[Senate Hearing 107-988]
[From the U.S. Government Publishing Office]



                                                      S. Hrg. 107-988


                    THE ROLE OF CHARITIES AND NGO'S
                IN THE FINANCING OF TERRORIST ACTIVITIES

=======================================================================

                                HEARING

                               before the

                            SUBCOMMITTEE ON
                    INTERNATIONAL TRADE AND FINANCE

                                 of the

                              COMMITTEE ON
                   BANKING,HOUSING,AND URBAN AFFAIRS
                          UNITED STATES SENATE

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION

                                   ON

 EXAMINING THE SCOPE OF THE CURRENT PROBLEM; STEPS THE ADMINISTRATION 
   HAS TAKEN TO CURB THE DIVERSION OF CHARITABLE FUNDS TO TERRORIST 
ORGANIZATIONS; WAYS TO CURTAIL THE FLOW OF MONEY FROM FOREIGN AND U.S.-
BASED ISLAMIC CHARITIES TO TERRORIST ORGANIZATIONS; AND WHAT ADDITIONAL 
    TOOLS ARE NECESSARY FOR LAW ENFORCEMENT TO IDENTIFY AND CUT OFF 
                      TERRORIST FINANCING NETWORKS

                               __________

                             AUGUST 1, 2002

                               __________

  Printed for the use of the Committee on Banking, Housing, and Urban 
                                Affairs



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                            WASHINGTON : 2003
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            COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                  PAUL S. SARBANES, Maryland, Chairman

CHRISTOPHER J. DODD, Connecticut     PHIL GRAMM, Texas
TIM JOHNSON, South Dakota            RICHARD C. SHELBY, Alabama
JACK REED, Rhode Island              ROBERT F. BENNETT, Utah
CHARLES E. SCHUMER, New York         WAYNE ALLARD, Colorado
EVAN BAYH, Indiana                   MICHAEL B. ENZI, Wyoming
ZELL MILLER, Georgia                 CHUCK HAGEL, Nebraska
THOMAS R. CARPER, Delaware           RICK SANTORUM, Pennsylvania
DEBBIE STABENOW, Michigan            JIM BUNNING, Kentucky
JON S. CORZINE, New Jersey           MIKE CRAPO, Idaho
DANIEL K. AKAKA, Hawaii              JOHN ENSIGN, Nevada

           Steven B. Harris, Staff Director and Chief Counsel

             Wayne A. Abernathy, Republican Staff Director

                      Steve Kroll, Special Counsel

                   Craig Davis, Legislative Assistant

             Madelyn Simmons, Republican Professional Staff

   Joseph R. Kolinski, Chief Clerk and Computer Systems Administrator

                       George E. Whittle, Editor

                                 ______

            Subcommittee on International Trade and Finance

                      EVAN BAYH, Indiana, Chairman

                 CHUCK HAGEL, Nebraska, Ranking Member

ZELL MILLER, Georgia                 MICHAEL B. ENZI, Wyoming
TIM JOHNSON, South Dakota            MIKE CRAPO, Idaho
DANIEL K. AKAKA, Hawaii

                Catherine Cruz Wojtasik, Staff Director

              Daniel M. Archer, Republican Staff Director

                                  (ii)
?

                            C O N T E N T S

                              ----------                              

                        THURSDAY, AUGUST 1, 2002

                                                                   Page

Opening statement of Senator Bayh................................     1

Opening statement of Senator Enzi................................     4

                               WITNESSES

Kenneth W. Dam, Deputy Secretary, U.S. Department of the Treasury     6
    Prepared statement...........................................    32
Quintan Wiktorowicz, Ph.D., Assistant Professor, Department of 
  International
  Studies, Rhodes College........................................    15
    Prepared statement...........................................    37
Matthew A. Levitt, Senior Fellow in Terrorism Studies, The 
  Washington
  Institute for Near East Policy.................................    18
    Prepared statement...........................................    41
Peter Gubser, Ph.D., President, American Near East Refugee Aid 
  (ANERA), on behalf of InterAction..............................    22

              Additional Materials Supplied for the Record

Statement of InterAction, dated August 1, 2002...................    50
Statement of Khalil E. Jahshan, Director, Government Affairs 
  Affiliate NAAA-ADC, Executive Vice President, the American-Arab 
  Anti-Discrimination Committee (ADC), dated June 4, 2002........    51

                                 (iii)

 
                              THE ROLE OF
                       CHARITIES AND NGO'S IN THE
                   FINANCING OF TERRORIST ACTIVITIES

                              ----------                              


                        THURSDAY, AUGUST 1, 2002

                               U.S. Senate,
  Committee on Banking, Housing, and Urban Affairs,
           Subcommittee on International Trade and Finance,
                                                    Washington, DC.

    The Subcommittee met at 2:35 p.m. in room SD-538 of the 
Dirksen Senate Office Building, Senator Evan Bayh (Chairman of 
the Subcommittee) presiding.

                 STATEMENT OF SENATOR EVAN BAYH

    Senator Bayh. I would like to call this hearing of the 
Subcommittee on International Trade and Finance of the Senate 
Banking Committee to order. And I would like to thank all of 
you for being here. I know that there are other things that you 
could be doing this afternoon and we appreciate your time and 
interest in this subject matter.
    I would also like to thank Senator Hagel. As so often 
happens in the Senate, we are still working on figuring out a 
way to be two places at the same time. He has an important 
hearing on the subject of Iraq, Mr. Secretary, and is required 
to be there for the Foreign Relations Committee, but I know he 
would want to extend to you his warmest regards.
    He and I have a very good bipartisan working relationship 
on this Subcommittee and on a variety of other areas, 
particularly when it comes to things like cracking down on 
financing for terrorist organizations. There are no Republicans 
or Democrats here. Just Americans who want to do the right 
thing. So, I know that he would extend to you his regards and I 
want to extend to him my thanks in absentia.
    Senator Enzi, I thank you for your interest as well. It has 
been a pleasure working with you on this and other matters, and 
I look forward to hearing your remarks in just a couple of 
minute after I have offered an opening statement. So thank you 
for your time in the midst of your busy schedule.
    Cutting off the financing of terrorist organizations is a 
critically important component of the war against terror and to 
protect America. But it is often an invisible part of that war. 
When we cut off the finances of these organizations, we in many 
cases are literally taking weapons out of their hands. But it 
is not as obvious as a bombing run or a capture mission. 
Unfortunately, charities are an important part of the financing 
picture.
    Al Qaeda has five principal sources of funding--the 
personal wealth of Osama bin Laden, other wealthy individuals, 
principally located in the Persian Gulf area, front companies 
operated for profit, illegal activities, such as money-
laundering or smuggling, and finally, charities, where 
inadvertent or intentional diversion of funds finances terror, 
not benevolent activities.
    The problem appears to be unfortunately pervasive. I was 
sharing with the Deputy Secretary just a few moments before we 
came out, a visit I had yesterday from the U.S. Attorney in the 
Northern District of my State, and he was not visiting me on 
this subject. I just asked him as a general matter of curiosity 
the kinds of things he was working on. And without prompting, 
he volunteered that he was working on a couple of open 
investigations involving the misuse of charities in the 
Northern District and the siphoning of funds from those 
charities to assist al Qaeda.
    And my response is that if it is going on in smaller 
counties in northern Indiana, it must be going on in a lot of 
places in addition to that, not just the large metropolitan 
areas. That may give you some indication of just the extent of 
the challenge that we face.
    It is particularly galling and outrageous when funds 
generated in the United States by what I assume are 
predominantly legal and patriotic U.S. citizens, are being 
diverted to assisting attacks upon America and harming or, in 
some cases, as we have tragically learned, killing Americans.
    This hearing has been called to send a very clear signal 
that those who use the cover of humanitarian and charitable 
efforts to hide their support for the murderous acts of 
terrorism should have no safe harbor in our country or anywhere 
else on the globe, and that we will do everything humanly 
possible to stop this illicit financial activity, and that we 
will expect our allies to do the same.
    Last fall, this Subcommittee held a hearing on Hawala, an 
informal remittance system used by al Qaeda to move money 
around the world in order to finance terrorist activities. We 
included two provisions in the USA PATRIOT Act regarding 
terrorist financing.
    The first proposal required the Department of the Treasury 
to extend registration and suspicious activity-reporting 
requirements to Hawala and other informal remittance systems, 
and required the Department to begin immediate onsite 
inspections of registered Hawala.
    I understand the Administration is undertaking this effort 
and although this hearing is not intended to focus upon this, I 
would like to ask for an update at the appropriate time. Mr. 
Secretary, I think I indicated that to you a few minutes ago.
    We also recently saw the 2002 Money Laundering Strategy 
that the report on Hawala, which I requested, is being 
developed. I would also like an update on that report, perhaps 
during the questioning period, or if the update is not 
currently available, then as soon as possible after the hearing 
is concluded.
    The second proposal that we included in the USA PATRIOT Act 
authorizes each U.S. executive director of the international 
financial institutions to use both the voice and the vote of 
the United States to require an audit of disbursements to make 
sure that aid is not being inadvertently diverted to 
terrorists. Unfortunately, I did not see any mention of this 
provision in the 2002 Strategy and I would appreciate an update 
on this at the appropriate time as well, Mr. Secretary.
    Islamic charities collect millions of dollars every year, 
and millions more are granted to development projects by the 
World Bank, U.S. AID, and other United States and international 
funds through nongovernmental organizations. While the majority 
of this funding is used for benevolent causes, some of it, 
unfortunately, is diverted to terrorists, either by design or 
through the exploitation of otherwise legitimate organizations.
    Since September 11, the United States has designated seven 
foreign charitable organizations as having ties to al Qaeda and 
has shut down two prominent U.S.-based charities with alleged 
ties to Osama bin Laden and the Taliban.
    The assets of the largest U.S.-based Islamic charity, Holy 
Land Foundation, have been frozen, based upon information 
linking it as a funding vehicle to Hamas. At least $2.4 million 
in U.S. charitable funds have been seized and an undisclosed 
amount has been frozen in Bosnia and Somalia.
    The 2002 National Money Laundering Strategy, released on 
July 25, lists as one of its priorities the, ``Investigation of 
nongovernmental organizations used to raise, collect, and 
distribute funds to terrorist groups.'' According to the 
Strategy, information yielded through investigations by the law 
enforcement and intelligence communities shows that terrorist 
organizations use charities and NGO's to facilitate funding and 
to funnel money.
    Additionally, legitimate charities have been exploited when 
their field operations have been infiltrated by terrorist 
elements, particularly in the areas of conflict. It is clear 
that this is an area that demands further attention from our 
Government.
    Today's hearing will examine how terrorist groups exploit 
charities and NGO's and the ways to curtail the flow of money 
to these organizations, while preserving humanitarian aid.
    Our first witness will be the Deputy Secretary of the 
Treasury, Kenneth Dam. Deputy Secretary Dam is the point person 
for the Treasury Department in the financial war on terror.
    Mr. Deputy Secretary, I want to thank you for being present 
and for your leadership in this important area, and I look 
forward to your testimony.
    Also testifying today are: Dr. Quintan Wiktorowicz--I hope 
that I pronounced that correctly, Doctor. Where is the Doctor? 
Did I pronounce that correctly?
    Dr. Wiktorowicz. Yes.
    Senator Bayh. Very good. My last name is very commonly 
mispronounced. So, I hope that I am not doing the same in your 
case.
    Also, Matthew Levitt, and Dr. Peter Gubser--Doctor, did I 
pronounce that correctly?
    Dr. Gubser. Gub-ser.
    Senator Bayh. Gubser. Thank you, Doctor.
    Dr. Wiktorowicz, invited at the request of Senator Hagel, 
is an acknowledged expert on Islamic culture, including 
charities, and will discuss the scope of the problem and the 
importance of charity in the Muslim community.
    Matthew Levitt, a Fellow at the Washington Institute for 
Near East Policy, will explain how and why terrorists use 
charities to further their goals.
    And Dr. Gubser, President of the American Near East Refugee 
Aid, will describe the types of work that--and I hope I am 
pronouncing that correctly, also--ANERA does, how the 
organization coordinates its efforts with other local groups on 
the ground, and how charities can avoid being exploited while 
working in areas with a heightened risk of terrorist influence.
    ANERA is a member of InterAction, an alliance of U.S.-based 
international development and humanitarian NGO's operating in 
over 100 countries.
    One of the challenges in investigating terrorist financing 
through charities and NGO's is distinguishing terrorist 
financing from legitimate charitable fundraising. As the 
testimony will show, the line is often blurred. The persons 
donating money to charitable 
organizations often believe the money is being used solely for 
charitable and humanitarian purposes, and usually a portion of 
the money will go for that purpose. However, there are a number 
of charitable organizations which siphon off a percentage of 
these funds, either directly to terrorist groups or to provide 
logistical support to terrorists. They must be stopped.
    We must continue to seek every angle that terrorists use to 
finance their operations. We must make sure that every penny in 
U.S. aid and charity is going to people who need it the most, 
not to terrorists for training and arms.
     Let me reiterate once again, the war against terrorism 
demands that we strengthen our resolve, sharpen our skills, and 
redouble our efforts to cut off the flow of funds to terrorists 
and those who support them.
    I want to thank all of you who are here to testify today. I 
look forward to hearing from you.
    Now, Senator Enzi, I look forward to hearing your comments. 
Thank you for coming.

              STATEMENT OF SENATOR MICHAEL B. ENZI

    Senator Enzi. Thank you, Mr. Chairman.
    First of all, I want to thank you for holding this hearing 
and for continuing to lead this Subcommittee on closing down 
money laundering, particularly those that are directing funds 
toward terrorist organizations. I also want to thank the 
witnesses for agreeing to testify today and for their work on 
curbing these efforts.
    Since September 11, the Congress and the Administration 
have taken a number of important steps to curb money laundering 
and I am proud to say that this Subcommittee acted immediately 
after the attacks. We doubled our efforts to find problems with 
the current reporting system and bring to a halt the corruption 
which allowed groups to fund terrorists attempting to harm our 
country and our citizens.
    I am proud to say that on October 26 of last year, 
President Bush signed into law the USA PATRIOT Act, which was 
the first step to stopping this transfer of funds.
    However, we have more work to do. We cannot allow 
charitable organizations to paint themselves as tools of 
goodwill when they are nothing more than facilitators of evil.
    Federal law enforcement authorities must have a clear 
understanding of what these organizations are funding. That is 
why we are giving both domestic and international agencies more 
authority to investigate these organizations.
    A good example is the work being done by the United Nations 
Security Council Counter-Terrorism Committee, or CTC. The CTC 
was created by Security Council Resolution 1373 after the 
attacks of last September and with full support of the United 
States.
    With the exemplary leadership of Sir Jeremy Greenstock, 
British Ambassador to the United Nations, the CTC has gathered 
reports from over 170 individual nations, some of whom are not 
even members of the United Nations.
    The Committee has made suggestions on how these nations can 
continue to improve their financial monitoring systems in the 
fight against terrorism. Although not all the reports to the 
CTC have shown effective action being made by nations, the 
knowledge garnered by the international community can be used 
to find links 
between charities, NGO's, and terrorist organizations.
    I have worked with Ambassador Greenstock and am very 
pleased with his leadership of the CTC. I was also pleased to 
hear of his support for regional organizations taking a larger 
role in the fight against terrorism. Regional organizations 
such as the Organization of American States or the Association 
of Southeast Asian Nations can use the experiences of larger 
nations to help the smaller nations who may not have the 
resources to effectively find corrupt charities or NGO's 
operating within their borders.
    Unfortunately, the good support that can be found from some 
nations is negated when cooperation is lost. For example, the 
European Union has refused to freeze assets of groups that the 
United States considers terrorist organizations. This lack of 
coordinated effort gives terrorist-supporting organizations the 
ability to subvert U.S. attempts to stop their destructive 
actions.
    Stopping money laundering through international charities 
and international NGO's must be done through the international 
community with coordinated efforts.
    Again, Mr. Chairman, I think you are to be applauded for 
your diligence on this issue. I hope to continue to work with 
you, the other Members of the Subcommittee, and our law 
enforcement officials to continue to work against these 
organizations.
    I look forward to hearing from the witnesses. Thank you, 
Mr. Chairman.
    Senator Bayh. Thank you, Senator. And I do not believe I 
have had an opportunity to personally congratulate you yet on a 
different subject the Full Committee has worked on, and that 
is, of course, the accounting reform issue. I want to thank you 
for your really historic effort in that regard. So, I take this 
opportunity, the first I have had.
    Senator Enzi. I enjoyed working with you on that one, too.
    Senator Bayh. Likewise.
    Mr. Secretary, thank you for your presence today. We look 
forward to hearing from you.

