and between the two clearly there will
be overlap. But I think there's clearly room for both. In an
automated sense, in terms of what can be shared, I don't see a
real problem.
Mr. Bereuter. Madam Chairwoman, I'll just conclude with a
comment and say that one of the concerns we've had pre- and
post-September 11th is a different culture, different objective
in the FBI, and that is, that you are interested,
understandably, in putting people in prison and protecting
evidence. But certain information has to be shared rather
broadly with other domestic as well as intelligence agencies.
And if, in fact, you establish your own database, we may be
working to reinforce what has been a problem.
Mr. Lormel. If I may, ma'am, I'd like to respond to that,
because on a daily basis, we give a download of our data to
Customs. And we have FinCEN agents and analysts assigned to our
task force. So if I've given you the impression that we're
being parochial, please, that's anything but the truth. As of
September 11th in this regard, I'm not a terrorist agent. I've
been a criminal investigator since September 11th. The only
thing I've worked is financial terrorism. And believe me,
there's nothing in my being that is not team oriented. And I
insist that the people that work for me share that model, and
clearly, we are working in conjunction with.
Now we can have semantics about should we or shouldn't we
have a database. The bottom line is, we need to attack
financial terrorism, and one of the best mechanisms to do it is
for us to have that capability. If I could, I'll defer to Jim.
Mr. Bereuter. I'll defer to the Chairwoman. If you want to
have us continue, that's up to you.
Chairwoman Kelly. Mr. Sloan, you wanted to say something.
Please do make it short, because these other Members also need
the courtesy.
Mr. Sloan. Yes, ma'am, certainly. Clearly, we would be
paying very close attention at FinCEN to a parallel database
being constructed at the FBI. Perhaps it's the way in which the
words were presented on paper, but in fairness to the Financial
Review Group, as well as our other clients, Operation Green
Quest or OFAC's FTAT, the product that FinCEN is delivering to
them is a finished product of analytical wealth developed from
our databases.
And in the case of the FBI, they do combine in their
database, 6(e) grand jury material, and other material that's
coming from a lot of different sources that FinCEN certainly
wouldn't have access to from the financial aspect. Perhaps the
choice of words is unfortunate, but their database is not
something that we would be endorsing if we thought it was in
exact parallel to what we're providing. They are an important
client, and they do get the product of our database. And we're
paying close attention to making sure that our resources are
not competing with one another.
Chairwoman Kelly. Thank you very much, Mr. Sloan.
Mr. Crowley.
Mr. Crowley. Thank you, Madam Chairwoman. I appreciate the
courtesy you extended. Thank you very much. I have a series of
questions. I'm only going to ask one and I'll submit the others
in writing and appreciate again the courtesy extended.
Al Qaeda is responsible for the deaths of thousands of U.S.
citizens. In my district, as a result of the September 11th
attack, at least 105 of my constituents were killed in the
attack on the World Trade Center. Hamas and Islamic Jihad admit
to killing dozens and wounding hundreds of innocent civilians,
including Americans, in Israel and throughout the globe.
The U.S. Government has prevented the former U.S. hostages
in Iran, people who dedicated their lives to public service and
who gave up 444 days of their lives as prisoners of the Iranian
regime, from claiming damages from the Iranian government's
frozen assets. Will assets belonging to Al Qaeda, Hamas,
Islamic Jihad and other terrorist groups that are confiscated
under the authorities of the USA PATRIOT Act be subject to
court judgments if the victims or the survivors, including the
105 constituents and their survivors that I represent, seek
damages for their pain and suffering? And that would be
addressed either to Justice or to Treasury.
Mr. Zarate. I could address that briefly, Congressman. And
I will pass it off to Rick Newcomb, who administers the
programs under which assets are frozen by the U.S. Government
by OFAC. Presently under the President's Executive Order, the
assets that are frozen are not subject to court orders or are
not subject to payment to victims or victims' families. That's
consistent with the way sanctions programs generally have been
administered by the United States Government.
Our intent is to freeze the assets. For example, in the
case of the Afghanistani assets, it is often the case that the
assets are at some point unfrozen and given back to the
established regime, in this case, the regime in Afghanistan.
But I will pass the question off to Rick Newcomb, who can
answer perhaps in more detail your question.
Mr. Newcomb. Thank you, Mr. Crowley. We have had such claim
settlement programs, most recently in legislation entitled Mack
Laudenberg for claimants against Cuba for the shootdown of
Brothers to the Rescue and for various claimants that had
judgments in Federal court against the government of Iran.
Those are the only two active claim settlement programs that we
currently administer, and those are almost complete at this
time, based on claimants having adjudicated judgments. Should
there be another claim settlement program, we may be called
upon to implement that, but at this time, we have no such
program.
Chairwoman Kelly. Thank you, Mr. Crowley.
Mr. Tiberi.
Mr. Tiberi. Thank you, Madam Chairwoman.
My question is directed at two of you, Ms. Warren and Mr.
Zarate. And I apologize if you addressed this before I got
here. I leafed through both your testimonies and didn't see it.
My question revolves around a provision requiring financial
institutions to verify the identity of individuals when opening
up a new account in the PATRIOT Act, and the House added a
provision, as you may know, that dealt with criminal penalties
for consumers who falsify information to those financial
institutions. And my question to both Justice and to Treasury
is through your rulemaking process, are you pursuing that
provision?
Mr. Zarate. Congressman I can address that first. I believe
you're referring to Section 326 of the PATRIOT Act. If that's
the provision you're referring to, sir, yes, we are proceeding
with issuing regulations. For that matter, we're proceeding
aggressively and on time, for the most part, with issuing
relevant regulations with respect to all PATRIOT Act
provisions.
As Congressman Gutierrez indicated in his opening
statement, there are certainly considerations that we need to
take into account and are taking into account with respect to
privacy interests and sensitivities of that nature. That's
precisely why we have set forth aggressively with working
groups, interagency working groups, working with Federal
regulators, working with the Department of Justice very closely
to implement regulations on a timely basis.
Ms. Warren. Maybe if I could just extend that remark a bit.
As Mr. Zarate said, we at Justice are working closely with them
on those regulations. But in a more general way, we often use
that kind of fraud that is found, and if the accounts have been
opened on counterfeit information, we use that kind of fraud in
furtherance of our investigations of larger criminal acts.
Recently the U.S. Attorney's office, working with Federal
agencies in Utah, looked at fraud in, for instance, Social
Security numbers, and found that 60 people at the Salt Lake
City International Airport had used fraudulent documents to get
jobs at the airport in very significant positions just before
the Olympics started out there.
Just 2 or 3 days ago in Miami, a similar effort was
launched by the Federal agencies and the U.S. Attorney's office
there when they found that fraud had been used in immigration
documents for commercial pilots as well as ground access people
at the Miami International Airport as well as the Broward
County Airport.
These are of enormous significance to homeland security,
these kinds of special areas. And we look at that kind of fraud
as an adjunct to these larger investigations. With Mr. Zarate,
we at Justice agree that this has to be handled with the right
balance so that individuals who ought to have access to
financial services have that right along with everyone else in
the United States, whether they are immigrants or natural born.
So it is a sensitive area, but an important one.
Chairwoman Kelly. Thank you, Mr. Tiberi.
Now, I'd like to ask a couple of questions. One, I'd like
to address to Mary Lee Warren and Mr. Zarate. I'd like to know
if the current laws that you have to work with now are
sufficient to ensure that the currency and securities markets
are able to detect and halt the illegal movement of funds.