                  STATEMENT OF KENNETH W. DAM

       DEPUTY SECRETARY, U.S. DEPARTMENT OF THE TREASURY

    Mr. Dam. Thank you, Chairman Bayh and Senator Enzi, for 
inviting me to testify today about the misuse of charities by 
terrorist organizations to raise and move money. This is an 
important and complex issue. I applaud the Subcommittee for 
focusing on it. And I appreciate the leadership that you have 
provided, Mr. Chairman, on this important issue.
    We, in the Executive Branch, are addressing this problem at 
several levels. We are stopping the flow of funds by freezing 
the assets of charities that are supporting terrorist groups, 
as well as aggressively investigating suspected abuses of 
charities. We also work with countries around the world to help 
raise standards of oversight and accountability for charities. 
In this work we are guided always by two principles: First, 
preventing the abuse of charities for terrorist purposes; and 
second, preserving the important role that charities play 
throughout the world.
    I have written testimony which I would like to put into the 
record which goes into this in detail and provides an update. 
Now, I would like to just focus on a few key points.
    Senator Bayh. Without objection, we will include your 
entire statement in the record.
    Mr. Dam. Thank you.
    We believe al Qaeda and other terrorist organizations are 
suffering financially as a result of our actions. We also 
believe that potential donors are being more cautious about 
giving money to organizations where they fear the money might 
end up in the hands of terrorists. In addition, greater 
regulatory scrutiny in financial systems around the world is 
further marginalizing those who would support terrorist groups 
and activities.
    At the same time, I must tell you that we have much to do. 
Al Qaeda's financial needs, after all, are greatly reduced. 
They no longer bear the expenses of supporting the Taliban 
government or of running training camps in Afghanistan, for 
example. We have no reason to believe that al Qaeda, however, 
does not have the financing it needs to conduct at least a 
substantial number of additional attacks. In short, a great 
deal remains to be done.
    Your invitation letter requested my thoughts about the 
scope of the problem of terrorist abuse of charities and of 
nonprofits. Unfortunately, this is not an issue on which its 
precise measurement is possible, at least not yet. We do know 
that the mechanism of charitable giving has been used to 
provide a cover for the financing of terror and that it has 
been a significant source of funds. As an example, consider the 
case of al Haramain.
    Al Haramain is a Saudi Arabian-based charity with offices 
in many countries. Prior to designation, we compiled evidence 
showing clear links demonstrating that the Somali and Bosnian 
branch offices were supporting al Qaeda. For example, we 
uncovered a history of ties between al Haramain Somalia and al 
Qaeda and the designated organization known as AIAI, or al 
Itihaad al Islamiya, and other associated entities and 
individuals. Over the past few years, al Haramain Somalia has 
provided a means of funneling money to AIAI by disguising funds 
allegedly intended to be used for orphanage projects or for the 
construction of Islamic schools and mosques. Based on this and 
other information, the United States and Saudi Arabia jointly 
designated the Somali and Bosnian offices of al Haramain.
    Now as I stated at the outset, our goal is to guard 
charities against abuse without chilling legitimate charitable 
works. Our strategic approach involves domestic and 
international efforts to ensure that there is proper oversight 
of charitable activities, as well as transparency in the 
administration and the functioning of the charities. It also 
involves greater coordination with the private sector to 
develop partnerships that include mechanisms for self-policing 
by the charitable and nongovernmental organization sectors.
    Here at home, we are working to stem the flow of funds to 
terrorists through all channels. As I mentioned, we have issued 
blocking orders against charities and branches of charities 
providing support to terrorists. As an example, and you 
yourself, Mr. Chairman, mentioned Holy Land Foundation, we 
blocked the assets of that foundation on December 4 of last 
year. Holy Land describes itself as the largest Islamic charity 
in the United States. It operates as a U.S. fundraising arm of 
the Palestinian terrorist organization Hamas. We have also 
designated as terrorist supporters the Makhtab al Khimamat/al 
Kifah, which is a clearinghouse for Islamic charities financed 
directly by Osama bin Laden, and was a party to the 1993 World 
Trade Center attack. We have also designated the al Rashid 
Trust, the Wafa Humanitarian Organization, and the Rabita 
trust. They are all Pakistan-based al Qaeda financier 
organizations, as well as the Ummah Tameer E-Nau, a Pakistani 
NGO which provided nuclear, biological, and chemical weapons 
expertise to al Qaeda.
    In addition, we have blocked the assets of the Global 
Relief Foundation and the Benevolence International Foundation, 
under the provisions of the USA PATRIOT Act to assist the 
ongoing investigation of alleged links to terrorism. And we 
would not have had the power to do that, but for the action of 
the Congress in the USA PATRIOT Act.
    Another aspect of our domestic strategy is to work within 
the U.S. regulatory system to ensure that charities are 
transparent to the maximum extent practical. In the United 
States, the transparency of the charitable sector is a concern 
of both Federal and State officials, as well as, and this I 
would like to emphasize, of private organizations representing 
donors and charitable organizations. As this Committee well 
knows, the IRS is the primary Federal agency with oversight 
responsibility for charities. The IRS's responsibilities have 
expanded as the tax law has changed to keep up with the growth 
of the nonprofit sector, which now consists of more than 1.5 
million tax-exempt organizations, including nearly 800,000 
charities and 350,000 religiously affiliated organizations 
controlling $2 trillion in assets.
    While the IRS's primary functions in this sphere are to 
recognize and regulate tax-exempt status, and to implement 
those provisions of the tax code that derive from that status, 
the IRS also performs a crucial role in the development and 
dissemination of information about those charities that fall 
under its jurisdiction. Most 501(c)(3) organizations, as they 
are referred to, except for the churches and certain small 
organizations, are required to file annual information returns 
showing the income, expenses, assets, and liabilities of the 
organization, as well as information about its programs. And 
501(c)(3) organizations must make their returns available to 
anyone who asks--the only thing they do not have to make 
available are the names of their contributors--by publishing 
them in readily accessible electronic and hard-copy forms. The 
availability of information about charities' operations helps 
stimulate oversight by donors, as well as by the media, 
academia, and private organizations.
    Also, State Attorneys General have statutory jurisdiction 
over the charitable assets of those organizations and over 
fundraising activities of charities. Oversight responsibilities 
and practices vary from State to State, but most States 
exercise regulatory oversight over all of the organizations 
that raise money in their State, excluding churches, 
synagogues, and mosques, regardless of where the charity is 
domiciled.
    The United States also has private, nonprofit organizations 
that work to safeguard our tradition of charitable giving. One 
such organization is the Council on Foundations, which focuses 
on issues affecting private foundations. The Evangelical 
Council for Financial Accountability serves a major segment of 
the religious community as an accreditation organization that 
either grants or withholds membership based on an examination 
of the financial practices and accomplishments of charitable 
organizations that apply. It provides public disclosure of its 
more than 900 members' financial practices and accomplishments, 
including on its website, www.ecfa.org. The ECFA is also the 
United States member of the International Committee for 
Fundraising Organizations, ICFO, an umbrella group that links 
the accreditation organization of 10 countries. We are looking 
at ways to encourage the same kind of accreditation for Islamic 
charities.
    Now, turning to our international efforts, we must have 
international cooperation and support in this effort. As I have 
stated many times before, we cannot bomb foreign bank accounts 
and, equally, we need the cooperation of foreign governments in 
the charities area. Indeed, each of the blocking actions that 
we have taken to combat the abuse of charities, with the 
exception of the blocking in aid of investigations, as I 
mentioned before, each of these blocking actions has been 
backed by our allies.
    Moreover, we are working with other countries to strengthen 
their own internal charitable regulation regimes so that they 
can feel confident that their charitable communities are not 
being abused. We have pursued these discussions both 
bilaterally and multilaterally in the Arab world, Southeast 
Asia, and Europe, as well as in the G7 and G8 processes, and 
especially through an organization known as the Financial 
Action Task Force, or FATF, as it is popularly referred to. 
Secretary O'Neill has raised this issue directly with his 
counterparts on his visits to the Persian Gulf and Europe. 
Other countries, especially those whose cultures incorporate, 
encourage, and require charitable giving, are as concerned as 
we are that the good deeds of well-intentioned donors should 
not be hijacked by terrorists.
    They are making progress, as a review of the foreign press 
indicates. To cite just two examples, and I have more in my 
written testimony, on March 21, the Saudi press reported that 
the Saudi government had issued a regulatory decision requiring 
charitable societies to submit to the Saudi Foreign Ministry 
the details of projects they intend to finance abroad. That is 
to say, outside of Saudi Arabia. And in June, the Egyptian 
press reported that a draft law expanding Government oversight 
of nongovernmental and charitable organizations had been 
submitted to parliament.
    Mr. Chairman, your invitation letter inquires whether we 
need additional authorities to prevent the abuse of charities. 
Now, as you know, in December of last year, Congress passed the 
Victims of Terrorism Tax Relief Act of 2001, which expanded the 
availability of tax returns and return information under 
Section 6103 for purposes of investigating terrorist incidents, 
threats, or activities, and for analyzing intelligence 
concerning such incidents, threats, or activities. The ability 
to access and consolidate all relevant financial information in 
order to uncover terrorist networks and support cells is 
crucial to our overall efforts. In this context, this ability 
is important to our efforts to ensure that charities are not 
being abused by terrorist groups and supporters.
    Though we are exploring ways to make our efforts more 
efficient and effective, we do not see at this time a 
particularized need for new legislation. But we look forward to 
working with you when we identify such need or discussing this 
matter with you at any time in the future.
    Mr. Chairman, that concludes my formal testimony. I would 
be pleased to answer questions and to hear your comments.
    Senator Bayh. Thank you, Mr. Secretary.
    Mr. Secretary, I apologize on behalf of the Subcommittee. 
We have one of those scheduling problems that we occasionally 
run up against. They have called a vote on the Defense 
Appropriations Bill, and I have 4 minutes to get over there to 
vote.
    If it would not be an undue imposition, if you would allow 
me to do that, I will return immediately and we will have a 
round of questioning.
    Mr. Dam. Absolutely, Mr. Chairman.
    Senator Bayh. I appreciate your forbearance. I will be back 
as quickly as my legs will allow. Thank you.
    We are in temporary recess.
    [Recess.]
    Senator Bayh. We are back in session.
    I apologize, it turned out that we had not only the Defense 
Appropriations bill, but also the judicial nomination. As a 
matter of fact, we have another vote on another judicial 
nomination.
    Mr. Secretary, I have five or six questions for you. I hope 
we can fit that in before the next vote is out. I apologize to 
the next panel, but this is the last vote of the day. So, I can 
run back, vote, and then come back and we will have the rest of 
the hearing.
    Mr. Secretary, I think you mentioned in your oral testimony 
that al Qaeda had suffered, I think was the word that you had 
used, financially. And I know that some of this perhaps 
involves classified information, not appropriate for a 
discussion here. But can you give us any idea of how difficult 
it is for them now? Is the suffering significant? You mentioned 
that they still have the ability to finance and carry out 
operations. Have we made it substantially harder for them to 
operate?
    Mr. Dam. I believe so. Certainly, nobody, no terrorist in 
his right mind is going to put or leave money in a major 
international bank today, for example, so they have to use 
other means.
    We know a lot of money is carried by hand. When that 
occurs, there is the possibility that the person will be 
arrested. I think it was in the newspapers that a man flew from 
Indonesia to Detroit and he had $12 million in fake cashier's 
checks. Now that wouldn't have been necessary, probably, even 
though that was a fraud. But also, that was an example of 
people being caught simply because they have to carry things 
physically.
    We also know that during the period in Afghanistan that 
there were urgent efforts by the al Qaeda fighting in 
Afghanistan to get more money. It was not coming just naturally 
any more. So those are some kinds of examples.
    Senator Bayh. I have heard in some other quarters that one 
of the motivations for al Qaeda trying to engage in another 
operation sooner rather than later is that some of their 
financial backers need some reassurance that they are still in 
operation, still capable of carrying out these acts. Is there 
some evidence that donors are getting a little cold-footed, for 
lack of a better term, some indication that donors are drawing 
back a bit, or being a little more tentative?
    Mr. Dam. Yes, Senator, we do have indications that it is 
harder for some of these charities to raise money.
    Now that is good, but it is also bad. This is one of the 
problems that I wanted to emphasize. We are not opposed to 
charitable activities. Quite the contrary. Charity is one of 
the principal tenets of Islam. So it is important for us to get 
this sorted out for the very benefits that the Islamic 
charities that have not been corrupted have promised and have 
been carried out.
    Senator Bayh. I would like to ask you two questions about 
the level of Saudi cooperation.
    First, in some other quarters, I have heard their 
cooperation described as spotty and uneven. There have even 