We've talked about the bank accounts. We've talked about
hawalah. I'd like to know whether or not these current laws
that we have in the PATRIOT Act are enough for you to address
the possibility of money transfer with currency and securities
markets. And I'd like to ask that question specifically of the
two of you.
Mr. Zarate. We think at this stage that the PATRIOT Act
does, to a certain extent, give us appropriate regulatory
authority to look at those industries that you have mentioned.
In particular, the securities interest. As you are well aware,
Madam Chairwoman, the PATRIOT Act provides that securities and
broker dealers will have to start complying with the suspicious
activity report requirements under the Bank Secrecy Act
starting by April 24th, which is when we are scheduled to issue
the final regulation. That we think will provide a very strong
measure for tracking money going through those dealers. In
fact, we think it will form part of the mosaic that is
currently put together by FinCEN when they look at SARs from
other industries as well as CTRs and other information that
they have in the Bank Secrecy Act database.
Madam Chairwoman, as you know as well, financial
institutions are defined very broadly in the PATRIOT Act. And
we're looking at ways of applying the anti-money laundering
provisions, in particular, Section 356, to certain industries,
including currency exchange, pawnbrokers, other industries that
may be of concern to us and could provide a way and a means for
money launderers, criminals, and terrorist financiers to move
money.
So we are certainly cognizant of those vulnerabilities and
are extremely willing and aggressive to use those provisions to
look at those industries.
Chairwoman Kelly. Thank you.
Ms. Warren.
Ms. Warren. I agree with Mr. Zarate, and we look forward to
the implementation dates of the regulations. I think
thereafter, as we watch the regulations come on line and the
responses from the industry, we'll know better whether we need
additional help. But at the moment, it looks like we're really
well positioned to be able to follow the money through those
particular services businesses.
Chairwoman Kelly. Thank you very much. Ms. Warren, I wanted
to ask you, on page 16 of your statement you mention, and I'm
quoting: ``The very restrictive 1-year limitation of 18 U.S.C.
Section 984.'' Does that limitation, that 1-year limitation,
need to be extended in your opinion? And if so, how long do you
think would be the ideal?
Ms. Warren. We have suggested in the past that it be
extended to at least 2 years. Chasing the money around the
globe is often difficult, even difficult to find a physical
location of some banks. With the addition of the PATRIOT Act
and our ability to proceed against correspondent accounts in
the United States, we are able to move more swiftly. But the
sophistication of some money laundering schemes and the rapid
rate that money moves internationally sometimes take us a much
longer time to trace than 1 year. And we would be at a severe
loss not being able to complete our investigation within that
time and use the advantage of the PATRIOT Act.
So far, we have been able to use that provision, 319, to
very good advantage within the 1-year limitation period. Again,
I think we will need to watch it now that we have the ability
to proceed against the correspondent account and not have to
find some Pacific atoll bank and try and find someone to serve
our process on. Again, as I said in the beginning, this is
something that we look forward to working with the subcommittee
on as we discover whether it will work or not under the
conditions presented.
Chairwoman Kelly. I'm out of time, so I'm going to call on
Mr. Gutierrez, but I want to say that we may go into a second
round, because there are still some very pertinent and
significant questions that need to be addressed right now.
Mr. Gutierrez.
Mr. Gutierrez. Thank you very much.
Mr. Zarate, in the ABA Resource Guide, it states that
neither a visa or foreign passport identification system,
quote: ``should be able to stand on its own as a form of
identification.'' Would a potential cardholder be required to
provide a Social Security number or a U.S. Government-issued
ID, State driver's license to open an account?
Mr. Zarate. Congressman Gutierrez, we are currently working
on minimum requirements for account openings. And that's part
and parcel of our implementation of Section 326 of the PATRIOT
Act. I tend to agree with the statement in the ABA document in
the sense that those documents can be and often are
counterfeited. So we are looking at ways to establish minimum
requirements for account opening.
We are subject to the PATRIOT Act provisions, required to
issue a report on better ways to enable financial institutions
to monitor and to verify documents used. We haven't come to any
conclusions yet, but we are working diligently on that report.
And I certainly understand your concerns, Congressman
Gutierrez, with respect to the possible hindrance to opening
accounts to immigrants who have to rely on those types of
documents. So it's something we're thinking about very
thoroughly.
Mr. Gutierrez. So you don't have any idea of what the
minimum? When will we have the regulations, do you feel? Can
you give us an estimate, Mr. Zarate?
Mr. Zarate. To be quite honest, Congressman, I don't have
the timetable in front of me. But the timetable set forth by
Congress are quite vigorous, so I assume it's very soon.
Mr. Gutierrez. Sometimes a little too vigorous. We haven't
quite got the airports ready for the luggage yet.
Mr. Zarate. Yes. And we're working as hard as we can to get
that out, and we certainly will work closely with this
subcommittee in terms of getting you that information as soon
as we have it.
Again, I'd like to stress, this is very much an interagency
process in terms of how we are dealing with these issues. It's
also a process by which we are talking directly with different
industries where we need to find out how best we can regulate
and how best to come out with regulations that are going to be
effective and efficient. So that's part of our strategy.
Mr. Gutierrez. Number one, I want to thank you for your
work and for coming to testify here today. And I say that to
all of the panelists here today. And I just want to figure out
how we--there are a lot of people, obviously, that come in
harm's way. Another part of our justice system deals with them,
because of the fact that they have to cash their checks at
currency exchanges and carry large amounts of cash. I would
think it would be safer and better for us and for our
intelligence services to have people at banking institutions
versus currency exchanges. We know more about the people. We
have an address on the person. We have more information about
where they work. And, obviously, we know where they're sending
money versus Western Union or Moneygram.
And if we force people by--and I know you have a broad
definition of ``banking services''--and if we force people to
stop using traditional banking services, what I have been
seeing lately, Mr. Zarate and other members, is that, for
example, the Mexican government. They are issuing a matricula.
It's a form of identification that they certify using a Mexican
passport. And maybe we should work with countries such as
Mexico and other countries to see what kinds of ID. I mean,
what we're talking about is undocumented workers in the United
States, to be clear. Those that are documented don't need and
can obtain other forms of identification.
And then they come by my office, for example. Because one
of the interesting things about our Department of Justice and
our justice system is that they can't get a work permit, but
we're happy to take--the IRS is happy to give them a tax
identification number so that we can know what they paid in
withholding. I mean, it's just a fact. It's one of those--I
didn't come to criticize, it's just one of those things.
But since we have that going on and I can get them a tax
identification number--my wife is a branch manager--and we get
them tax identification, between that and the matricula, they
can establish an account. We have an institution saying, yes,
this is who this is. And we go for purposes of them fulfilling
their financial responsibilities. So people come by my office
all the time and I tell them, fill out your income tax because,
you know, if President Bush and President Fox figure it out and
we have another program like we had in 1986, the Immigration
Reform and Control Act, we certainly don't want you to be
disallowed because you didn't pay income taxes.
And what we've found is, in a broad definition, people that
are working, paying taxes and following our laws, we should
understand that they are not disappearing. So we've got 8
million people, approximately, in the United States, 12 million
according to some folks. I think it's probably closer to 8
million. But we have a lot of people, and we are working, I
think.
There's going to be a meeting after the 20th of March
between President Fox and President Bush. I know they're going
to engage in that conversation once again on a process of
legalization. They have different terminologies for it.
But we are engaged in that process, and I hope you would
take that into consideration so that we can get hard working
people the kind of banking services that they need and they can
send their money, not for terrorist activity, but just back to
mom and dad and the wife and the kids, and we can help
stimulate economies abroad. Thank you all for being here this
afternoon. I really appreciate it. Thank you for your work.
Chairwoman Kelly. Thank you very much, Mr. Gutierrez.
We have been joined by Mr. Grucci. Mr. Grucci, have you
questions at this time?
Mr. Grucci. No, Madam Chairwoman, not at this time, thank
you.
Chairwoman Kelly. Thank you very much. Then I'd like to go
for a second round to start with Mr. Tiberi.
Mr. Tiberi. Thank you, Madam Chairwoman.
I'm going to go back again to Mr. Zarate and Ms. Warren.
You mention, Ms. Warren, in the context of money laundering.
And in fact you mentioned out in Utah. Can I get back to the
point again of individual money launderers who go into a bank
and use a false ID or false identification of any kind to open
a bank account? In the PATRIOT Act there was a provision the
House added that we wanted to see those individuals be
criminalized for that act. Can you please comment on what
Justice is doing with respect to the rule on that individual
who seeks to defraud the bank by using false identification?
Ms. Warren. I can tell you that we haven't had any
prosecutions under that yet. We are still collecting
information and look forward to the Treasury regulations on
exactly what will be appropriate bank account opening
identification that will help us learn more about how to
proceed in that particular area.
We have a long history of proceeding in terms of fraud for
credit and have learned a great deal when there have been
applications for loans at banks where there's fraud involved,
whether in the identification or in the amount of collateral
available. I think there's a lot that we can transfer there to
learn more about how to proceed here.
Mr. Tiberi. Thank you. Mr. Zarate, in terms of the rule
with respect to that provision, where are we on that?
Mr. Zarate. We are proceeding on schedule, sir. Something I
failed to mention when I answered your question the first time,
one of the things we're looking at is possible administrative
sanctions as well under the Bank Secrecy Act. As Ms. Warren has
indicated, we are looking for the right balance here for the
financial community. They have to be able to rely on documents
provided by individuals for account opening and other
transactions.
At the same time, we must send a message to those who use
fraudulent documents and who attempt to defraud the bank in the
way you described that that's not acceptable. And one of the
options we are looking at is the administrative sanction
possibility. But we are also working with Justice to look at
the potential criminalization.
Mr. Tiberi. You would agree with the provision that was
passed, the language that was passed in the PATRIOT Act with
respect to the criminalization, as you mention, of providing
the false information?
Mr. Zarate. Generally, yes. I mean, we are looking at the
best way of implementing that provision and the timing of it.
But certainly, yes.
Mr. Tiberi. You agree with the legislative intent then?
Mr. Zarate. Certainly.
Mr. Tiberi. Thank you.
Chairwoman Kelly. Mr. Gutierrez.
Mr. Gutierrez. Apparently we did a little better than with
the screening at the airports, and it's a year enactment. So
we'll have an opportunity for all of us to talk. I'm not saying
that lightly. It's just I'm happy we gave ourselves a little
more time. We were real quick with checking of the bags and we
haven't quite got the screeners.
Mr. Zarate. Thank you.
Mr. Gutierrez. So, I'm sure, given the work that you've
already done, and I know we're going to receive the
recommendations by April, and then by the end, so we have some
time to look at these things. Thanks once again.
Mr. Zarate. Thank you, Congressman.
Chairwoman Kelly. Thank you, Mr. Gutierrez.
I have a couple of questions that I'd like to ask. Section
373 of the PATRIOT Act was amended to strengthen law
enforcement's ability to stop illegal money service businesses
like the unlicensed hawalahs. How significant do you feel that
change has been? This is a multi-choice question here. I'd like
to know how significant you feel that change has been. I'd like
to know if you're actually able to use it as we've done the
law, and whether or not that amended version in Section 1960
was the basis for the Al Barakaat arrests in Boston. I believe
that it was, but I'm not sure. So I'd like to know about that.
And I will throw that out to the two of you.
Ms. Warren.
Ms. Warren. It was the basis for the Section 1960 charges
in the district of Massachusetts. It's the way we are
proceeding against the principals of the Boston branch of Al
Barakaat. So it has a significant effect. We were able to
combine those charges with all the other efforts against Al
Barakaat, brought together on a single day to have a real broad
based impact on an effective hawalah institution. I'm sure
we'll continue to use that section as we uncover other
unlicensed money transmitting businesses and as we learn more
about how they are used for illicit purposes.
Chairwoman Kelly. Thank you very much.
Mr. Zarate.
Mr. Zarate. I agree with Ms. Warren. It was an essential
part of the Al Barakaat takedown in Boston. And though neither
Ms. Warren nor I can comment on ongoing investigations, I can
assure this subcommittee that that provision is proving
helpful.
With respect to regulation of MSBs generally, I think that
this issue addresses Congressman Gutierrez's concerns about the
marginalization of people to using non-banking institutions.
One of the beautiful portions of the PATRIOT Act is that it now
allows us to start regulating and start looking at transactions
that occur in some of these marginalized institutions, which
are sometimes mom and pop wire remitting companies.
To date, we've had, I think, fairly good success in terms
of getting these companies registered. Mr. Sloan could perhaps
talk to that more specifically. And we think that this is going
to provide not only the enforcement element that Ms. Warren has
talked about, but also an additional tool with respect to
getting more information. Because they will be subject to the
Bank Secrecy Act provisions with respect to filing SARs, and
those regulations are forthcoming.
Chairwoman Kelly. Mr. Sloan, do you want to address that?
Mr. Sloan. Madam Chairwoman, as Mr. Zarate indicated, the
money services businesses rule that took effect on New Year's
Eve, December 31st, is somewhat of a success story as far as
the registration of those in the United States that choose to
register as money services businesses. Clearly, if somebody is
operating as a hawala and they choose not to register, then it
becomes an additional tool for law enforcement in that regard.
But to follow on to Mr. Zarate's comment, the registration
process is helping us to determine the universe of the so-
called money services businesses in the United States. We began
this process by utilizing the data that was coming from the 45
States that actually regulated this industry at the State
level, and taking that data we were able to determine that
there were probably around 11,000 principals out there that
needed to be registered. We essentially contacted every one of
them and found out that there's probably closer to 9,000
principals who are money services businesses who are
legitimate. And as of 2 weeks ago, about 8,700 of them have
registered with FinCEN and the Government.
So the registration process is a success story, and the
reason it's important, with regard to your comment, is that it
then becomes an even more important tool for law enforcement
when they, through surveillance or undercover activity or just
general investigative activity, determine that someone is
offering themselves as a money remitter in an informal or
underground way. It's another tool for law enforcement.
Chairwoman Kelly. Mr. Sloan, speaking of tools, it's come
to my intention that the Financial Crimes Enforcement Network
does not make use of the Social Security Administration's death
master file. Instead, you use a third party source for that
information.
Last Friday, I sent a letter to Secretary O'Neill asking
him to look into this. And I wanted to bring this to your
attention. With unanimous consent, I'm going to insert a copy
of this letter in the record. I wanted to bring that to your
attention. I think that may be a resource for you you may want
to look at.
[The information referred to can be found on page 42 in the
appendix.]
Mr. Sloan. Madam Chairwoman, the Secretary's office has
already delivered your letter to me. And just for the record,
we are examining, and we're working with the Social Security
Administration Office of Inspector General, who incidentally is
part of the FinCEN network.
We are actually developing some state of the art artificial
intelligence tools, that given the right safeguards, this
information will be incredibly important to us. You're right.