been some published reports indicating some in the 
Administration's concern about the level of Saudi cooperation, 
when it comes to the financial aspect of the war on terror. Can 
you share with us your opinion about the level of Saudi 
cooperation? That is my first question.
    And second, you mentioned some steps that they have 
outlined that they are going to take to try and have better 
oversight of the functioning of charities in Saudi Arabia. What 
is your level of confidence that those initiatives will not 
only be announced, but also actually implemented?
    Mr. Dam. That is a sensitive question and my answer would 
be sensitive.
    All I can say is that we are pleased with Saudi 
cooperation. We have had many conversations at many different 
levels with them. We have had visits by leading members of the 
Administration in which these questions have been discussed. Of 
course, we have to understand that the Saudi Arabian government 
has its own sensitivities with regard to activities carried on 
by its citizens. And so, I would say that we are pleased with 
the cooperation that we have received.
    Senator Bayh. Is it your impression that they understand 
the gravity of this issue?
    In other words, even if they are cooperating with us on a 
governmental level, there are individuals in Saudi who, for 
lack of a better term, are trying to have it both ways--working 
with us, but covering their bets by assisting some on the other 
side at the same time surreptitiously. Do they understand that 
it is really not possible, given what has happened, to have it 
both ways and that we take seriously not only the cooperation 
of their government, but also their attempting to do something 
about their citizens who would engage in this kind of activity?
    Mr. Dam. I am confident that they know that we are quite 
serious about this.
    At the same time, as I pointed out in my statement, we 
depend on cooperation in order to stamp out the financing of 
terror. And so, we have to cooperate with many different types 
of governments around the world, many different kinds of 
societies.
    Some prefer public means of action. The United States 
always has a bias toward passing laws, having regulations, 
taking public actions, and announcing them. Other societies 
operate in completely different ways. So, we have to be 
sensitive to those cultural and political differences as well.
    Senator Bayh. Publicly or privately, as long as the 
cooperation is effective, that it seems to me is what matters. 
And I hope that they understand our seriousness of purpose when 
it comes to this and the exact means that we can work out.
    I am pleased to see that they have made this announcement 
and that they are taking these steps. I just hope that we 
follow up with them to try and ensure that it is carried out.
    With regard to other countries other than Saudi Arabia, the 
UAE, for example, or others, are you satisfied with the level 
of cooperation that we are getting from other countries as 
well?
    Mr. Dam. Well, yes. I think we, in general, have been 
receiving good cooperation.
    Of course, in the case of the state sponsors of terrorism, 
that is another matter entirely that I am not addressing. But 
with regard to the normal charities, there has been a great 
deal of interest.
    For example, there was a conference sponsored by Abu Dabi 
on Hawalas in May. We have had other kinds of international 
meetings, both bilateral and multilateral, involving countries 
in what is generally referred to as the Islamic world.
    Here, again, we come at this in a situation in which 
countries have not been accustomed to worrying about problems 
like this, or regulating charities.
    And I might say that I have a little personal experience in 
the United States. We have some issues in the United States, 
too.
    Senator Bayh. We do.
    Mr. Dam. I was thrust into a 6-month job at the United Way 
of America in 1992 because they had a big scandal because the 
board was not really paying attention to what was going on.
    That was personally impressed on me then.
    I think that, in general, the whole question of charitable 
governance is one that needs attention. That is why I hold out 
hope that we can work through national and international 
organizations involved in the promotion of charity. If you are 
really interested in promoting charity, you want to make sure 
that donors can be confident that their wishes are being 
carried out.
    Senator Bayh. Let me follow up on that for a moment.
    I know that we are in the process of working with other 
governments to encourage best practices in terms of the 
governance of charities and the accountability for how the 
funds that are disbursed are actually used. Does it put us in a 
bit of an awkward position when we are urging practices on 
others that we may not be implementing here at home ourselves?
    Mr. Dam. Well, I do not think that we can urge practices 
that we are not implementing. And when you consider that we 
have 1.5 million charitable organizations in the United States 
and we have hundreds of thousands of religious organizations in 
the United States, I think we need to keep that in mind and 
that is what are we willing to do ourselves?
    But we are pushing forward. There are a lot of best 
practices that do not raise those kinds of problems. We are 
preparing a paper for the conference of the Financial Action 
Task Force, which will meet in October. We are taking a major 
lead in drafting the statement on best practices, which we hope 
will be adopted by that organization. And if that comes about, 
I think then there will be a basis for pressing other countries 
to follow these best practices.
    That name-and-shame approach, for example, was used 
successfully in money laundering, and it would be along the 
same lines.
    Senator Bayh. If I could ask you about the Europeans for a 
moment. I would like to get your reaction to something that was 
in The Wall Street Journal. This has been several months ago, 
talking about how European officials may not be as cooperative 
as they had been in the first months of our effort to crack 
down on the money laundering and the terrorist financing. It is 
a delicate balance between trying to provide them with the 
evidence necessary to assist us, on the one hand, without 
compromising intelligence sources on the other.
    There is one individual quoted as saying with regard to us, 
he says, ``But they provide little that can be used in court. 
We are still waiting for real information.'' and another 
official says, ``We never really receive concrete 
information.''
    Is that what is going on there? It is difficult for us to 
provide them with information that reveals methods and sources 
that would be compromising the source of the intelligence, on 
the one hand. On the other hand, are they doing that because 
they are not entirely enthusiastic in terms of cooperating, 
using that basically as an excuse that we are not being more 
specific on the nature of the information that we are providing 
them? Or is that a legitimate problem that we have?
    Mr. Dam. Well, let me suggest several different points 
here.
    First of all, source and methods, absolutely. That is a 
problem. Under the USA PATRIOT Act, Congress gave the Executive 
Branch, the ability to present intelligence information on an 
ex parte basis to the court in so-called ``in camera'' 
proceedings. That was essential.
    Senator Bayh. I am referring to the Europeans.
    Mr. Dam. They do not have these provisions. So, because of 
that, we are not able to provide them that information.
    Senator Bayh. I guess my question is, are they insisting on 
a level of detail that we simply cannot provide them because of 
our intelligence concerns before they will do everything that 
is neces-
sary to help us get to the core of this problem?
    Mr. Dam. The short answer is yes.
    Senator Bayh. What do we do about it? It is a dilemma of 
sorts.
    Mr. Dam. It certainly is. We are doing our very best to 
find declassified information that we can provide them. But 
beyond that, I think it is fair to say that there are two more 
problems, and that is only one kind of issue. Another problem 
is, in many countries, it is approached very much as a law 
enforcement matter, as opposed to a prevention matter.
    What we are trying to do is to disrupt terrorists, and 
disrupt the financing of terrorism. We also, when we are able 
to do so, we prosecute people who violate the law. But that is 
not the fundamental point. I think the other point is the 
procedures of the European Union are such that they need 
unanimity of all the 15 member countries. If we had to, say, 
have unanimity of all 50 States, we would have a little 
problem, just to give you an analogy of how difficult that is.
    Senator Bayh. Unanimity is never a problem in the Senate, 
Mr. Secretary, I want to assure you.
    [Laughter.]
    It is a challenge when you have a lowest-common-denominator 
approach to trying to pursue these matters. Their full 
cooperation, of course, is important.
    Mr. Dam. Well, we have had joint designations. And they 
have designated many of the organizations that we have 
designated.
    There is an underlying philosophical, diplomatic, or 
political issue that sometimes come up. They have a somewhat 
different view of Hamas in particular, and you mentioned Hamas 
in connection with the Holy Land Foundation.
    Senator Bayh. Hezbollah, also.
    Mr. Dam. Hezbollah, also. Correct.
    Senator Bayh. Let me ask you. You mentioned the difference 
in perspectives that occasionally exists between our point of 
view and the Europeans'. It also exists within our own 
agencies. And you are in a coordination point of view. The 
intelligence services tend to be more proactive and analytical. 
The FBI and some of the law 
enforcement agencies tend to be more, naturally, law 
enforcement-oriented. Can you explain to us how we can 
coordinate and avoid unnecessary redundancy between entities 
sucha as GreenQuest, for example, or FinCEN, where you have 
Treasury. You have got, through the Financial Review Group, the 
FBI and Justice who have a part of this. You have the FTAT 
housed in the CIA.
    So you have--just there, just mentioning those three--
Treasury, Justice, CIA. There are others. How do we pull this 
together to ensure that everyone is speaking to each other, 
sharing information, that this is a coordinated effort, that we 
have common databases, things of that nature?
    Mr. Dam. The coordination is working much better than it 
was immediately after September 11, because there were certain 
statutes on the books that prevented full intermingling of 
information from the FBI and the intelligence community, law 
enforcement in general and the intelligence community. The USA 
PATRIOT Act facilitated that.
    Now with regard to the particular organizations, the 
Financial Crimes Enforcement Network, FinCEN, is really a 
service organization. It is like a utility. All the information 
from the banks and other kinds of reports like that are 
funneled in there and people can receive it offline.
    You mentioned Operation GreenQuest, which is a Treasury-
based organization, and the FBI. We have looked at that 
situation very carefully and, Senator, I would like to give you 
a little report on that, if I could, perhaps in writing, about 
the steps that have been taken to make sure that the 
coordination there is very good.
    In fact, coordination between, say, the Customs Bureau and 
the FBI, has been extremely good over the years in places like 
New York, where they work together in a joint task force on 
money laundering, particularly in the narcotics area. I think 
we are having some growing pains in the terrorist finance area, 
which we are getting over.
    Senator Bayh. Well, this is important because not only is 
cracking down on the financing essential to limiting the 
ability of the terrorist organizations to carry out their 
activities, but also I think as we discussed briefly 
beforehand, very often, there are leads that financial 
information can develop that lead us to other individuals that 
can be equally important.
    I think it was the FBI working with the Secret Service that 
very quickly, following September 11, was able to link the 19 
hijackers, using primarily financial information.
    Mr. Dam. That is correct.
    Senator Bayh. So, going forward, if there is ever to be a 
recurrence of a situation where we had these two individuals, 
Mr. al Hamsi, and the other name escapes me momentarily, but 
they were using credit cards, if they had Social Security 
numbers, if they were engaging in bank transactions and we had 
to try and find them, we could do more than simply search a 
hotel room that had been listed as an address 10 or 11 months 
before.
    This can be a very powerful preemption tool as well. But 
only if it is coordinated and everyone is talking to everyone, 
and so if they know where to go to find that kind of 
information on a very timely basis. That is why the 
coordination issue is particularly important.
    You have a big job, trying to mesh different cultures, 
different lines of authority, budgetary and legal. I do not 
envy you that task. But I do think it is critically important.
    Mr. Dam. You alluded to computer systems as well. They have 
to be able to exchange their information.
    As a matter of fact, the Detroit case is a good example. 
The reason the man was stopped who was carrying the $12 million 
worth of fraudulent cashier's checks was because his name 
appeared on a list. It got on that list not from Customs or 
Immigration and Naturalization Service, but from the U.S. 
military.
    Senator Bayh. I think Mr. al Mithar was the other name I 
was searching for.
    So, we need a system where, when the intelligence services 
are able to identify people they have reason to believe may be 
involved in imminent threats to the country's security, we can 
trace them not only physically, but through financial means as 
well and have a global approach to trying to track and 
apprehend dangerous potential terrorists.
    Mr. Secretary, I want to thank you for your appearance. If 
we have other questions, I hope I can submit them to you in 
writing. And thank you for your patience as well. Putting up 
with the uncertain schedule in the U.S. Senate is always a 
challenge. But I thank you for your efforts and your staff, and 
I want to cooperate with you in making sure that we do the very 
best that we can in addressing this important area. Thank you 
for your time today.
    I am going to go cast my final vote, then I will return. I 
want to thank the other panelists for your patience. Since 
there are no other votes, I should be able to just vote quickly 
and return very quickly.
    Thank you, Mr. Secretary.
    Mr. Dam. Thank you, Mr. Chairman.
    Senator Bayh. We will be in temporary recess.
    [Recess.]
    Senator Bayh. The Subcommittee will come to order.
    I very much appreciate your patience. It turned out that we 
had not one vote, but two, which in the workings in the Senate 
meant that things were not quite as simple or as expeditious as 
otherwise might have been the case. We had three votes on the 
same subject today to finally get the matter resolved.
    So thank you. I look forward to hearing from you.
    Doctor, why don't we begin with you.