We've been using a third party source of information, and the
timeliness is not what we would hope.
Chairwoman Kelly. Mr. Grucci.
Mr. Grucci. Thank you, Madam Chairwoman. Just a couple of
questions if I could.
Mr. Zarate, what gaps in regulations or authority to
regulate exist and what is the Treasury doing to fill them?
Mr. Zarate. Congressman, as Ms. Warren indicated earlier, I
think it's too early to tell with respect to potential gaps in
the regulatory framework and our authority to enforce those
regulations. Right now, because we are in the middle of
implementing aggressively the provisions of the PATRIOT Act,
our concentration and our focus has been on those
implementation efforts.
Generally, we think that the broad scope of the PATRIOT
Act, and as I mentioned earlier, for example, the broad
definition of what a financial institution is, provides us a
wonderful tool to think about and potentially regulate
industries that have not fallen directly under our regulatory
strictures to date.
Mr. Grucci. Maybe I should have been a little bit more
specific. I really meant in the context of credit cards.
Mr. Zarate. We are looking at that. In particular, the
sections that are of most use to us with respect to the credit
card industry, are Sections 252, which provide for or ask for
an anti-money laundering regime to be established by
institutions, all financial institutions. This could affect
credit card companies.
But as you know, Congressman, credit card transactions and
credit card use in general is an extremely complex process. You
have issuers. You have acquirers, you have associations, you
have the merchants and then you have the actual customer. To
date, we feel that the provisions of the Bank Secrecy Act allow
us to at least track some of those transactions that occur,
because at some point during the transaction, a U.S. financial
institution is involved, whether it's as the issuer or as the
actual participant in the transaction.
That being said, we are looking at ways of regulating the
credit card industry. And we are fully engaging, again, as I
said before, in the interagency process to do that.
Mr. Grucci. Just one more quick question if I may. Could
you elaborate on what steps the Treasury is taking to address
the potential abuse of credit cards for terrorist financing and
money laundering?
Mr. Zarate. Certainly. Immediately after the September 11th
attacks, the U.S. Secret Service, which has expertise in credit
card use and abuse and investigations, was immediately tasked
by the FBI and by the Treasury Department to look into credit
card use by the 19 hijackers. That was the first thing that we
did.
Second, we have engaged the Secret Service's New York
Electronic Crimes Task Force, which deals with credit card
issues and credit card fraud in the investigations by the FBI's
FRG as well as in Operation Green Quest.
Finally, we are working to regulate, potentially regulate
the credit card industry so that we are able, as I said before,
to create a full mosaic of what transactions we're looking at,
what suspicious transactions look like, what anomalous
transactions we can identify. But quite honestly, at this
stage, it's very hard to tell what further regulations we can
ask for to make those things happen.
But we are fully engaged in the issue and certainly
recognize that credit card use can form a way of not only
laundering money, but of financing terrorist cells around the
world.
Mr. Grucci. Thank you. Thank you, Madam Chairwoman.
Mr. Lormel. Madam Chairwoman, if I may?
Chairwoman Kelly. Yes.
Mr. Lormel. Just as a follow up, from an investigative
standpoint, we really haven't seen that much, the real
significant use of credit cards. Initially we thought that the
19 hijackers had an extensive amount of credit cards and we
thought they were involved in bust-out schemes. But when we got
through the name associations, we found that they were heavily
involved with debit cards as opposed to credit cards, because
they couldn't get credit cards here in the U.S.
The only place where we have seen a substantial use of
credit cards for fraud is with a cell of the terrorists in
Spain. Certainly we see credit card abuses and fraud, and we've
had a project ongoing with Secret Service in that regard, but
we haven't seen a crossover into terrorism.
Chairwoman Kelly. Thank you very much. Yes, the credit card
issue is a thorny one, and it's an ongoing one, and we do
continue to need to address it.
If there are no more questions, the Chair notes that some
Members will have additional questions, and there are Members
who had intended to be here today who for one reason or another
have not been able to be here. And they may wish to submit
questions in writing. So without objection, we will hold the
hearing record open for 30 days for Members to submit written
questions to the witnesses and to place their responses in the
record.
I thank this first panel very much. You have all been very
indulgent with your time, and we are grateful. You are excused
with the subcommittee's great appreciation for your time. And
the second panel, without ado, we hope you will please take
your seats. Thank you so much.
Mr. Zarate. Thank you, Madam Chairwoman.
Chairwoman Kelly. On our second panel we have Mr. Steven
Emerson, who is the Executive Director of the Investigative
Project. Next we are going to hear from Mr. Jeffrey Neubert,
the President and CEO of the New York Clearing House
Association. Next we are going to hear from Mr. John Byrne, who
is Senior Counsel and Compliance Manager for the ABA, the
American Bankers Association. And finally, we will hear from
Mr. John A. Herrera, the Vice President of Latino-Hispanic
Affairs for the Self Help Credit Union, who is testifying on
behalf of the Credit Union National Association and the World
Council of Credit Unions.
I want to thank all of you for taking your time today to
share your thoughts with us on this very interesting topic. And
without objection, your written statements in full will be made
a part of the record.
You will each be recognized for 5 minutes in turn. I want
to remind you that I will try to enforce the 5-minute rule. And
we will begin with you, Mr. Emerson.
STATEMENT OF STEVEN EMERSON, EXECUTIVE DIRECTOR, THE
INVESTIGATIVE PROJECT
Mr. Emerson. Thank you very much. I would like to ask that
the chart that was prepared in the testimony on page 3 be also
introduced into the record which I think provides a very good
display of the worldwide Al Qaeda network through the use of
charities, front groups, websites, human rights groups. It's on
page 3 of the testimony. And I think the degree to which the Al
Qaeda, as well as other organizational networks connected to
terrorism, have been able to enrich their coffers as well as
fund the organizations' movements worldwide based on the
legitimate institutions goes to the heart of the problem that
underlay the ability of terrorists to hide under the radar
screen and to execute their horrific atrocity on 9/11.
I will say this. I am not a member of the Government. I
operate as a terrorism investigator and analyst. I operate an
institution that collects material documents and intelligence
on radical Middle Eastern and Islamic terrorist organizations
and their infrastructure. We have obviously been working very
diligently since 9/11 to find out exactly how these
organizations have been able to fund terrorist acts. Primarily,
I think we have come to the conclusion, at least tentatively--
and I will say this. I think Government agents and officials in
various agencies deserve a great deal of credit for the very
hard work, the tireless work that they have engaged in since 9/
11 in terms of trying to play catch-up against a terrorist
entity that is very elusive, very secretive, and often
disguises their financing in clandestine ways.
Without going into the macro detail as outlined in the
testimony, the basic paradigm by which Al Qaeda has been able
to enrich its coffers as well as fund its activities, not just
Al Qaeda, but also Hamas, Hizballah, the Islamic Jihad and
other terrorist groups, have been primarily through five or six
different conduits over the last 10 years.
One is the use of charitable organizations, non-profits,
some of them which are actual tax deductible organizations in
the United States, which have become conduits for the movement
of people, the transfer of assets and actual movement of actual
terrorist institutional apparatuses such as passports and other
credentials. These charitable conduits have primarily been able
to operate because of the fact that they are not investigated.
And I think one of the problems that we need to ensure in the
future is that the IRS be given more abilities to ensure that
the declared charitable aim of these organizations is kept true
to what the statements are made and not used falsely.
Number two, there are financial institutions, corporate
front companies similar to companies that have been used by
organized crime. There is also internet-based funding that has
solicited tens of thousands dollars that we have tracked for
Jihad-based organizations over the last 5 years. I believe that
the ability of terrorist movements, in particular Al Qaeda, but
also for Hamas, Hizballah and others, to exploit the freedoms
in the United States, also to evade restrictions because of the
fact that they are adhering, at least on paper, to the declared
aim of what papers they have filed on behalf of their financial
institutions goes to the core of why 9/11 needs to have a much
greater degree of analytical attention I think focused on the
future of how terrorists can raise money.
Clearly, transferring money through bank accounts and
credit card transactions has been a major vehicle. But I think
terrorists have been on the winning end in terms of being able
to advance their agenda by basically exploiting the loopholes
and the freedoms, the naivete, the generosity of the United
States, has included which USAID has unwittingly assisted some
radical Islamic charities by giving them actual financial
assistance and a platform on the basis of their declarations to
USAID.
I see that my time is up, and I ask that the rest of my
testimony be submitted. Thank you.
[The prepared statement of Steven Emerson can be found on
page 122 in the appendix.]
Chairwoman Kelly. All of the written testimony will be
submitted in full in the written record. And I appreciate the
fact that you are sensitive to the time.
Next we turn to you, Mr. Neubert, and I hope you've had
more than a turkey sandwich before you arrived here. That was
an interesting piece of testimony you submitted.
STATEMENT OF JEFFREY P. NEUBERT, PRESIDENT AND CEO, THE NEW
YORK CLEARING HOUSE ASSOCIATION, L.L.C.
Mr. Neubert. Thank you very much, Madam Chairwoman. And,
yes, I have. And I thank you and Ranking Member Gutierrez and
the rest of the Members of the subcommittee. I am Jeff Neubert
of the New York Clearing House. The Clearing House has been in
business for nearly 150 years and has been involved in the
payment system throughout that entire time.
We operate electronic payment systems that process more
than eight million transactions per day involving about $1.5
trillion U.S. dollars. We also clear and settle paper checks
and operate electronic check payment services. And very
importantly and germane to today's testimony is the fact that
the Clearing House has served as a forum for its members to
discuss common interests and to identify and prevent potential
problems in the financial sector as well as to deal with
financial and other crises. And it seems to me and us that
there's never been a problem more urgent, more global than the
need to combat international terrorism.
I want to thank you for the opportunity to tell you today
about the extraordinary cooperative effort between the
financial services community, financial regulators and law
enforcement in response to the attacks of September 11th. There
have been two principal aspects of this effort. The first was
to assure the continued operation of the payment services and
the payment infrastructure and the clearing of settlement
payments in the immediate aftermath of the attack, and the
second was to identify and prevent the funding of terrorists,
including the Intercept Forum, which is a team of 34 public and
private sector organizations which are working together to find
ways to identify, reduce and ultimately eliminate the flow of
funds to and from terrorist organizations.
On the first aspect, the critical payment systems continued
to operate in large part due to the public and private sectors
banding together in the hours and days immediately following
those attacks. And that teamwork and cooperation continues
today. Senior officials from both the public and private
sectors did and are working together to find ways to eliminate
terrorist access to our financial system. And we are committed
to do our part. It's part of a broader campaign, and much like
the military and political effort, the fight on the financial
front is a long-term commitment and it will take time to fully
accomplish our mission.
What emerged in the aftermath of this tragedy is an
unprecedented, it seems to me, shared purpose. For those of us
in financial services, our unity of purpose with law
enforcement and bank regulatory authorities is to prevent
individuals and organizations from taking advantage of our
financial system.
I was particularly touched by this since my offices are
mere blocks from the Trade Center, and I was in my office both
during the time of the attack, the implosions, and for 3 days
thereafter. But there was no time to think about the disaster
at that time other than to make sure all of my employees were
safe and sound, which I thank the Lord they were. Rather, I
turned my attention, as did my team, to making sure the payment
systems continued to operate. We immediately reached out to the
Federal Reserve, and with their agreement, we set up a series
of conference calls which took place beginning at 10:30 the
morning of the 11th and continued throughout the days and
evenings of that week to make sure that the fundamental
infrastructure of the payment systems not only for banks, but
for the securities industry and other financial industries
continued to operate. And I'm glad to say that indeed they did.
Perhaps, because of our traditional role and maybe, because
of those calls and the relative success we had that first week,
the Clearing House was called into service again on October 1st
when I received a call from one of our board members asking if
we would convene a forum to discuss and determine what
financial institutions, working with the public sector could do
to eliminate the flow of funds to terrorists and their
organizations.
On October 11th, exactly one month after the attack, we
convened our first Intercept Forum meeting and we had 100
percent attendance from 34 public and private sector
organizations who quickly determined that the mission of our
group would be to determine ways to identify and intercept the
flow of funds to and from terrorists and their organizations
and thereby deter and ultimately eliminate that flow.
From that mission, we divided into five task groups. Each
group is co-chaired by a public and private sector executive
and involves public and private sector professionals working on
those task groups all with the same mission, to identify and
interrupt the flow of funds to terrorists.
I think that this forum is a great example of the public
and private sectors' ability to come together, to meet and
discuss and take positions and move forward. And from the very
first meeting, it was very clear to all who were present that
we had a common purpose and that teamwork was the fundamental
mantra of our group.
I thank you for your time this afternoon for the
opportunity to enter my testimony with you.
[The prepared statement of Jeffrey P. Neubert can be found
on page 153 in the appendix.]
Chairwoman Kelly. Thank you very much.
We go now to Mr. Byrne.
STATEMENT OF JOHN J. BYRNE, SENIOR COUNSEL AND COMPLIANCE
MANAGER, AMERICAN BANKERS ASSOCIATION
Mr. Byrne. Madam Chairwoman, Congressman Gutierrez, I am
pleased to be here today to present our views on the important
work of the industry to address the changes in our country's
money laundering laws since the passage of the USA PATRIOT Act.
Madam Chairwoman, we pledged in October to support fully
efforts to find and prosecute the perpetrators of these heinous
acts and their supporters and work with Congress and this
subcommittee to enact new tools in the campaign against
terrorism. We helped fulfill that pledge with our strong
support of the USA PATRIOT Act, and we continue to work closely
with the Government to ensure that any new tools created are
used effectively to achieve our mutual goal. That goal, of
course, is to prevent our Nation's financial system from being
used by terrorists.
In my statement today, I'd like to briefly cover several
points. First of all, the banking industry strongly supported
Title III of the USA PATRIOT Act. As we now enter the
regulatory implementation process, it is more important than
ever that Congressional intent be followed and that the
industry continue to work with the appropriate agencies charged
with the anti-terrorism efforts.
The ABA has also prepared, and we are releasing today, a
resource guide for our members addressing the importance of a
strong and effective account opening procedure. This guide,
attached to this testimony for your information, is the product
of extensive work and input from both the private and public
sectors. As the Treasury Department considers its regulatory
obligation to draft a regulation dealing with the verification
of identities at the account opening stage, we believe this
guide will be of great assistance.
I would like to also direct your attention to a number of
the provisions in Title III. A few of these we believe can
improve the industry's and the Government's ability to address
terrorist activities. Specifically, Section 314, Cooperative
Efforts to Deter Money Laundering, requires the Treasury
Department to issue regulations to, quote: ``encourage further
cooperation'' among financial institutions, their regulatory
authorities and law enforcement authorities through the sharing
of information on terrorist and money laundering activities.
The ABA has long stressed the need for clarity on what
information can be shared to protect our institutions from
being used unwittingly by criminals.