            STATEMENT OF QUINTAN WIKTOROWICZ, Ph.D.

               ASSISTANT PROFESSOR, DEPARTMENT OF

             INTERNATIONAL STUDIES, RHODES COLLEGE

    Dr. Wiktorowicz. I will try to keep it brief, which, for an 
academic, is saying quite a bit.
    Senator Bayh. You have waited a long time. Please, feel 
free to take whatever time that you think is necessary to tell 
us what is important.
    Dr. Wiktorowicz. Okay. I would like to make three major 
points about Islamic charities in general, not just in regard 
to the war on terrorism, but in terms of the relationship with 
the broader Muslim community.
    The first one is just a simple statement and something that 
I think that needs to be said, especially at this hearing, 
which is that the vast majority of Islamic charities are not 
radical. The vast majority of these organizations, especially 
in the Middle East, which I am more familiar with, are created 
at the grassroots level by people who know one another. They 
want to help out people in need. They are looking to promote 
socioeconomic development, which is very important, especially 
in neighborhoods and communities where state infrastructure is 
lacking, where the state is unable financially or logistically 
to provide basic social services--medicine, education, et 
cetera. So many of these Islamic charities fulfill real need in 
their communities.
    Now having said that there are Islamic charities that 
serves as al Qaeda fronts. But when you read off a very long 
list of different Islamic charities, I think we sometimes give 
the impression that there is this big conspiracy out there in 
the Islamic charitable world that might not really exist. There 
are literally tens of thousands of Islamic charities globally, 
and only a very small portion of these are used to support what 
we would consider to be terrorist activities.
    Those that do support al Qaeda obviously do support them 
rather indirectly. They either operate as fronts, so that the 
donors do not know where the money is going, or they advertise 
themselves as giving to some more general Islamic cause--let's 
help the Muslims in Kashmir, in Chechnya, and Dagistan, and 
places like this. And it is only later, during the end-use 
period, that this money is siphoned off for radical activities. 
And of course, that is the big question--how do we actually 
discern whether or not the money at the end-use level is going 
to be used for Islamic Jihad activities?
    The second major point is that Islamic charities are not 
homogenous. There is a tendency to think that because the term 
``Islam'' is used, that somehow, all of these are equally 
religious, when in fact they are not. Many people in the Middle 
East, and even more broadly, in the Muslim world, believe that 
if they use the term Islam, that it provides a sense of 
legitimacy, that it is culturally authentic, as opposed to 
western NGO's that come through the town and say, ``We are 
going to provide you with all these solutions. We are going to 
help you. We are going to give you democracy, economic 
development.''
    Islamic charities are often formed as a culturally 
authentic alternative to the socioeconomic development models 
of the rest of the world. Some of these I have seen are very 
minimally religious. I have been to Islamic charities where 
people spent more time literally playing ping-pong than 
actually engaged in charitable activities or in any kind of 
religious activities.
    Many of these are more for social purposes in the community 
under an Islamic or religious umbrella. There are, of course, 
others that are very religious, where people take it very 
seriously, where they study with one another and they are 
engaged in Islamic study circles, et cetera. And then there are 
still others that are affiliated with various Islamic 
movements. Examples include the Muslim Brotherhood of Jordan, 
which really operates a very large network of charitable 
societies, as well as Islah in Yemen.
    I would say that in terms of trying to target our limited 
resources at the kinds of charities like Wahabe Salafe 
charities that are more likely, though certainly this is not 
anywhere close to universal, than other Islamic charities, to 
support the overall objectives of bin Laden.
    Now, I qualify that very heavily by saying the vast 
majority of Salafe charities are not used to support bin Laden. 
But in terms of limited resources, there is much more 
ideological affinity between these types of charities and 
others.
    I would also argue that most governments in the Middle East 
know the difference. There is a large surveillance society in 
most Middle Eastern countries. They tend to know who is and who 
is not aligned with people like bin Laden, people like the al 
Qaeda network. And that we should enlist their support.
    I think part of the problem is they are not always 
forthcoming with that kind of information. Some countries, it 
is easier for them to tell than others. But, for the most part, 
the government has maintained very strict regulations over 
these societies and oftentimes, these organizations get away 
with what they are doing while their governments just simply 
close their eyes to what is happening.
    The third point I would like to make is to really stymie 
the argument that Islamic charities can help create 
infrastructure for terrorism, that they can create a network 
that terrorists can use, for example, to recruit the poor, from 
urban cities, and enlist them in the Jihadi cause.
    For several reasons, I think that this is unlikely, 
although still possible.
    First, there are very strict legal requirements and 
governments are not likely to allow charities to be formed to 
be utilized by Jihadi organizations, unless it suits state 
governmental interests in some manner or another. The Saudi 
case is a classic example of this, especially during the war by 
the Islamists and by Mujahadin against the Soviets in 
Afghanistan.
    Second, states oftentimes provide money to Islamic 
charities. So, they are not always separate entities. Not only 
will they provide patronage to particularly moderate or 
apolitical Islamic charities, but also they will help provide 
space where they can hold events or they will cosponsor things 
or help with the publication of certain kinds of materials. 
Radicals have a real difficult time working with governments in 
this respect.
    Third, charities tend to compete with one another over 
scarce resources. There is surprisingly little cooperation 
given the fact that these are supposed to be all under the 
umbrella of some general religious cause. There are exceptions 
to this, but I and other colleagues of mine who have actually 
gone out and done field work with these organizations, have 
always been really surprised at how little cooperation there is 
among these organizations. They are competing with one another 
for beneficiaries, for stands in their communities, as well as 
for donors.
    Fourth, Islamic charities are based in the middle-class 
networks and they tend to serve middle-class interests. This 
derives from the operational needs of these organizations. They 
need to hire doctors. They need to hire teachers. They need 
money. They need donations. They need building materials and 
supplies that only the middle class can provide them with. The 
poor are too poor to do these kinds of things and the rich tend 
to go to private hospitals, and private schools. So, they do 
not really bother with these kinds of things, though, again, 
there are always exceptions to these.
    Radicals have had very little success in terms of 
recruiting through the middle-class networks. There are people 
in the middle class--doctors, lawyers, et cetera--who have 
joined up, but usually, they are not the foot soldiers. They 
are typically the elites of the societies. The poor or less 
educated stratas of society who are more likely than others to 
join up or to at least be empathetic to the call, do not really 
frequent these charities as much as we might think.
    They tend to frequent Islamic charities in their own 
communi-
ties. But these charities are limited in terms of their 
resources and in terms of their outreach programs.
    I think this tells us four things in terms of the 
relationship between Islamic charities and terrorism.
    First, the statement I made earlier, which is the vast 
majority of Islamic charities are not linked to terrorists, and 
it is very important to note that.
    Second, because Islamic charities can vary widely in terms 
of their ideological perspectives, that in terms of limited 
resources, we need to determine whether or not certain 
categories of Islamic charities are more likely than others to 
actually support these kinds of agendas. We will never get 100 
percent. That will never happen. But at least we can start to 
target resources.
    Third, because of state regulations, governments are 
probably aware of which charities are more or less likely to 
support these kinds of causes and that we should enlist their 
support. I mean, we have discussed this a little bit earlier 
and some of the real difficulties in that.
    And fourth, radicals are unlikely to be able to use 
charities in terms of a vast network for mobilizing support for 
al Qaeda. They will always be able to infiltrate one here, one 
there, to use certain ones for money laundering. But in terms 
of real deep institutional infrastructure, I think it is rather 
limited.
    Thank you.
    Senator Bayh. Thank you very much, Doctor.
    Mr. Levitt.