The Federal agencies have opined on the ability of banks to
share fraud-related information as long as the fact of a
Suspicious Activity Report being filed is not disclosed. The
industry, however, needs additional guidance, we believe this
regulation has the potential of assisting us in that effort.
While we await the Treasury's proposal, the industry
remains hopeful that the rule will actually facilitate
information and not place unnecessary burdens on the industry.
For example, the ``notice'' requirement--notice to Treasury
that financial institutions are sharing information--has the
potential of discouraging the transfer of information if it
becomes a major unnecessary reporting requirement. The ABA
believes that Section 314 should permit the filing of SARs as
compliant with the notice provisions. While we realize that
there may be mechanical problems with this approach, we would
still argue that it should be considered.
Section 355 of the Act is another important provision. This
section addresses a long-standing industry concern for
preventing criminal activity by permitting depository
institutions to provide information in a written employment
reference to other institutions concerning the possible
involvement in potentially unlawful activity by a current or
former employee. The passage of 355 should greatly enhance the
industry's ability to protect its institutions and account
holders. In order to encourage banks to use this new authority,
we are publishing an article on how to implement this in the
March-April edition of our Bank Compliance magazine. The
author, Robert Serino, the former Deputy Chief Counsel of the
Office of the Comptroller of the Currency, points out that
Section 355 will protect financial institutions and their
employees from liability when they take steps to keep dishonest
individuals out of the financial services industry.
Finally, Section 326 of the Act requires the Secretary to
issue regulations to establish minimum procedures for financial
institutions to use in verifying the identity of a customer
during the account opening process. The ABA as part of its
overall effort has been moving to address this issue
aggressively, even in advance of the regulatory process. In
fact, ABA began a process to address the account opening issue
prior to the passage of the Act and obviously before the Notice
of Proposed Rulemaking.
We have learned today from our witnesses and in the press
that the 9/11 terrorists that utilized financial institutions
did so by opening up checking accounts with minimal
identification and low dollar amounts. In fact, the
identification offered were visas and the potential customers
did not possess Social Security numbers. Section 326, when
implemented across industry lines, will prevent criminals from
using any financial enterprises following these rules.
Madam Chairwoman, I will end here and just say we welcome
the opportunity to answer any questions you might have and
appreciate the opportunity to present today before the
subcommittee.
[The prepared statement of John J. Byrne can be found on
page 160 in the appendix.]
Chairwoman Kelly. Thank you very much. I appreciate your
keeping that condensed and right on time. Thank you so much.
Now we go to Mr. Herrera.
STATEMENT OF JOHN A. HERRERA, VICE PRESIDENT FOR LATINO/
HISPANIC AFFAIRS, SELF-HELP CREDIT UNION, ON BEHALF OF THE
CREDIT UNION NATIONAL ASSOCIATION AND WORLD COUNCIL OF CREDIT
UNIONS
Mr. Herrera. Buenas tardes, Chairwoman Kelly, Ranking
Member Gutierrez, and Members of the subcommittee. Thank you
for the opportunity to provide comments on implementation of
the USA PATRIOT Act. I am John Herrera, Vice President of Self-
Help Credit Union and founding member and current Board Chair
of the Latino Community Credit Union with offices in Durham and
Charlotte, North Carolina. I appear before you today on behalf
of the Credit Union National Association, and the World Council
of Credit Unions.
I would like to commend Congress for the swift passage of
the PATRIOT Act and assure the subcommittee that credit unions
are committed to being a part of the effort to ensure that
terrorists and those seeking to abuse our financial markets
through money laundering are identified, pursued and punished.
It is also important to recognize that the United States,
which is facing its highest level of immigration since the
Depression era, has a growing population of unbanked
individuals. There are an estimated 28.4 million foreign-born
individuals residing in the United States today, comprising
over 12.4 percent of our work force. Half of these immigrants
are from Latin America. This recent influx of immigrants has
been identified by Federal Reserve Board Chairman Alan
Greenspan as one of the key reasons for the unprecedented
period of economic growth and low inflation during the 1990s.
Ninety percent of the Latino Community Credit Union's 4,000
members are immigrants. Two-thirds of them have never
previously had a financial account in their lives. Nationwide,
approximately 60 percent of all Latino immigrants are unbanked,
compared to 10 percent of the total U.S. population that is
unbanked.
Regarding the PATRIOT Act, credit unions went to work with
the Treasury Department and the National Credit Union
Administration to support implementing regulations that are
consistent with Congressional intent. We certainly appreciate
the importance of meeting our compliance responsibilities,
particularly after September 11th.
But one concern relates to Section 326, which requires the
Treasury Department to study whether foreign nationals must
obtain an additional identification number, which will function
similarly to a Social Security number or a tax identification
number.
Another concern is with the proposal to establish a
database to be maintained by the Government to identify foreign
nationals seeking to open accounts. In addition to raising
privacy concerns, the security goals of these proposals seem to
be met by the Office of Foreign Assets Control. Today, credit
unions and banks generally open non-interest-bearing accounts
for undocumented members and then assist them in obtaining
individual tax identification numbers so that they can earn
interest and pay taxes. In fact, the World Council has even
published a manual on how to serve undocumented individuals
which I will offer to place in the record.
If we had to refuse opening a non-interest-bearing account
pending the tax ID number, the potential member would revert to
the world of less secure cash transactions, often becoming
victims of crime and predatory lenders. Again, I want to work
with the Treasury and Congress to avoid having a chilling
effect on the ability of unbanked individuals to use
traditional financial institutions.
I would also like to briefly call attention to the issue of
money transfers, given their importance in immigrant
communities. The Inter-American Development Bank estimates that
an additional $3 billion per year could be sent to Latin
America by immigrants in the United States if the costs of
transmissions were more reasonable.
Our efforts to reach low-income and unbanked individuals,
however, will be significantly enhanced with a policy change.
We propose that credit unions be permitted to provide check
cashing and remittance services to non-members, such as those
within the field of membership. CUNA agrees with the National
Credit Union Administration, which recently requested such a
legislative change in the Federal Credit Union Act of Chairman
Oxley. Such a change would provide an excellent opportunity for
individuals to access a low-cost, viable alternative to less
regulated and higher cost financial intermediaries.
In conclusion, to quote James W. Ziglar, the Immigration
Commissioner, ``the events of September 11 were caused by evil,
not by immigration.'' Many credit unions throughout the country
such as the Latino Community Credit Union are leading the way
in ensuring that immigrants have access to affordable financial
services. And, as we seek to protect our homeland, it is
important to maintain access to our financial services
industry.
Thank you for this opportunity to comment, and I would be
glad to answer any questions from the subcommittee.
[The prepared statement of John A. Herrera can be found on
page 168 in the appendix.]
Chairwoman Kelly. Thank you very much.
I have a couple of questions for this panel. One that I
think I'd like to ask you, Mr. Byrne, on page 4 of your
testimony, you mention--I'm quoting here: ``The Federal
agencies have opined on the ability of banks to share fraud
related information as long as the fact of a SAR being filed is
not disclosed. The industry, however, needs additional
guidance, and this regulation has the potential of assisting us
in that effort.'' Is this sufficient with the regulation or do
you need more?
Mr. Byrne. We hope that this will be sufficient. The issue,
very briefly, and it happened obviously prior to 9/11, was
banks want to share information on check fraud or debit card
fraud or something like that between institutions. And it was
always unclear to us that if somebody had filed a Suspicious
Activity Report, you clearly can't disclose that fact to the
other institution. But the agencies have said from time to time
that you could share some of the elements in the SARs. You
always run the risk that if you tell another bank, here's the
check fraud, that you may also innocently disclose the fact
that you did something about it and filed a SAR and that
potentially there's an issue.
Section 314, we believe, can be the answer. And certainly
if it's done carefully and it takes that into consideration, we
think we may not need any more. We won't know till the proposal
comes out. We're looking very carefully. We've offered some of
our suggestions already to the Treasury. But we're looking
forward to that as something that will help not only the
institution, but will protect the account holders as well as
the safety and soundness of the industry.
Chairwoman Kelly. Thank you very much for that
clarification. Mr. Emerson, what's your estimate of the total
amount of funding that organizations in the United States have
raised for Al Qaeda and for other terrorist groups?
Mr. Emerson. That's a very difficult question to answer
precisely because of the nature of the clandestine conduits
that are used to funnel money. For example, non-profit
charities may account for tens of millions of dollars over the
last few years to militant Islamic groups. And the problem is
that when you look at the accounts of some of these groups, you
won't find a ledger or a cash transaction for weapons or for
any type of military component, so that the real burden becomes
proving that the organization is serving as a conduit in terms
of its worldwide operations.
Based on what we have looked at in terms of documents from
the Government, as well as open source material and other
documents we've obtained and information, it is certainly
within the realm of probability that Al Qaeda worldwide,
because it's hard to compartmentalize the money they raised
here or brought in, certainly raised worldwide through their
network of front companies in terms of their use of the
internet, the use of charitable conduits and false human rights
groups, probably on the magnitude of $25 to minimally $50
million every year.
Again, because of the way the structure is set up, it's
hard to pinpoint exactly where the money is at any one time.
They're multinational and global and can shift monies on a
moment's notice, and it's very hard. It's like squeezing air in
a balloon in terms of focusing on one, let's say subsidiary of
a militant Islamic charity. It can transfer its money
immediately to another chapter overseas and eradicate any trace
of where the money was.
Chairwoman Kelly. When they raise this money, are they
using the U.S. mail? Are they doing it at rallies? Is it coming
in in cash? Do they use things like people writing checks,
using credit cards and so on? How are they raising this money?
Mr. Byrne. Well, in fact, all of the above. And one of the
problems is also discerning at least when they raise it
publicly, let's say at a rally or through the internet or
through the mail, whether in fact the donor is really knowingly
contributing to a terrorist conduit or whether he's doing it
naively or she's doing it naively.
And so you have a situation where they can freely advertise
raising money for families in Chechnya or families in, quote:
``Palestine,'' and the donor may not know that it's actually
going to fuel Hamas or funding the Al Qaeda movement in
Chechnya. On the other hand, at rallies where you hear ``Death
to America'' and then they pass the hat around, you can be
pretty sure that the monies are going to a nefarious purpose.
So it's very difficult to get a handle on this. The tax
returns of 990s, which are the annual tax returns, provide some
indication. But my suspicion is that that represents only a
fraction of the amount of monies raised in the United States.
And some of those 990s actually show transfers of money from
the Middle East into the U.S. where they're parked and
laundered, and then they are shipped out in the following year.
Chairwoman Kelly. That takes me to another question with
regard to the security that banks and other entities are taking
within all of you in financial situations. I'm wondering
whether or not you are going back and looking at, as we are in
the airline industry, are you looking at who is working for
you? Is it possible for people to put someone in your financial
institutions, a plant that could disrupt the flow of what
you're doing or subvert it in another way? Are you going back
and having a look at who's working for you? What kind of
implementation have you put, what kind of things have you put
in place? And Mr. Byrne, I think really I'm going more at you
than check clearing and so on. But, credit unions also have an
obligation, I think, to all of us who use them.
Mr. Byrne. Madam Chairwoman, that's an excellent question.
And in fact, there is a partial response in the PATRIOT Act.
Section 355 of the Act deals with the issue that we have been
grappling with for quite a while, and that is if we dismiss
somebody for committing a crime or we believe has committed a
crime, but it's such a low dollar amount that nobody prosecutes
that individual, they go to an institution down the road, and
we can't tell that institution why we dismissed the employee.
Section 355 of the PATRIOT Act, which you obviously passed last
year gives us some ability to do that, and that obviously will
deal with some issues.
We also do fingerprint every new employee. The Clearing
House is involved in that project as are we. And you run those
fingerprints by the FBI, and if you get a match of someone
who's been convicted before, that does help weed out some of
this. So it does address it to some degree, 355 plus the
fingerprint program which many of our banks are engaged in.
Chairwoman Kelly. Do you use biometrics?
Mr. Byrne. That's a bank-by-bank decision. I think some
banks are exploring those possibilities, but I couldn't tell
you that it's an industry practice. Some groups are using it,
others are still looking at the technology.
Chairwoman Kelly. Thank you very much.
Mr. Gutierrez.
Mr. Gutierrez. Thank you very much.
Let me ask Mr. Herrera, how can we comply with the US
PATRIOT Act and the regulations and at the same time serve the
unbanked, undocumented immigrant community of the United
States?
Mr. Herrera. Congressman Gutierrez, that's a really good
question and I think we want to work together on finding the
most efficient way to do that. I think we already have at the
credit union level a lot of policies and security procedures
that are in place to track suspicious movements. Just to give
you an example, wire transfers are one of the most popular
services that we provide in my credit union. Every time we do a
wire transfer overseas, we match that name against the list of
OFAC.
I think it's better to have more information, and we really
know, credit unions are uniquely positioned in the sense that
we really know our members. We're more intrinsically linked.
Our members--I'm sorry. I just lost my train of thought. I
believe the systems that we have in place are very efficient.
We really have a very special relationship with our members and
our board of directors, I mean, we work with volunteer
communities. We are membership organizations. From the
personnel to the folks that work in credit unions, we really
know who our members are. We are limited by fields of
membership. So we just don't serve everyone. But I think that
uniquely qualifies us to be more aware of any illegal use by
potential terrorists.
Mr. Gutierrez. I think that it's probably going to be
incumbent upon organizations such as yours to come up with
those scenarios and structures that is going to allow the
undocumented immigrant community to continue to send their
remittances back home. I obviously agree with you.
But I think you can see by the tenor of the debate here in
Washington, DC. and the declarations that are made by law
enforcement officers time and time again, there has been a
continuing linkage between terrorists and immigrants, almost to
the point where one has become synonymous with the other.
That's an unfortunate reality and an untrue reality, but it's
one that we continue to see more and more today.
The people that came here to strike against our country on
September 11th weren't immigrants. They were terrorists. They
didn't come here to contribute, to work, to sweat, to toil, to
bring us their creativity and their imagination as other
immigrant groups that came before them. They came here with one
sole express purpose: To try to destroy this Nation.
We know that there are millions of immigrants in this
country that come here to work and provide vital services. But
I think that unless we come up with our own series of
safeguards, the day in which I can give someone as a Member of
Congress or relate to someone as a Member of Congress and get
them their tax identification card and/or their consulate
offices issuing some kind of identification form, those days
may come to an end, thereby taking an immigrant community that
wants to continue to--and I don't know that people are going to
be in the mood to hear and discuss the debate.
Let's remember that President Fox was here on September 5th
and 6th. And I remember when the Democratic and the Republican
party couldn't get closer to him. There was a big debate here
in Washington, DC. who was the biggest friend of the immigrant
community, who had done more, who was going to do more. And
then, 5 days later, it was like we washed our hands like
Pontius Pilot of the immigrant community and people couldn't
run away faster from the immigrant community and the policies
that we were addressing at that point.