                 STATEMENT OF MATTHEW A. LEVITT

               SENIOR FELLOW IN TERRORISM STUDIES

         THE WASHINGTON INSTITUTE FOR NEAR EAST POLICY

    Mr. Levitt. Thank you, Mr. Chairman.
    It is a pleasure and an honor to be here today. My remarks 
are a summary of my more detailed written testimony and 
therefore, before I begin, I would like to first request that 
my written statement be included in the official record.
    Senator Bayh. It will be included in the record.
    Mr. Levitt. Thank you, sir.
    The synchronized suicide attacks of September 11 
highlighted the critical role financial and logistical support 
networks play in the operations of international terrorist 
organizations.
    The al Qaeda suicide hijackings underscored the post-blast, 
investigative utility of tracking the money trail, but they 
also drove home the critical need to preemptively deny 
terrorists the funds they need to conduct their attacks.
    Often, as was the case in the investigation of the 
September 11 attacks, financial transactions provide the first 
and most concrete leads for investigators seeking to flush out 
the full scope of a terrorist attack, including the identities 
of the perpetrators, their logistical and financial support 
networks, links to other terrorists, groups, and accomplices. 
Since September, the U.S. Government has spearheaded a 
groundbreaking and comprehensive disruption operation to stem 
the flow of funds to and among terrorist groups. Combined with 
the unprecedented law enforcement and intelligence effort to 
apprehend terrorist operatives worldwide, which constricts the 
space in which terrorists can operate, cracking down on 
terrorist financing denies terrorists the means to travel, 
communicate, procure equipment, and conduct attacks.
    The phenomenon of charitable and humanitarian organizations 
financing terrorism occurs within the larger context of a 
network of terrorist financing. Of course, cracking down on 
terrorist financing demands an all-encompassing approach to 
have any chance of successfully disrupting terrorist activity, 
targeting the full array of groups, individuals, businesses, 
banks, and other financial institutions, criminal enterprises, 
and charitable and humanitarian organizations to finance 
terrorism.
    For the sake of brevity, I will go straight to the issue at 
hand and refer you to my written remarks for examples and 
analysis of other means of financing terrorism, such as 
criminal enterprises, official and unofficial banking systems, 
wealthy individuals, and otherwise legitimate commercial 
enterprises.
    Each of these trends is significant in its own right, and 
all the more so when applied in tandem. Humanitarian 
organizations, however, have played a particularly disturbing 
role in terrorist 
financing, and present an especially sensitive challenge as 
authorities are faced with discerning between legitimate 
charity organizations, those unknowingly hijacked by terrorists 
who divert funds to finance terrorism, and others proactively 
engaged in supporting terrorist groups. A key challenge that 
arises in this regard, which we have discussed already today, 
is the Government's effort to balance the need to share 
information linking such organizations to terrorism against the 
cost of exposing intelligence sources and methods.
    Long before September 11, officials were aware that 
financial networks of charitable and humanitarian organizations 
were financing terrorism. For example, investigators looking 
into the 1993 World Trade Center attack traced funding for the 
operation back to a company that imported Holy Water from Mecca 
to Pakistan.
    Only now, however, is the trend receiving the full 
attention it deserves. The State Department's Coordinator for 
Counterterrorism recently noted that, ``Any money can be 
diverted if you do not pay attention to it. And I believe that 
terrorist organizations, just like criminal enterprises, can 
bore into any legitimate enterprise to try to divert money for 
illegitimate purposes.'' While such manipulation is a 
tremendous concern, an even more disturbing trend has become 
evident in the efforts of some charitable and humanitarian 
organizations to knowingly and proactively raise funds for 
terrorist groups. Often, leaders of such organizations raise 
funds from both individuals seeking to fund terrorist groups, 
as well as innocent contributors unwitting of the groups' links 
to terrorists.
    On December 14, 2001, Federal officials raided, for 
example, the offices of the Global Relief Foundation in Chicago 
and froze its assets. The group's offices in Kosovo were raided 
by NATO forces a few days later after NATO was provided with 
``credible intelligence information'' that the group was 
``allegedly involved in planning attacks against targets in the 
United States and Europe.'' Ongoing international terrorism 
investigations have raised further concerns. For example, 
according to the information provided by the Spanish Interior 
Ministry, a senior bin Laden financier arrested in Spain, 
Mohammed Galeb Kalaje Zouaydi, transferred funds to several 
individuals linked to the bin Laden network, including over 
$205,000 to the head of the Global Relief office in Belgium.
    While September 11 highlighted the al Qaeda terrorist 
network, bin Laden and his terrorist affiliates are by no means 
the only groups using humanitarian organizations to finance 
their terrorist activities.
    On January 4, 2001, FBI agents and New York City police 
raided the Hatikva Center, a community center in Brooklyn run 
by followers of Rabbis Meir Kahane and Benjamin Kahane, father 
and son and founders of the Jewish terrorist groups Kach and 
Kahane Chai, respectively. Officials seized a trailer full of 
material searching for evidence the organization was providing 
material support to either Kach or Kahane Chai, both of which 
are designated Foreign Terrorist Organizations by the U.S. 
Department of State.
    More recently, on December 4, 2001, the Bush Administration 
exposed the Holy Land Foundation as a front for Hamas. In a 
detailed 49-page FBI memorandum, the U.S. Government 
established that these funds were used by Hamas to recruit 
suicide bombers and to support their families. Five days before 
the September 11 attacks, the FBI raided the offices and froze 
the assets of Infocom, an Internet company that shares 
personnel, office space, and board members with the Holy Land 
Foundation. The Holy Land Foundation relied heavily on local 
``zakat'' or charity committees in the West Bank and Gaza to 
funnel funds to Hamas. The FBI memorandum establishes that 
known Hamas activists ran the zakat committees in question, in 
whole or sometimes in part. For example, among the senior Hamas 
members affiliated with the Tulkarm zakat committee, which 
received over $70,000 from Holy Land between 1997 and 1999, are 
Mohmammed Hamed Qa'adan, head of the Tulkarm zakat committee, 
and Ibrahim Muhammad Salim Salim Nir al Shams, a member of both 
the Talkarm zakat committee and the Supreme Hamas leadership in 
Nur al Shams.
    A key Saudi charity linked to terrorist financing is the al 
Wafa Humanitarian Organization. U.S. officials have described 
al Wafa as a key component of bin Laden's organization. One 
official was quoted as saying that al Wafa and other groups 
listed, ``do a small amount of legitimate humanitarian work and 
raise a lot of money for equipment and weapons.'' For example, 
Abdul Aziz, a Saudi citizen, senior al Qaeda finance official, 
and Camp X-Ray prisoner, allegedly financed al Qaeda activities 
through al Wafa.
    Several charitable and humanitarian organizations have not 
only financed groups, but actively facilitated terrorist 
operations. At the New York trial of four men convicted of 
involvement in the East Africa Embassy attacks, a former al 
Qaeda member named several charities as fronts for the 
terrorist group, including Mercy International Relief 
Organization. Documents presented at the trial demonstrated 
that Mercy smuggled weapons from Somalia into Kenya, and 
Abdullah Mohammad, one of the Nairobi bombers, delivered eight 
boxes of convicted al Qaeda operative Wadi el Hage's 
belongings--including false documents and passports--to Mercy's 
Kenya office.
    Along with Mercy, the Kenyan government also banned the 
International Islamic Relief Organization after the embassy 
bombings. Bin Laden's brother-in-law, Muhammad Jamal Khalifa, 
has been involved with IIRO in the Philippines. In November and 
December 2001, Philippine police arrested four Arabs associated 
with the Moro Islamic Liberation Front, describing them as an 
al Qaeda ``sleeper cell.'' According to the Philippine police, 
Mohammad Sabri, one of the four men arrested, worked closely 
with Khalifa in running the IIRO office. Indian police, in 
January 1999, foiled a plot to bomb the U.S. consulates in 
Calcutta and Madras. The mastermind behind this plot was Sayed 
Abu Nasir, an IIRO employee who received terrorist training in 
Afghanistan.
    Last October, NATO forces raided the Saudi High Commission 
for Aid to Bosnia, founded by Prince Selman bin Abdul Aziz and 
supported by King Fahd. This charity has also been linked to 
actual terrorist activity and my written statement goes into 
that in great detail.
    Of particular interest to us is the Benevolence 
International Foundation, which was raided by U.S. authorities 
in December in Chicago. The Foundation's videos and literature 
glorify martyrdom and, according to the charity's newsletter, 
seven of its officers were killed in battle last year in 
Chechnya and Bosnia. Four months later, the U.S. Embassy in 
Bosnia was shut down for 4 days after Bosnian officials 
informed the Embassy of a possible threat. Al Qaeda terrorists 
reportedly met in Sofia, Bulgaria, where they decided, 
according to a Bosnian official, that, ``in Sarajevo something 
will happen to Americans similar to New York last September.''
    More recently, in April, the foundation's executive 
director was arrested in the United States on perjury charges 
for making false statements in a lawsuit against the 
Government. It turns out that this individual had close 
affiliation to bin Laden and had been providing material 
support to al Qaeda.
    So how do we go about disrupting the network? The 
phenomenon of terrorists funding their activities through 
charitable and humanitarian organizations, either as full-
fledged front organizations or as unwitting accomplices, is 
clearly a critical problem. But it can be equally difficult to 
disrupt. Discriminating between legitimate and nefarious 
charities is extremely difficult, partly because front 
organizations do not hang a shingle on the door identifying 
themselves as terrorists and partly because they attempt to 
actively hide their financing of terrorism among some 
legitimate causes they fund as well.
    There are, in fact, a number of things that can be done. As 
we have discussed earlier today, international cooperation is 
critical. Targeting a wide array of groups and organizations 
must be conducted as part of a well-coordinated attempt. This 
is a particularly sensitive issue, especially in the Middle 
East. In November 2001, for example, a senior U.S. delegation 
traveled to Saudi Arabia to solicit greater cooperation in the 
arena of tackling terrorist financing. Secretary of the 
Treasury O'Neill visited again 3 months later, agreeing to 
quietly broach concerns regarding specific humanitarian 
organizations. Very quickly, the United States and Saudi 
governments jointly froze the accounts of the al Haramain 
Humanitarian Organization, which was wonderful. Unfortunately, 
subsequent reports already indicate that U.S. authorities are 
concerned that Saudi authorities are glossing over the 
terrorist connections of other humanitarian organizations, 
including the al Wafa Humanitarian Organization, the 
International Islamic Relief Organization, and its parent, the 
Muslim World League.
    It is critical to gain the Saudi support. The Saudis have, 
at a minimum, a clear pattern of looking the other way when 
funds are known to support extremist purposes. One Saudi 
official was quoted in the press as saying that a Saudi 
organization created to crack down on charities funding 
terrorism does little because ``it doesn't want to discover top 
people giving to charities.''
    It is critical that we work with our allies in Europe, and 
we have already discussed in some detail the tensions we have 
in getting their cooperation and enabling ourselves to provide 
the kind of information they need. What is critical here is 
that some of the groups that have been listed or not listed on 
the European Union's terrorist lists have been the subject of a 
distinction to which we do not subscribe, and that is a 
distinction between political and military wings, which is 
critical because if you give credence to the political wing of 
an organization, you are very likely giving credence to the 
humanitarian organizations that are supporting that terrorist 
group.
    Even within the American bureaucracy, we have tensions. 
There are competing bureaucracies within the Departments of 
Justice, the Treasury, and other agencies, as you have 
mentioned.
    To conclude, terrorism is always going to exist. That is 
why there is no exit strategy for combatting terrorism. 
Counterterrorism is, in fact, a form of conflict management, 
not conflict resolution. And techniques must be as 
comprehensive, ongoing, and cooperative as possible. Cracking 
down on terrorist financing will only succeed in dismantling 
the groups' logistical and financial support networks and by 
extension preventing terrorist attacks, if the governments and 
agencies involved in the effort act in concert and, at a mini-
mum, mirror the resolve, commitment, and dedication displayed 
by the terrorists.
    Thank you.
    Senator Bayh. Thank you, Mr. Levitt, both for your oral 
testimony and for your written testimony. It was very extensive 
and interesting.
    Dr. Gubser.

                STATEMENT OF PETER GUBSER, Ph.D.