I'm hopeful that we can engage in a serious debate of what
we do with our immigrant community in a serious light, and not
one affected adversely by the actions of terrorists on
September 11th. Because it's pretty unfair, as you and I both
know. This Government, as a member of it, and this Congress,
has showed absolutely no will to bring about an effort to
deport the 8 million people. There is no funding for their
deportation. There is no political will for their deportation.
There is no program. And no Member of Congress has ever
articulated a manner in which to do that.
So given the absence of will, that means that we are
acquiescing to their presence here in this country. We all know
it. Every time we bite into a piece of fruit, everyone knows
that 60 percent of all of the agriculture industry in this
country is undocumented workers, but we eat the apple. We chew
on the grapes. Every time we go into a restaurant there's a
nice clean plate. ``Oh, it's nice and clean in here and the
food is delicious.'' We know who's washing those dishes.
Everybody in this room knows who's washing those dishes.
And we walk into a beautiful building and it's marvelous,
so nicely shined, we step on it and we say, ``Oh, let me not
slip. This is such a wonderful place.'' Or walk into a hotel
room and say, ``Isn't this a wonderfully cleaned room?'' We
sleep in the rooms. They even take care of our children and
raise our most precious asset, our most precious commodity.
What is it? Our children. Every day I see them, they go ``Toma
comida. Guidamera.'' Take care of her. Feed her. And then they
go off to work.
So we know they're here. Everyone in this room. And I'm
happy you brought up Mr. Greenspan--and I'll conclude in 15
seconds. Mr. Greenspan says that one of the reasons of our
unprecedented economic growth in this Nation during the decade
of the 1990s was the immigrant community, because they keep
inflation down. Because they work hard and toil at the jobs
that most people born in the United States of America, citizens
of this country, would never consider doing.
So in the absence of a program to eliminate them, and since
they're here, I think we should allow them to continue to have
banking services and not confuse one with the other. And I
think that's going to be a real challenge for this House and I
thank you for your work, Mr. Herrera.
Mr. Herrera. Thank you, Mr. Gutierrez.
Chairwoman Kelly. Mr. Bachus, welcome. Thank you.
Mr. Bachus. Mr. Emerson, you're an expert on Osama bin
Laden and his operations and Al Qaeda and their financial
network around the world. As you well know, he was based in the
country of Sudan for the first half of the 1990s, I think he
left in 1996. And there has been, many believe, I'll just put
it that way, that since his departure in 1996, the Sudan has
continued to give financial and logistical and diplomatic
support to Osama bin Laden and to Al Qaeda. What's your
assessment? Are you in the camp that agrees with that?
Mr. Emerson. I definitely believe that the Sudan has
continued--bin Laden was in the Sudan from 1991 through 1996,
and he left under, quote: ``government pressure'' at that point
because of the appropriate pressure, but not enough appropriate
pressure placed on by the Clinton Administration. And I know
there have been some reports that he was offered up to the
United States.
But frankly, the Sudanese government has continued to
engage and support international terrorism and involve itself
in the operations of Al Qaeda, as evidenced most recently in
terms of testimony in open source material by the trial of the
embassy bombing defendants from Kenya and Tanzania who describe
the role of the Sudan in supporting Al Qaeda.
Now the question could be asked, what has happened since 9/
11? Frankly, any superficial effort to sort of please the
United States must be contrasted with the continuation of
support for other terrorist groups such as Hamas or the Islamic
Jihad, the training camps that are in the Sudan today, and the
extent to which there has been no accountability for the years
of support that the Sudan provided to Al Qaeda and to bin Laden
personally.
Mr. Bachus. It's interesting what you talk about, after
September 11th. When our Government was saying that Sudan is a
member of the alliance and they're cooperating with us. After
they made some of those statements, I actually read in the Wall
Street Journal where some of the Sudanese government officials
said ``We're going through the motions. We're really not
cooperating.''
I very much suspect any so-called cooperation we're getting
with Sudan. Do you think it's real in any way?
Mr. Emerson. I think that there is, you know, it's an
illusory type of cooperation. On the one hand, they may trumpet
a certain amount of public statements or public acts. On the
other hand, there is no doubt that Al Qaeda terrorists operate
and have used Sudanese passports and continue to use them. And
Sudanese financial institutions have been directly involved in
the support of Al Qaeda. And it was only because the U.S.
Government froze the assets of some of those groups,
institutions, that those monies were not available. It was not
because of the Sudan freezing the assets of those groups after
9/11.
Mr. Bachus. You know, there are certain financial
institutions that have been linked with Osama bin Laden, and
two of those are in Sudan. That's Taba Investments and Al-
Shamal.
Mr. Emerson. Al-Shamal Bank. Exactly.
Mr. Bachus. Al-Shamal Bank. Number one, what role does Taba
Investments play in the Osama bin Laden financial network? And
number two, I know Al-Shamal--is that how you pronounce it?
Mr. Emerson. Yes, sir.
Mr. Bachus. They wired $250,000 to an Osama bin Laden
operative in Texas back in what, 1993? And they bought a plane
for Osama bin Laden. Can you update us on those two financial
institutions? And also, to your knowledge, does Al-Shamal Bank
maintain any correspondent accounts, either directly or
indirectly, with any U.S. financial institution?
Mr. Emerson. Let me just take the last question. I'm not
familiar with whether they maintain any corresponding accounts.
As far as Al-Shamal, as well as Taba Investments, they were
direct bin Laden financially owned acquisitions. He was the
largest shareholder.
Mr. Bachus. Yes, he owned it actually, didn't he?
Mr. Emerson. Right. Although there were other shareholders,
he directly controlled both institutions. And they were used to
basically provide wire transfers and liquidity to the bin Laden
empire, which consisted of more than--I'm looking here at the
chart that we assembled--the minimum of a dozen financial
institutions and another one-and-a-half dozen companies
worldwide that generated, quote: ``legitimate profit,'' but
were serving as a vehicle basically for terrorism.
As far as what the current status is, I will have to get
back to you about what the exact current status is in the last
5 months about Shamal and Taba Investments. But I can assure
you that up until 9/11, they were very active. And again, it
was only because of the Executive Orders issued by the
President that their financial operations were interrupted. It
was not because of any unilateral action by the Sudanese
government.
Mr. Bachus. And I'll just close by saying, you know, the
Sudanese government since 9/11 has actually strafed people in
the south of the Sudan when they were picking up food drops.
They continue to say that they're waging Jihad against the
people of the Christian and other faiths in the south of the
Sudan.
Mr. Emerson. The black minority, the Christian black
minority has been subjected to what human rights organizations
called genocide. And they've killed tens of thousands. And that
has continued. That has not stopped at all since 9/11.
Mr. Bachus. So it's hard for me to believe that we have a
comfortable alliance with people that are doing what we
witnessed on September 11. Thank you.
Chairwoman Kelly. Thank you very much, Mr. Bachus. I don't
believe there's any more questions from the subcommittee, and
so the Chair will note that Members may have additional
questions of this panel as well, which they may wish to submit
in writing. Without objection, the hearing record is going to
remain open for 30 days for Members to submit those written
questions to these witnesses and to place their responses in
the record.
This panel is excused, and we are very grateful for your
testimony on a very interesting topic. Thank you very much. We
appreciate your time. The hearing is adjourned.
[Whereupon, at 4:24 p.m., the hearing was adjourned.]
A P P E N D I X
February 12, 2002
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