       PRESIDENT, AMERICAN NEAR EAST REFUGEE AID (ANERA)

                    ON BEHALF OF INTERACTION

    Dr. Gubser. Thank you very much, Senator.
    It is a pleasure to appear before the Senate Subcommittee 
on International Trade and Finance. As mentioned, my name is 
Peter Gubser. I am the President of American Near East Refugee 
Aid, ANERA, a position that I have held since 1977.
    ANERA's mission is to reduce poverty and relieve suffering, 
thereby improving the lives of people in the Middle East. In 
cooperation with local institutions--community nongovernmental 
organizations, NGO's, charities, municipalities, cooperatives, 
and branches of central governments--we formulate and implement 
social and economic development projects, and provide relief in 
response to emergency needs.
    A nonprofit, charitable organization, ANERA is concerned 
with the long-term development needs of Palestinians, Israelis, 
Lebanese, and Jordanians. ANERA assists grassroots 
organizations to provide their communities with crucial health 
care and community services in addition to increasing 
employment and educational opportunities for deprived groups of 
people. Through an in-kind program, ANERA assists medical 
clinics and hospitals in meeting their annual requirements of 
pharmaceuticals and medical supplies, and sends emergency 
shipments in times of conflict. ANERA is also a pioneer in 
developing and supporting Arab-Israeli cooperative projects 
such as Friends of the Earth-Middle East, which is the 
association of Israeli, Jordanian, and Palestinian 
environmental NGO's.
    Since 1968, ANERA has helped provide the basic necessities 
of life to people adversely affected by war and conflict. 
Through these efforts and increasing public understanding of 
the region, ANERA promotes peace.
    During the past ANERA fiscal year, we provided over $12 
million to projects in Israel, Jordan, Lebanon, and the 
Palestinian Territories. ANERA receives funding from 25,000 
individuals across the United States, corporations, 
foundations, the U.S. Agency for International Development, and 
multilateral U.N. organizations.
    As I first mentioned, ANERA implements its projects with 
and through local institutions. Overseas, we have a staff of 30 
people based in Jerusalem and Gaza, two of whom are American, 
the balance being local citizens. I wish to emphasize the fact 
that our staff has broad and deep knowledge of the area. The 
staffers are not only technically very sound, they also well 
understand the society in which we work.
    As I understand it, the Subcommittee wishes to know how 
ANERA operates in an environment where terrorist organizations 
operate, especially where some operate as charitable societies.
    Our overriding policy is that we only supply assistance to 
legitimate and capable institutions. This also means that we do 
not 
assist charities that are part of terrorist organizations. Just 
as others, ANERA has received the State Department's list of 
terrorist organizations. Organizations on this list or their 
charities are not eligible for ANERA assistance.
    The role of ANERA's able staff is to evaluate the 
capabilities and capacities of our local partners. The staff 
members assess accountability, governance, technical capacity, 
ability to reach intended beneficiaries and the like. During 
this process, we establish that the institution is legitimate, 
capable, and eligible to receive ANERA's assistance. Naturally, 
all relevant data about the local institution is collected in 
our files. In light of this assessment, the staff develops the 
implements the projects under senior leadership guidance.
    As a project matures and is completed, extensive fiscal and 
programmatic reporting is generated for ANERA's purposes as 
well as for the purposes and requirements of ANERA's donors. 
These reports consist of detailed financial reports on how 
ANERA's funds were used, as well as the contribution by local 
institutions. Thus, we ensure accountability on the part of the 
local institution and ANERA. In like manner, we measure the 
impact of the project: Was it completed? Does it produce the 
stream of benefits for the beneficiaries that was desired? Do 
the beneficiaries have access to these benefits? In this 
manner, we continually evaluate and assess the projects from a 
fiscal and impact standpoint.
    In sum, ANERA's process of project development, assessment, 
and completion seeks to assure that the funds are used 
properly. As a complement to this function, the process also 
assures that the funds are not used improperly, for terrorist 
purposes that are the subject of this hearing, for corrupt 
purposes, or just for purposes other than those for which they 
were intended.
    Looking at these issues from another level, ANERA is a 
founding member of InterAction, the association of American 
NGO's--or otherwise known as the PVO's--private voluntary 
organizations--that work overseas. InterAction has published 
standards to which ANERA subscribes. As a board member of 
InterAction, I would like to petition the Subcommittee to allow 
me to submit a prepared InterAction statement. And also with 
the permission of the Subcommittee, I will read a couple of the 
most salient portions of InterAction's statement. Naturally, I 
will be pleased to answer any questions the Subcommittee 
Members may have.
    Senator Bayh. We would be happy to enter that document into 
the record.
    Dr. Gubser. Thank you.
    Senator Bayh. If you would like to read some salient 
portions. I would only ask that they be reasonably concise.
    Dr. Gubser. Okay. They will be very brief.
    InterAction is the largest alliance of U.S.-based 
international development and humanitarian nongovernmental 
organizations with 160 members. It was formed in 1984, and is 
based in Washington, DC.
    Reflecting both the generosity of the American people and 
their strong support for international development and 
humanitarian assistance, InterAction's members receive more 
than $3 billion in annual contributions from private donors. 
Neither InterAction nor its members bear lightly the 
responsibility of the trust the American people place in 
InterAction and its members. As such, members ascribe to 
InterAction's Private Voluntary Organization Standards that 
help assure accountability in the critical areas of financial 
management, fundraising, governance, and program performance. 
The standards are found on InterAction's website. These 
standards define the financial, operational, and ethical code 
of conduct for InterAction and its members.
    Given their fiduciary responsibility for the funds they 
receive, InterAction members have long-established procedures 
to prevent theft, embezzlement, and other diversions of funds 
and supplies. Increasing care is taken in vetting new 
employees, in their training, in their supervision, and in 
creating an environment that they will consider themselves 
genuine team members.
    In the post-Cold War era, insecurity has become a growing 
menace to the operations of NGO's, especially those disaster 
response agencies trying to assist refugees, internally 
displaced persons and others exposed to death and injury in 
civil conflicts. Both governments and nonstate actors have 
ignored their obligations to permit humanitarian organizations 
to have access to the victims of war. Indeed, NGO's, U.N. 
agencies and the Red Cross Movement have seen their personnel 
killed, injured, raped, taken hostage, and otherwise abused in 
increasing numbers. In this environment, humanitarian 
organizations have been compelled to pay increased attention to 
personal organizational security.
    In that context, we have actually, through InterAction and 
through USAID funding, set up short courses that have been 
conducted all over the world for our personnel, InterAction's 
personnel, including ANERA's.
    Senator Bayh. Dr. Gubser, is this part of the documents 
submitted into the record?
    Dr. Gubser. Yes.
    Senator Bayh. Perhaps it would be best, given the hour, if 
we could do that, and then allow us to review it.
    Dr. Gubser. I have completed my statement.
    Senator Bayh. Okay. Thank you very much. And I appreciate 
your patience.
    Senator Bayh. I am going to ask just a few questions and I 
will try and be reasonably brief. And if I could ask all of us 
to try and follow that, I would be grateful.
    The first two or three questions, Dr. Wiktorowicz and Mr. 
Levitt, I think are for both of you.
    Do we have any rough estimate about the percentage of 
terrorist financing that is derived from charitable 
organizations? Or is it just impossible to even try and put a 
rough figure on it, versus the amount of money that they get 
from running front companies or wealthy individuals directly, 
as opposed to through charities? Do either of you care to 
hazard an estimate?
    Mr. Levitt. No, I do not think it can be done. I also think 
that there is a lot of overlap. A lot of these wealthy 
individuals are engaged together with some of these 
organizations. So there is going to be overlap. They bleed into 
one another.
    Senator Bayh. I can understand the reluctance to try and 
quantify this under the circumstances. Is it your impression 
that it is a not insignificant amount?
    Mr. Levitt. Absolutely. In fact, according to the 
Department of the Treasury's recently released money laundering 
report, which included a 13-page section on international 
terrorist financing, it is the most important.
    Senator Bayh. The most important. So rather than state a 
double-negative, in your opinion, it is a significant part.
    Mr. Levitt. Absolutely.
    Senator Bayh. I said not insignificant. And at least one 
indication that it is the most important.
    Mr. Levitt. Yes.
    Senator Bayh. Doctor, anything that you would like to 
follow up on that?
    Dr. Wiktorowicz. Well, I would say that whatever numbers 
the Treasury Department has, you probably need to raise them a 
little bit because there is still informal charitable giving 
that goes on that oftentimes can be quite substantial.
    I know at least in the Jordanian case, that informal zakat 
or alms-giving in Islam constituted about 50 percent of all 
charitable giving. So it can be sizable. Now how sizable that 
is for the al Qaeda network, I would not be sure of.
    Senator Bayh. What about this difficult dichotomy of 
distinguishing and when we are dealing with organizations that 
perform both legitimate and terrorist activities? We have, as 
Dr. Gubser mentioned, Hamas, Hezbollah perform some civic 
functions. But then they also have their terrorist wings.
    When it comes to dealing with nation states, we tend to 
identify them as either terrorist or not. Those that engage in 
terrorist activities, we treat as such. Even if they perform a 
whole host of other services on behalf of their citizens.
    How is it possible to differentiate between these kinds of 
activities? Isn't that a slippery slope that inevitably leads 
us to treating them as all or nothing?
    Dr. Wiktorowicz. I think it is very difficult. I think it 
also gets down to the definition of terrorism. There is that 
universal adage that one person's terrorist is another's 
freedom fighter. And for most Muslims, especially in the Middle 
East, when they see Hamas, they see a legitimate national 
liberation movement.
    Senator Bayh. Excuse me for interrupting. I am familiar 
with that line of thought, and I think many Americans would say 
that there is room for certain debate, even if they might 
disagree about whether an organization was a movement of 
national resistance or not. But that there are certain means 
that are beyond the pale, irrespective of what your political 
beliefs or national aspirations might be, one of which would be 
committing terrorist acts, particularly against civilians.
    Dr. Wiktorowicz. I wasn't arguing about the distinction.
    Senator Bayh. No, I understand.
    Dr. Wiktorowicz. What I was trying to get at was the view 
of the donors that give to Hamas and give to these kinds of 
charities. It is viewed as part of the same package, taking 
care of the Palestinian people, for example.
    Senator Bayh. So, from a religious point of view, there is 
no problem donating to a charity, even if you know ahead of 
time that a certain percentage of that is going to support 
terrorist activities?
    Dr. Wiktorowicz. I am not going to generalize about all 
Islamic perspectives. There are so many different views in 
terms of the legitimacy of a group like Hamas, the legitimacy 
of suicide bombers, and the legitimacy of giving to particular 
kinds of charities. And there is definitely no universal 
consensus.
    But I think that, in terms of theological lines of thought, 
there are scholars out there, including those in Saudi Arabia, 
who argue that there is no problem with that. And that certain 
tactics in warfare are permissible. For example, Hamas has made 
this argument, and there are others in Saudi Arabia, including 
in the religious body that helps run the country, that civilian 
targeting is permissible under certain kinds of conditions.
    Senator Bayh. They would have no problem with their 
opponents doing the same?
    Dr. Wiktorowicz. Well, there is a double standard, without 
a doubt. Look at Hamas' response to the use of a major bomb 
that blew up an entire city block. According to Jihadi 
theological arguments, that is a permissible action, given that 
you are targeting a military individual, someone who is a 
legitimate target and there are civilians in the area.
    The argument that has been made by some of these Jihadi 
scholars has been that that is still legitimate in Islam. So, 
you are right. There is a double standard there.
    Senator Bayh. Mr. Levitt.
    Mr. Levitt. I think it is also fair to say, if I may, that 
there is a need for a public diplomacy campaign to address this 
point. There is a need for an international conference of 
Islamic scholars to address this point.
    There is no shortage of Islamic scholars, including in 
Saudi Arabia, who have condemned suicide bombings. I think 
Secretary Paul O'Neill put it best in Saudi Arabia when he was 
asked by a local member of the media this exact question. He 
was told, many people here would say that Hamas and Islamic 
Jihad are not terrorists.
    Senator Bayh. In fact, wasn't there an open letter among 
some leading Palestinians condemning suicide bombings?
    Mr. Levitt. There was in fact, yes. And Secretary O'Neill 
responded, at a certain level, this is very simplistic, but at 
a certain level, you just need to judge people by the actions 
they take. And if they are blowing up buses of civilians, it is 
a terrorist act. I do not mean to be simplistic, but at some 
point, it really just is.
    There is a theological issue that they need to work 
through, and for others, they are simply using the theology to 
support an evil ideology that they subscribe to. The fact is 
that you have individuals who are supporting terrorist activity 
and they are using the guise of religion to support that. And 
we should not sit back and accept that just because they say 
that they are doing it under the veil of religion.
    Senator Bayh. So how do we treat one of these charitable 
entities where--pick a figure--70, 80, 90 percent of their 
resources are going to legitimate purposes, but 10, 20, 30 
percent are not?
    Mr. Levitt. There have been a number of U.S. Government 
officials who have recently articulated that perhaps our issues 
with Hezbollah, for example, should not be an issue with 
Hezbollah, but with Hezbollah actions. There can be actions by 
Hezbollah that we would not take issue with.
    But when an organization officially and very publicly will 
admit to you that they are engaged in this type of activity and 
that type of activity, and that includes terrorist activity, 
then we in the United States will not make that distinction, 
and our legislation does not make that distinction, and we 
should not make that distinction. Hamas is a great example.
    There are many examples of how the dawa, the social welfare 
infrastructure, the orphanages, the hospitals have been used to 
facilitate terrorist activity, whether it is hiding munitions 
or ferrying a bomber from one place to another, or hiding 
fugitives.
    It is not always the case. Nor can you draw an imaginary 
line between these wings. And I put that in quotes. These are 
not wings. In fact, if you go to Hezbollah and you ask them, 
they will say that there are no wings.
    Senator Bayh. Money being fungible, as a practical matter, 
I agree with you.
    Let me ask about Saudi Arabia. I think, Mr. Levitt, you 
indicated that, if my stenography here, as rusty as it is, is 
accurate, ``a clear pattern of looking the other way'' has 
existed in Saudi Arabia when it comes to finances flowing to 
terrorist organizations. Why is that, and what should we do 
about it?
    Mr. Levitt. Well, there are many reasons. I think the 
critical reason that Saudi Arabia has to deal with wealthy 
individuals, powerful individuals who set up some of these 
organizations and back some of these organizations, and the 
nature of society in Saudi Arabia is that many of these 
powerful, wealthy individuals who are financing terrorism are 
very close to the royal family, and in some cases, part of the 
royal family. And that creates a very clear and difficult 
situation.
    Senator Bayh. Do you hazard an opinion on that, Doctor?
    Dr. Wiktorowicz. Sure. I think that Saudi power for a very 
long time, especially--
    Senator Bayh. Can I ask you one other thing?
    Dr. Wiktorowicz. Sure.
    Senator Bayh. Excuse me for interrupting. You made an 
interesting point about how, in some of these societies, the 
government exert a much greater degree of oversight of 
charitable activities than do we.
    So how can they have it both ways? How can they have a much 
better handle on what these charities are doing, but profess 
ignorance or noncomplicity when the charities are doing things 
like funding terrorist activities?
    Dr. Wiktorowicz. Do you want my honest assessment of that?
    I think that there is a bit of deception that is going on. 
A lot of these governments, and Saudi Arabia is a good case in 
point, generally know who is who. They are not going to know 
every single individual who is aligned with bin Laden. 
Otherwise, this would be a very short war on terrorism. But 
they do know generally which kinds of groups are more likely to 
utilize this than others.
    And the reason why, to a large extent, in addition to what 
is 
already been stated, the Saudi government turns a blind eye is 
because it has relied on the Salifi establishment, this really 
fundamentalist community, in part for its right to rule, for 
its legitimacy. It has had a pact with the Ulamar, the 
religious scholars of Saudi Arabia, in which it would support 
not only the war in Afghanistan against the Soviets, but it 
also would support fundamentalism at home.
    Now it is very difficult, given the elite nature of the 
Saudi royal family, beyond their tribal ties, to try to 
maintain that high level of legitimacy because they understand 
the sway the scholars of Islam in Saudi Arabia have gained over 
the general population over large segments of the masses. So it 
is a very difficult thing to try to extricate themselves from 
that relationship right now.
    Mr. Levitt. It is also a very practical matter. We heard 
earlier, for example, that Saudi Arabia has taken some positive 
measures.
    One of those is an effort to say that individuals who want 
to fulfill their Islamic obligation of zakat should do it 
through government-sanctioned charities, which is wonderful. 
Except that a large number of those charities that are 
sanctioned by the government as being okay also appear on our 
terrorism lists.
    Senator Bayh. Certainly an incongruity. Thank you. There 
are a lot of things that I could say in following up on that. 
But in the interest of time, I will move on.
    Dr. Gubser, can you tell us, you operate side-by-side with 
some of these organizations, some of the same territories as 
Hamas and Hezbollah, as I understand it. Is that correct?
    Dr. Gubser. There are certainly Hamas organizations that 
are out there, or charitable organizations that have Hamas 
connections in the West Bank and Gaza and so forth.
    We are in the same environment. And as I mentioned, we have 
a very talented staff that knows this society very well. The 
staff knows very well that among our other policies is that we 
will not support any organization that has to do with 
terrorism.
    Senator Bayh. You and your organization have a good 
reputation. How do you go about ensuring that the groups that 
you are helping aren't in some way infiltrated by the elements 
that you do not want to support?
    Dr. Gubser. Basically, you look at their leadership and the 
two aspects of their leadership. One is the board and the other 
is the senior executive. And you make sure that those are not 
Hamas-
related people. You do that.
    Senator Bayh. Do they carry identification around labelling 
them as such? Or this is just generally known?
    Dr. Gubser. No. It is generally known. People will know it. 
And that is where we trust our staff. If there is an 
organization that somebody wants us to work with and we do not 
know it, I will 
actually call up the State Department and ask them if this 
organization is okay. I have done that on more than one 
occasion.
    Senator Bayh. What kind of accountability measures do you 
have in place to ensure that the funds that you distribute are 
spent 
according to your wishes?
    Dr. Gubser. That is as I outlined in my statement, it is 
from the beginning to the end of the projects. We define what 
the project is, building a classroom, building an irrigation 
system, building a 
clinic, training people to run the clinic, whatever it may be. 
We have agreement with the local entity that is going to do it, 
and then we have oversight to make sure it happens as we had 
planned. There is great accountability on that.
    Senator Bayh. Gentlemen, this is my last question. There is 
some difference of opinion, Doctor, between you and Mr. Levitt. 
You indicated that for a variety of reasons the charities being 
used to facilitate terror was unlikely.
    Mr. Levitt, you outlined a couple of specific examples 
where that had, in fact, taken place. Is it your opinion that 
it is unlikely, or perhaps it is a little more widespread than 
Dr. Wiktorowicz has indicated in his testimony?
    Mr. Levitt. He made a very good point when he pointed out 
that there are so many Islamic charities. We are talking about 
a very small percentage. We agree on that.
    Senator Bayh. And that's important to state again for the 
record.
    Mr. Levitt. It is extremely important. That is the case 
internationally. It is the case in this country. We do not want 
to stymie the effort to do good. We want to make sure that 
people are not doing bad under the guise of claiming to do 
good.
    But even within that small percentage, there is an alarming 
number of organizations that are involved in the financing of 
facilitating terrorism. And by alarming number, it does not 
have to be hundreds. It can be just a few dozen. That is the 
nature of international terrorism. You do not need a lot of 
people or organizations.
    Senator Bayh. I meant the facilitation through providing 
cover employment and logistical support, things of that nature, 
as opposed to the transfer of cash.
    Mr. Levitt. It is certainly more common to find 
organizations that are simply providing a financial role. We 
are seeing more and more cases--I do not know that the trend is 
increasing or just that we are looking harder--where 
organizations are providing all kinds of logistical support. 
And we have broken up a number of cells in Germany, for 
example, that were engaged, we only thought, of financial 
activity, that it now turns out they were procuring false 
documents and other types of more logistical support.
    Senator Bayh. Doctor.
    Dr. Wiktorowicz. I think he answered the question. I think 
that we do not have a difference at all. I wanted to articulate 
a warning. I think it is just an issue of scale. But he is 
correct in stating that it just takes a few to really do a lot 
of harm.
    My fear, and I am not a Muslim and I do not claim to 
represent the Muslim community, is that there is going to be a 
backlash.
    The more news articles report on this link between Islamic 
charities and terrorism, the more it is going to be associated 
within the American public. And that can be dangerous for 
Muslims in terms of discrimination, in terms of just being able 
to raise money for very legitimate and needed kinds of causes.
    Senator Bayh. That is dangerous. The funding of terror 
through the inappropriate use is also dangerous.
    Dr. Wiktorowicz. I would never argue otherwise. But it is 
not as though you want to stop every single Islamic charity, 
lock up all the Muslims, and say, we did it. We stopped 
terrorism.
    Senator Bayh. Of course not. No one is suggesting anything 
close to that. On the contrary. It is one of our great 
strengths, that we respect diversity of religious belief and 
the important roles that charity play in our society.
    My final question, in Islam, the obligation to give 
charitably, to help those who are less fortunate, does that 
only apply to fellow believers, or does that apply to 
individuals of other faiths as well? I am curious about that. 
And then, is most of the charity directed toward other nations 
or is a significant amount of the charity applied to helping 
less fortunate individuals, fellow Muslims who are not in this 
country?
    Dr. Wiktorowicz. I think the general practice in terms of 
charitable giving, it is supposed to be about 2.5 percent of 
your annual income, if you have a certain level, has been to 
give to Muslim causes. I do not believe that that is a 
theological requirement, but that has just been the general 
practice.
    In terms of giving, I think more frequently than not, 
Islamic charities are organized at community-based levels, 
which means that they are trying to give to their own community 
for local concerns. You still are going to get massive Islamic 
charities that give globally. And there is a lot of money in 
terms of those.
    Senator Bayh. My original question, by the nature of the 
hearing, we focus on transfers of funds to other countries 
where they can be more likely used for illicit purposes. I was 
just curious if a lot of the charitable giving, in fact, goes 
to help less fortunate Muslims or others in the United States?
    Dr. Wiktorowicz. Yes, there is a lot of money that is used 
domestically in the country where the charity is located.
    Senator Bayh. Very good.
    Dr. Gubser. Mr. Chairman.
    Senator Bayh. Dr. Gubser.
    Dr. Gubser. If I could just add to that. Whether it is in 
the United States or over in the Middle East or other parts, 
the bulk of the money would actually be used locally. And it 
would be used for running local schools, local soup kitchens, 
the mosque, whatever other types of activities. You will 
certainly find it in this country and you will find it in the 
Palestinian Territories, Jordan, or the United Arab Emirates.
    Senator Bayh. Gentlemen, I want to thank you for your 
patience. I am very grateful for your testimony. I appreciate 
it. I know the Committee as a whole does as well.
    Thank you very much.
    Dr. Gubser. Thank you.
    Dr. Wiktorowicz. Thank you, Senator.
    Mr. Levitt. Thank you.
    Senator Bayh. The hearing is adjourned.
    [Whereupon, at 5:15 p.m., the hearing was adjourned.]
    [Prepared statements and additional material supplied for 
the record follow:]

                  PREPARED STATEMENT OF KENNETH W. DAM
           Deputy Secretary, U.S. Department of the Treasury

                             August 1, 2002

    Chairman Bayh and distinguished Members of the Senate Subcommittee 
on International Trade and Finance, thank you for inviting me to 
testify about the misuse of charities by terrorist organizations to 
raise and move money. This is an important and complex issue. I applaud 
the Subcommittee for focusing on it. And I appreciate the leadership 
you have provided, Mr. Chairman, on this and related issues.
    The financial front of the war on terror is a particularly 
important issue for the Treasury Department. Secretary Paul O'Neill is 
the Administration's principal spokesman for the financial front of the 
war. As his Deputy, I chair a high-level interagency committee that 
sets strategic priorities for the financial front. Our General Counsel, 
David Aufhauser, chairs the National Security Council's Interagency 
Policy Coordination Committee on Terrorist Finance. Our Under Secretary 
for Enforcement, Jimmy Gurule, leads our enforcement bureaus including 
the U.S. Customs Service, the U.S. Secret Service, and FinCEN, as well 
as our Office of Foreign Assets Control as they fight terrorist 
financing. Our Under Secretary for International Affairs, John Taylor, 
works to build and maintain the international coalition against 
terrorist finances. Our Under Secretary for Domestic Finance, Peter 
Fisher, also works to help implement the USA PATRIOT Act, and to help 
protect our Nation's critical financial infrastructure. And, of course, 
we have many employees who are working hard and, in some cases, putting 
their lives at risk to fight the financing of terror.
    Our first actions after the tragedy of September 11 were to 
identify known terrorists and terrorist entities, freeze their assets 
in the United States, and work with our allies to extend those freezes 
worldwide. As you know, we have obtained significant results in this 
effort, blocking over $112 million globally and forging a coalition of 
support that includes all but a handful of countries.
    Since these first actions, our fight against the financing of 
terror has expanded to the abuse of charities. As Secretary O'Neill has 
said, few actions are more reprehensible than diverting money intended 
for charity and using it to support hatred and cruelty. Such abuse 
corrupts the sanctity of charitable giving, diverts funds and resources 
from those in need, betrays the trust and goodwill of donors, and is a 
danger to us all.
    We are addressing this problem at several levels. We are stopping 
the flow of funds by freezing the assets of charities that are 
supporting terrorist groups as well as aggressively investigating 
suspected abuses of charities. We also work with countries around the 
world to help raise standards of oversight and accountability for 
charities. In this work we are guided always by two principles: (1) 
preventing the abuse of charities for terrorist purposes; and (2) 
preserving the important role that charities play throughout the world.
    Before I detail these efforts and address the specific topics 
raised in your invitation letter, allow me to update you briefly on the 
efforts the Treasury Department has taken, in cooperation with our 
sister agencies and departments, to combat terrorist financing.
Achievements in Financial Aspects of U.S. Anti-Terrorism Initiatives
    As you know, our priority is to prevent terrorist attacks by 
disrupting terrorist finances. As the President has said, we seek to 
``starve the terrorists of funding.''
    I just noted that, since September 11, the United States and other 
countries have frozen more than $112 million in terrorist-related 
assets. More importantly, we have cut the flow of terrorist money 
through funding pipelines, as in the case of Al Barakaat's worldwide 
network which was channeling as much as $15 to $20 million to al Qaeda 
a year. Where warranted, we have also unblocked funds. For example, 
$350 million in Afghan government assets that had been protectively 
frozen in connection with the Taliban sanctions, mostly before 
September 11, have now been returned to the legitimate Afghanistan 
government.
    We have received strong international cooperation in this effort. 
All but a handful of countries and jurisdictions have pledged support 
for our efforts, over 160 countries have blocking orders in force, 
hundreds of accounts worth more than $70 million have been blocked 
abroad, and foreign law enforcement have acted swiftly to shut down 
terrorist financing networks. The United States has often led these 
efforts, but there have also been important independent and shared 
initiatives. On March 11, 2002, the United States and Saudi Arabia 
jointly designated two branches of a charity, and on April 19, 2002, 
the G7 jointly designated nine individuals and one entity. These 
efforts have been bolstered by actions from the European Union which 
has issued three lists of designated terrorists and terrorist groups 
for blocking.
    In addition to these efforts, we work with countries daily to get 
more information about their efforts and to ensure that the cooperation 
is as deep as it is broad. We are also providing technical assistance 
to a number of countries to help them develop the legal and enforcement 
infrastructure they need to find and freeze terrorist assets.
    We have also had success pursuing international cooperation through 
multilateral forums including the UN, G7, G20, the Financial Action 
Task Force (FATF), the Egmont Group, and the international financial 
institutions to combat terrorist 
financing on a global scale. In particular, Treasury continues to play 
a strong leadership role in the FATF, a 31-member organization 
dedicated to the international fight against money laundering. As this 
Committee is aware, in late October 2001, the United States hosted an 
Extraordinary FATF Plenary Session, at which FATF established eight 
Special Recommendations on Terrorist Financing, including a 
recommendation regarding the need to regulate nonprofit organizations. 
These recommendations quickly became the international standard on how 
countries can 
ensure that their financial regimes are not being abused by terrorist 
financiers.
    Our law enforcement efforts also have proven fruitful. Treasury's 
Operation GreenQuest, a multiagency terrorist financing task force, was 
established in October 2001, to identify, disrupt, and dismantle 
terrorist financing networks by bringing together the financial 
expertise from Treasury and other branches of the Government. Through 
their investigations, Operation GreenQuest agents have been targeting a 
wide variety of systems that may be used by terrorists to raise and 
move funds. These systems include illegal enterprises, as well as 
legitimate enterprises, and charity/relief organizations (in which 
donations may be diverted to terrorist groups). GreenQuest's work, in 
cooperation with the Department of Justice, has led to 38 arrests, 26 
indictments, the seizure of approximately $6.8 million domestically, 
and seizures of over $16 million in outbound currency at the borders, 
including more than $7 million in bulk cash being smuggled illegally to 
Middle Eastern destinations. Recently, Customs, U.S. Secret Service, 
and FBI agents apprehended and subsequently indicted Jordanian-born 
Omar Shishani in Detroit for smuggling $12 million in forged cashier's 
checks into the United States. The detention and arrest of Shishani is 
highly significant as it resulted from the Customs Service's cross-
indexing of various databases, including information obtained by the 
U.S. military in Afghanistan. That information was entered into 
Custom's ``watch list,'' which, when cross-checked against inbound 
flight manifests, identified Shishani. In addition, GreenQuest agents, 
along with the FBI and other Government agencies, have traveled abroad 
to follow leads and examine documents.
    We are confident that our efforts are having real-world effects. 
What I can tell you in open session is that we believe that al Qaeda 
and other terrorist organizations are suffering financially as a result 
of our actions. We also believe that potential donors are being more 
cautious about giving money to organizations where they fear that the 
money might wind up in the hands of terrorists. In addition, greater 
regulatory scrutiny in financial systems around the world is further 
marginalizing those who would support terrorist groups and activities. 
This deterrent effect, though perhaps not quantifiable, is an essential 
effect of our efforts.
    At the same time, I must tell you that we have much to do. Although 
we believe that we have had a considerable impact on al Qaeda's 
finances, we also believe that al Qaeda's financial needs are greatly 
reduced. They no longer bear the expenses of supporting the Taliban 
government or of running training camps, for example. We have no reason 
to believe that al Qaeda does not have the financing it needs to 
conduct at least a substantial number of additional attacks. In short, 
a great deal remains to be done.
The Misuse of Charities and Non-Profit Organizations
    Your invitation letter requested my thoughts about the scope of the 
problem of terrorist abuse of charities and nonprofits. Unfortunately, 
this is not an issue on which precise measurement is possible. We do 
know that the mechanism of charitable giving--for example, the 
collection of resources from willing donors and its redistribution to 
persons in need--has been used to provide a cover for the financing of 
terror and that it has been a significant source of funds. In certain 
instances the charity itself was a mere sham that existed simply to 
funnel money to terrorists. However, the abuse often occurred without 
the knowledge of donors, or even of some members of the management and 
staff of the charity itself. Allow me to provide some examples.
Examples of Abuse of Charities by Terrorist Groups
    Example 1--Afghan Support Committee (ASC): On January 9, 2002, the 
United States designated the Afghan Support Committee (ASC), a 
purported charity, as an al Qaeda supporting entity. The ASC operated 
by soliciting donations from local charities in Arab countries, in 
addition to fundraising efforts conducted at its headquarters in 
Jalalabad, Afghanistan, and subsequently in Pakistan. The ASC falsely 
asserted that the funds collected were destined for widows and orphans. 
In fact, the financial chief of the ASC served as the head of organized 
fundraising for Osama bin Laden. Rather than providing support for 
widows and orphans, funds collected by the ASC were turned over to al 
Qaeda operatives. With our blocking action on January 9, 2002, we 
publicly identified the scheme being used by ASC and disrupted this 
flow of funds to al Qaeda.
    Example 2--Revival of Islamic Heritage Society (RIHS): Also on 
January 9, 2002, we designated the Pakistani and Afghan offices of the 
Revival of Islamic Heritage Society (RIHS). The RIHS is an example of 
an entity whose charitable intentions were subverted by terrorist 
financiers. The RIHS was a Kuwaiti-based charity with offices in 
Pakistan and Afghanistan. The Peshawar, Pakistan Office, Director for 
RIHS also served as the ASC Manager in Peshawar. The RIHS Peshawar 
office defrauded donors to fund terrorism. In order to obtain 
additional funds from the Kuwait RIHS headquarters, the RIHS Peshawar 
office padded the number of orphans it claimed to care for by providing 
names of orphans that did not exist or who had died. Funds sent for the 
purpose of caring for the nonexistent or dead orphans were instead 
diverted to al Qaeda terrorists. In this instance, we do not currently 
have evidence that this financing was done with the knowledge of RIHS 
headquarters in Kuwait.
    Example 3--Al Haramain Islamic Foundation: On March 11, 2002, the 
United States and Saudi Arabia jointly designated the Somali and 
Bosnian offices of the Saudi-based Al Haramain organization. Al 
Haramain is a Saudi Arabian-based charity with offices in many 
countries. Prior to designation, we compiled evidence showing clear 
links demonstrating that the Somali and Bosnian branch offices were 
supporting al Qaeda. For example, we uncovered a history of ties 
between al Haramain Somalia and al Qaeda, the designated organization 
al Itihaad al Islamiya (AIAI), and other associated entities and 
individuals. Over the past few years, al Haramain Somalia has provided 
a means of funneling money to AIAI by disguising funds allegedly 
intended to be used for orphanage projects or the construction of 
Islamic schools and mosques. The organization has also employed AIAI 
members. Al Haramain Somalia has continued to provide financial support 
to AIAI even after AIAI was designated as a terrorist organization by 
the United States and the United Nations. In late-December 2001, al 
Haramain was facilitating the travel of AIAI members in Somalia to 
Saudi Arabia. The joint action by the United States and Saudi Arabia 
exposed these operations.
Preserving and Safeguarding Charities and Charitable Giving
    As I stated earlier, our goal is to guard charities against abuse 
without chilling legitimate charitable works. Our strategic approach, 
as set forth in the recently published 2002 National Money Laundering 
Strategy, involves domestic and international efforts to ensure that 
there is proper oversight of charitable activities, as well as 
transparency in the administration and functioning of the charities. It 
also involves greater coordination with the private sector to develop 
partnerships that include mechanisms for self-policing by the 
charitable and nongovernmental organization sectors.
Domestic Front
    Here at home, we are working to stem the flow of funds to 
terrorists through all channels. As mentioned above, we have issued 
blocking orders against charities and branches of charities providing 
support to terrorists. The three examples I cited previously all 
represent such blocking actions. In addition, we have blocked the 
assets of several other charities or groups that claimed to be 
providing charitable services. For example, on December 4, 2001, we 
blocked the assets of the Holy Land Foundation for Relief and 
Development, which describes itself as the largest Islamic charity in 
the United States. It operates as a U.S. fundraising arm of the 
Palestinian terrorist organization Hamas. We have also designated as 
terrorist supporters the Makhtab al Khimamat/al Kifah, a clearinghouse 
for Islamic charities financed directly by Osama bin Laden and party to 
the 1993 World Trade Center attack; the Al Rashid Trust; the al Wafa 
Humanitarian Organization; and the Rabita Trust--all Pakistan based al 
Qaeda financier organizations; and the Ummah Tameer E-Nau, a Pakistani 
NGO which provided nuclear, biological, and chemical weapons 
expertise to al Qaeda.
    In addition, we have blocked the assets of the Global Relief 
Foundation and the Benevolence International Foundation, under the 
provisions of the USA PATRIOT Act to assist the ongoing investigation 
of alleged links to terrorism.
    Another aspect of our domestic strategy is to work within the U.S. 
regulatory system to ensure that charities are transparent to the 
maximum extent practical. In the United States, the transparency of the 
charitable sector is a concern of both Federal and State officials, as 
well as of private organizations representing donors and charitable 
organizations. As this Subcommittee well knows, the Internal Revenue 
Service is the primary Federal Agency with oversight responsibility for 
charities. The IRS's responsibilities have expanded as the tax law has 
changed to keep up with the growth of the nonprofit sector, which now 
consists of more than 1.5 
million tax-exempt organizations, including nearly 800,000 charities 
and 350,000 religiously affiliated organizations that control $2 
trillion in assets.
    Under U.S. law, any person or group may establish an organization 
with charitable purposes, and the creators of the organization are free 
to choose any charitable endeavor they wish to pursue. If the 
organization applies to the IRS for recognition of tax-exempt status, 
and shows that it meets the requirements of Section 501(c)(3) of the 
Internal Revenue Code (IRC), it will be recognized exempt until it 
ceases to exist or until the IRS determines it no longer meets the 
requirements and revokes exempt status. A charity may have its Section 
501(c)(3) application denied or its 
existing tax-exempt status revoked by the IRS if it does not comply 
with these standards. A ``revocation'' means that the organization 
becomes taxable and that donors will receive no tax benefits from 
contributions to the organization. Revocation may also cause the State 
in which the charity is organized to take action to ensure its assets 
are used for charitable purposes.
    While its primary functions in this sphere are to recognize and to 
regulate tax-exempt status and to implement those provisions of the tax 
code that derive from that status, the IRS also performs a crucial role 
in the development and dissemination of information about those 
charities that fall under its jurisdiction. Most IRC 501(c)(3) 
organizations (except for churches and certain small organizations) are 
required to file annual information returns showing the income, 
expenses, assets, and liabilities of the organization, as well as 
information about its programs. IRC 501(c)(3) organizations must make 
their returns available to anyone who asks 
(except for the names of contributors) by publishing them in readily 
accessible electronic and hard-copy formats. The availability of 
information about charities' 
operations helps stimulate oversight by donors, the media, academia, 
and private organizations.
    Also, State Attorneys General have statutory jurisdiction over the 
charitable 
assets of these organizations and over fundraising activities of 
charities. Oversight responsibilities and practices vary from State to 
State, but most States exercise regulatory oversight over all 
organizations that raise money in their State, excluding churches, 
synagogues, and mosques, regardless of where the charity is domiciled. 
State charities officials have formed a national-level organization, 
the National Association of State Charities Officials (NASCO--
www.nasconet.org). Among other things, NASCO has promoted harmonization 
in registration requirements among the States, and has advanced a 
``Model Act Concerning the Solicitation of Funds for Charitable 
Purposes.''
    The United States also has private, nonprofit organizations that 
work to safeguard our tradition of charitable giving. One such 
organization is the Independent Sector, a coalition of more that 700 
national organizations, foundations, and corporate philanthropy 
programs that collectively represent many thousands more 
organizations throughout the United States. Its many research 
activities include defining and addressing ways to improve 
accountability in the charitable sector. Other organizations focus on 
particular segments of the charitable sector. The Council on 
Foundations focuses on issues affecting private foundations. The 
Evangelical Council for Financial Accountability serves a major segment 
of the religious community as an accreditation organization that either 
grants or withholds membership based on an examination of the financial 
practices and accomplishments of charitable organizations that apply. 
It provides public disclosure of its more than 900 members' financial 
practices and accomplishments, including on its website, www.ecfa.org. 
ECFA is also the United States member of the International Committee 
for Fundraising Organizations (ICFO), an umbrella organization that 
links the accreditation organization of 10 countries (United States, 
United Kingdom, Canada, Norway, Sweden, France, Germany, Switzerland, 
Austria, and the Netherlands).
    Other organizations promoting transparency include the 
Philanthropic Research Institute, whose Guidestar organization 
maintains a database containing IRS filings and other financial 
information of over 200,000 charities. Any interested individual can 
access the information through its www.guidestar.org website. Another 
donor-information organization, the Better Business Bureau (BBB) Wise 
Giving Alliance, focuses on organizations that conduct broad-based 
fundraising appeals. It collects and distributes information about the 
programs, governance, fundraising practices and finances of hundreds of 
nationally soliciting charitable organizations that are the subject of 
donor inquiries. It asks the selected organizations for information 
about their programs, governance, fund raising practices, and finances, 
and measures the results against general guidelines and standards it 
has developed for measuring organizational efficiency and 
effectiveness. It publishes the results, including whether the selected 
organization refused to supply information, on its website at 
www.give.org. While we are continually assessing ways to attack 
terrorist finances, there is no current Treasury Department proposal 
under consideration to modify the Federal tax code for the purpose of 
blocking terrorist finance through charities. However, we are working 
with State charities officials and the private sector watchdog agencies 
to widen their horizons from the pursuit of fraud to the fight against 
terrorist finance.
International Efforts
    As on all issues related to terrorist financing, our efforts to 
prevent the abuse of charities by terrorists can only be successful if 
we have international cooperation and support. As I have stated before, 
we cannot bomb foreign bank accounts. We need the cooperation of 
foreign governments to investigate and block them. The blocking actions 
we have taken to date were not isolated U.S. actions, as seen in the 
March 11, 2002, joint designation with Saudi Arabia. Each of the 
blocking actions we have taken to combat the abuse of charities--with 
the exception of the freezes in aid of U.S.-based investigations--have 
been backed and echoed by our 
allies. I am very proud of the work that has gone into building the 
international coalition against financial terrorism, and would like to 
take this opportunity to give credit to the other agencies of the U.S. 
Government--including the State Department, the intelligence community, 
the FBI, and the Department of Justice--that have helped us keep that 
coalition in place.
    Moreover, we are working with other countries to strengthen their 
own internal charitable regulation regimes so that they can feel 
confident that their charitable communities are not being abused. We 
have pursued these discussions both bilaterally and multilaterally, in 
the Middle East, Southeast Asia, and Europe, as well as in the G7 and 
G8 processes and especially through the Financial Action Task Force 
(FATF). Secretary Paul O'Neill has raised this issue directly with his 
counterparts on his visits to the Persian Gulf and Europe. Other 
countries, especially those whose cultures incorporate, encourage, and 
require charitable giving, are as concerned as we are that the good 
deeds of well-intentioned donors should not be hijacked by terrorists.
    They are making progress, as even a cursory review of foreign press 
reports indicates. For example, on March 21, the Saudi press reported 
that the Saudi government had issued a regulatory decision requiring 
charitable societies to submit to the Saudi Foreign Ministry the 
details of projects they intend to finance abroad. Also in March, the 
Pakistani press reported on the Pakistan Center for Philanthropy, an 
independent, nonprofit organization dedicated to improving 
philanthropic regulation. According to these reports, the Pakistani 
government asked the Center to 
develop recommendations for a new law governing charities, NGO's, and 
other civil society organizations. In May, the Azerbaijani press 
reported that the government had submitted to parliament a new law 
further regulating the funding of charities and other NGO's. And in 
June, the Egyptian press reported that a draft law expanding government 
oversight of nongovernmental and charitable organizations was submitted 
to parliament.
    There is not a single correct approach to ensuring appropriate 
transparency and oversight of charitable organizations. Different 
countries attempt to do so using a variety of approaches. In some, 
independent charity commissions have an oversight role. In other 
countries, government ministries are directly involved. Moreover, in 
many jurisdictions, the focus of oversight has been combating fraud 
rather than terrorist financing. Many of the same regimes and 
mechanisms, however, can assist in the fight against terrorist finance 
as well.
    We are attempting, bilaterally and multilaterally, to ensure that 
all jurisdictions treat the regulation of charitable institutions with 
the seriousness that that it deserves. As I mentioned earlier, one of 
the eight special counterterrorism recommendations adopted at the 
October 2001 plenary session of FATF specifically called on member 
countries to ensure that charities and other NGO's should not be abused 
for the furtherance of terror, and the United States is taking the lead 
within FATF to develop specific best practices to ensure transparency, 
accountability, and enforcement of regulations over charities.
Additional Authority to Prevent the Misuse of Charities
    Mr. Chairman, your invitation letter inquires whether the 
Administration needs additional authorities to prevent the abuse of 
charities. As you know, on December 20, 2001, Congress passed the 
Victims of Terrorism Tax Relief Act of 2001 in which there were 
revisions of some elements of the tax code. An important change in the 
tax-related laws involved the expansion of the availability of tax 
returns and return information under Section 6103 for purposes of 
investigating terrorist incidents, threats, or activities, and for 
analyzing intelligence concerning terrorist incidents, threats, or 
activities. The ability to access and consolidate all relevant 
financial information in order to uncover terrorist networks and 
support cells is crucial to our overall efforts. In this context, it is 
important to our efforts to ensure that charities are not being abused 
by terrorist groups and supporters.
    Though we are exploring ways to make our efforts more efficient and 
effective, we do not see a particularized need at this time to ask this 
Committee and Congress for additional authority. We look forward to 
working with you when we identify necessary changes to make our efforts 
most effective.
Conclusion
    Mr. Chairman, this concludes my formal testimony. I would be 
pleased to answer any questions that you, or Members of the 
Subcommittee, may have regarding the Administration's goals and 
policies regarding the abuse of charities by terrorist 
organizations, as well as other issues related to terrorist financing.

                               ----------
            PREPARED STATEMENT OF QUINTAN WIKTOROWICZ, Ph.D.

   Assistant Professor, Department of International Studies, Rhodes 
                                College
                             August 1, 2002

Introduction
    This submitted statement is intended to provide a very brief 
overview of Islamic charities. It explains that while Islamic radicals 
have used specific charities to funnel money, they have had little 
success using these organizations for a broader revolutionary movement.

What Do Islamic Charities Do?
    Islamic charities provide basic goods and services to communities 
in a manner deemed consistent with the values and teachings of Islam. 
This includes medical services through local clinics and hospitals, K-
12 schools, universities and colleges, orphanages, vocational training 
centers, subsidies for poor families, and other grassroots activities. 
Islamic charities also collect donations to help Muslims outside their 
own country in places such as the Palestinian territories, Bosnia, 
Chechnya, and Kashmir. These kinds of donations have created problems 
for law enforcement in the war on terrorism because of the difficulty 
of determining whether money collected for a particular cause (helping 
the Palestinians rebuild their cities after the recent Israeli 
incursions, for example) is actually used for the originally specified 
purpose. Muslim governments are very good at preventing charities from 
raising money to overthrow them, but they are far less effective in 
making sure that money is not ``redirected'' once it leaves the 
country.
    In some cases, Islamic charities have explicitly raised money for 
causes that threaten current U.S. Government policy. Many Muslims, for 
example, especially those in the Middle East, view movements such as 
Hamas and Hezbollah as national liberation movements, not terrorist 
organizations. As a result, Islamic charities have solicited funds for 
what they term ``resistance to the Israeli occupation.''
    But Hamas and Hezbollah are fundamentally different from al Qaeda. 
They are nationalist Islamic movements that operate hospitals and 
schools, oversee charities, and run in local elections. Al Qaeda, on 
the other hand, is a transnational revolutionary movement. Few Islamic 
charities publicly call for donations to groups like al Qaeda. Even al 
Qaeda fronts do not openly request money for violent activities. 
Instead, they seek donations for general charitable calls and only 
later siphon the money to terrorist operations.
    The vast majority of Islamic charities, however, represent moderate 
Islamic interests and seek to implement the Quranic injunction to help 
others in need. In a sense, Islamic charities provide Muslims with an 
opportunity to put into practice the commands of God and fulfill their 
duties as Muslims. It is also seen as a way of demonstrating that 
``Islam is the solution'' (a common Islamist campaign slogan) to a 
myriad of widespread social ills. Islamic charities provide a visible 
example of how Islam can be put to work to improve society and 
alleviate socioeconomic stagnation in the Muslim world.

What Is ``Islamic'' About An Islamic Charity?
    Although there are thousands of charities that call themselves 
``Islamic,'' we need to be careful not to conceptualize all self-
proclaimed Islamic charities as part of a shared vision of religious 
activism. In Muslim societies, usage of the term ``Islamic'' connotes 
certain positive characteristics, such as honesty, social justice, and 
righteousness. As a result, state and societal actors frequently 
appropriate it to foster a sense of legitimacy. Regimes in the Muslim 
world, for example, wrap themselves in the symbols of Islam in an 
attempt to augment their right to rule, while powerful social forces 
frequently use Islam as a means of demonstrating cultural authenticity. 
In both cases, the actual level of religiousness often falls short of 
the rhetoric and symbolism.
    Using the term ``Islamic'' to describe a charitable organization 
brings several benefits to the organizer and sponsors. First, potential 
donors and beneficiaries often assume that because the institution is 
Islamic, it will treat them fairly, avoid corruption, and provide an 
effective remedy for social, economic, or medical distress. Simply 
calling a charity ``Islamic'' can thus bring immediate community 
support for the project and organization.
    Second, an ``Islamic'' charity enjoys the benefits of broader 
religious networks. Other Islamic institutions will frequently refer 
people to Islamic, as opposed to secular, charitable societies, and 
certain donors are more likely to give to Islamic causes in general, 
including Islamic charitable operations. In addition, Islamic charities 
frequently, though not always, maintain relationships with local 
mosques, which function as central social institutions in communities 
and neighborhoods. In some cases, the charity is physically located in 
the mosque and therefore enjoys 
access to prime neighborhood real estate where heavy traffic and 
community centrality ensure a steady flow of financial support. In 
other instances, Islamic charities are located near a neighborhood 
mosque and draw some of the same benefits. At a minimum, most Islamic 
charities enjoy some kind of relationship with mosques by the very 
nature of their supposed religious qualities.
    Third, calling a charity ``Islamic'' implies that it is rooted in 
the indigenous societies of the Muslim world and offers a model of 
socioeconomic development based on authentic, non-Western models. Up 
until about the mid-1900's, many charities in the Muslim world were run 
by non-Muslims, frequently foreign Christian missionaries. Given 
experiences of colonialism, there was impetus to establish charities 
run by the indigenous population, and Islamic charities fit these 
aspirations. Today, in a political climate where the West, particularly 
the United States, and its various global projects (economic neo-
liberalism, democracy, human rights, the war on terrorism) are viewed 
with suspicion in the Muslim world, using the term Islamic to describe 
organizational activities is a way of establishing culturally accepted 
anti-imperialist credentials within a legitimate religious framework. 
It demonstrates that the charity is organically linked to the society 
it serves, in contradistinction to western nongovernmental 
organizations (NGO's), which are often seen as part of a western 
project of neocolonialism. The fact that many indigenous NGO leaders in 
the Middle East have cheered governmental attempts to limit foreign 
financial contributions to charities is indicative of an overall 
resentment of western interference in domestic affairs. Islamic 
charities thrive in such an environment.
    The result of these incentives is that many people adopt an Islamic 
tenor because it is an effective mechanism to support charitable 
activities, which means that not all Islamic charities are equally 
Islamic. In some instances, individuals use the term ``Islamic'' like 
an advertising gimmick to attract attention and support. In one 
example, an organizer in Aqaba in southern Jordan formed an Islamic 
charity under dubious circumstances. He was a well known alcoholic 
whose personal behavior hardly emulated well accepted religious norms 
of propriety. There was nothing particularly religious about his 
organization.
    Despite this less savory example, most Islamic charities are formed 
by groups of friends who share a common concern about local 
neighborhood conditions or helping the poor. The founders and 
volunteers at these organizations are not necessarily conservative 
religious Muslims; many are simply driven by a general concern with 
helping others and charity. Islamic charities formed by such groups are 
often as much spaces for social gatherings as centers for the 
distribution of charity. They provide an opportunity for friends and 
neighbors to reinvigorate social ties while providing a service to the 
community.
    Still other Islamic charities are affiliated with organized Islamic 
movements. Movements such as the Muslim Brotherhood in Jordan and Islah 
in Yemen have extensive networks of charitable organizations. These are 
large scale, moderate, nonviolent movements that operate schools, 
welfare centers, vocational training centers, orphanages, and an 
assortment of other grassroots activities. Whereas Islamic charities 
formed by ordinary groups of people from local neighborhoods are often 
charities with an Islamic face (``Islamic lite,'' if you will), 
charities formed by Islamic movements are tied to the mission of the 
movement. The Muslim Brotherhood in Jordan, for example, uses its 
charities to provide jobs and other patronage benefits for its members, 
mobilize support in society for elections, and propagate the movement 
message about the need to establish religious change in society and the 
state. (It is important to note that connections between Islamic 
movements and charities are not always formal, organizational linkages; 
in many instances the charities are run and staffed by movement members 
acting as individuals rather than as representatives of the movement. 
In such cases, there are separate administrative structures, but the 
spirit and mission generally remain the same.)
    This indicates that Islamic charities are not homogenous and can 
differ dramatically. I have visited Islamic charities where the members 
dressed in blue jeans and T-shirts, did not have the traditional 
Islamic beard, played ping-pong, and rarely discussed religion. At 
other organizations, the members had well manicured, thick beards, wore 
traditional Islamic robes, and were deeply immersed in religious study. 
Islamic charities are characterized by an immense diversity that should 
be appreciated when investigating possible ties between charitable 
activities and terrorism.
    To determine what makes Islamic charities particularly ``Islamic,'' 
we need to also examine their actual activities. In point of fact, the 
charity work at most Islamic and secular organizations is basically the 
same. When asked what makes their activities Islamic, most organizers 
at Islamic charities answer in terms of the intentions of those who 
volunteer. They are inspired by the mores of Islam, which require that 
people help one another and provide charity to the community. While 
these are certainly noble reasons, they do not differ from the motives 
of those who volunteer at secular or non-Islamic charities. It is 
therefore typically the volunteers' own view of their actions and 
identity that defines them as engaged in particularly Islamic charity. 
The exception is Islamic cultural work, which tends to directly address 

Islamic beliefs, history, and sources. Purely charitable activities, 
however, do not have a unique Islamic character in most cases (there 
are always exceptions to this, especially at organizations operated by 
Islamic movements).

Could Islamic Charities Lead A Revolution?
    Some scholars have argued that radical Islamists could use 
charitable organizations to inspire and lead a revolution. The typical 
argument posits that charities can be used as recruitment vehicles, 
fundraising devices, and centers for violence since they are socially 
situated to tap into the grievances and discontent of the poor. In 
other words, providing charity allows radicals to turn the 
``mobilization potential'' of the disaffected, marginalized members of 
society (especially young men) into ``actual mobilization.'' Certainly 
this is always a possibility, but it is unlikely for several reasons.

Established Islamic Charities Are Tightly Regulated By The State
    All Muslim countries have very strict legal and bureaucratic 
requirements that, in essence, prevent Islamic charities from being 
used for revolutionary purposes. The government must approve the 
purpose of the movement, its activities, its memberships, the board of 
directors, and any changes. Charities are generally required to report 
all facets of their operations to the government, including all 
financial transactions (and there are supposed to be audits to 
ascertain how money is spent). Informants, routine inspections, and 
surprise visits are used to ensure that all regulations are followed. 
And the government reserves the right to dissolve the organization, 
change its leadership, expel particular members, and reorganize the 
charity if it believes the organization is being used for any kind of 
``antigovernment'' or illegal activities. In other words, the 
government maintains tight control over registered Islamic charities.
    Of course, regulation and oversight do break down. This is most 
likely to occur in large countries, such as Egypt, with thousands of 
Islamic charities. The sheer volume creates logistical difficulties, 
especially where the bureaucracy responsible for oversight is corrupt 
and inefficient. In smaller countries, such as Jordan, however, 
oversight is efficient and its strict, and the chances of radicals 
creating an Islamic charity are low. Although a small handful might 
slip through the bureaucratic net, a massive network of radical Islamic 
charities would be difficult to miss.
    An additional problem for oversight, again especially in large 
countries, is the 
assortment of illegal Islamic charities that operate without permits. 
Radicals are much more likely to establish informal charitable 
organizations since they can avoid the eyes of the bureaucracy. But 
these are difficult to expand since accumulated growth increases the 
probability of detection by state authorities. The more people you 
reach and involve, the greater the prospects that someone will inform 
the 
government.
    A more likely scenario is that radicals will attempt to take over 
already established Islamic charities, rather than form their own. In a 
number of cases, radicals have launched campaigns to take over the 
board of directors at particular charitable societies. Most boards are 
elected democratically, but elections suffer from extremely low voter 
turn out. As a result, well organized, disciplined radicals have 
attempted to gain control through democratic means. In most cases that 
I am aware of, however, more moderate elements have succeeded in 
beating back the radical campaign. Governments, such as Egypt, have 
enacted laws requiring minimal voter turnout for board elections in an 
effort to prevent radicals from taking advantage of apathy. But the 
possibility still exists.

Some Islamic Charities Are Tied To The State
    To call Islamic charities ``nongovernmental organizations'' (NGO's) 
is somewhat misleading. While Muslim governments might like to claim 
that the proliferation of Islamic charities is endemic of the freedom 
of association in society, these regimes maintain strong relationships 
with some of these organizations. In particular, governments at times 
provide funding for Islamic charities, which gives the regime 
certain prerogatives and influence in the affairs of the various 
organizations. In communities where resources are scarce, this 
government funding can be essential for survival. Organizations that do 
not receive government money must scrounge for themselves, and some are 
very likely to limit their activities or close for financial reasons. 
Government favoritism is directed toward moderate, nonpoliticized, 
Islamic charities; and radicals have very little opportunity to tap 
into this resource.
    Governments also help Islamic charities through nonfinancial 
incentives. Some may provide physical space to hold charitable events. 
Others co-sponsor programs and activities of mutual interests. And in 
many cases, well-connected individuals serve on the board of directors 
at Islamic charities. Because of the horrendous red tape that is 
notorious in many Muslim countries, registration or any changes that 
require governmental approval can take years to address. Well-connected 
individuals with contacts in the bureaucracy and government can be 
essential for an Islamic charity to bypass this inefficiency. 
Government or former government officials are therefore an enormous 
asset to Islamic charities, which do not hesitate to utilize all 
connections possible. Government ties to Islamic charities obviously 
serve as an obstacle for radicals seeking to expand their influence 
through charitable activities.

Islamic Charities Compete With One Another
    It is a misnomer that there is a vast, coordinated, network of 
Islamic charities that could be utilized by radicals as an 
organizational matrix for revolution. Because of scarce resources, 
Islamic charities are more likely to compete with one another than 
cooperate. They are concerned about attracting beneficiaries, raising 
funds in competitive donor environments, getting support from local 
communities with little disposable income, and presenting themselves as 
the most effective Islamic charity in the area. Under these conditions, 
the charities are frequently at odds with one another.
    Where cooperation does take place, it is usually because a single 
Islamic movement controls several different Islamic charities. Such 
coordination simply represents the cooperation of different branches of 
the same movement or group. For Islamic charities with no Islamic 
movement affiliation, however, this kind of cooperation at the 
organizational level is rare (though it does occur). Any cooperation 
usually takes place at the individual, as opposed to organizational, 
level because 
individuals belong to more than one Islamic charity.
    For these reasons, radicals would find it difficult to penetrate a 
critical mass of Islamic charities and create a large charity network 
that supports the cause of violence. Even if they succeed in 
penetrating a particular organization, this does not inevitably lead to 
broader access to other charities. And it would be difficult for 
radicals to take over the charitable organizations of moderate Islamic 
movements, which are frequently wary of cooperating with more radical 
fundamentalists, especially where this might endanger the movement's 
institutions because of state reprisals or crackdowns.

Islamic Charities Are Based In Middle-Class Networks
    Because of the operational needs of Islamic charities as 
organizations, most are rooted in middle-class networks. To survive, 
Islamic charities need to raise funds and attract suitable employees, 
especially middle-class professional such as doctors and teachers. As a 
result, most Islamic charities are located not in poor neighborhoods, 
which one might expect given their charity mission, but rather in 
middle-class communities. The middle class can provide donations and 
building materials to the charity, offer in-kind services, generate the 
needed professionals to work at an organization, and pay at least 
moderate fees for service usage. This means that there is an important 
distinction between Islamic charities designed to help the poor and 
Islamic charities that are directed to meet the needs of the middle 
class. The latter tend to predominate and are primarily directed toward 
providing employment opportunities, low-cost medical care, educational 
opportunities, and other services to the middle class.
    Given that radicals have had little success in co-opting and 
recruiting the middle class en masse, its ability to penetrate middle-
class networks remains limited. Certainly, professionals from the 
middle class have joined militant organizations, but they are a 
minority and usually constitute the elite of the radical corps. The 
rank and file tend to instead come from the less educated strata of 
society.
    Where they do support Islamism, middle-class professionals 
typically prefer moderate Islamic groups and movements. Radicalism is 
usually not in their self-interest since the middle class would best 
benefit from a reform of the system rather than its overthrow. Middle-
class professionals want access to employment, an end to corruption, 
and better social services for society. Reform, not revolution, would 
most likely achieve this.
    In addition, middle-class professionals who work at Islamic 
charities often do so as secondary or tertiary jobs to augment their 
income from government employment. During the day, many work at the 
ministry of education, ministry of religion, or ministry of health, and 
later moonlight at Islamic charities. For some of these people, 
overthrowing the system would mean instant unemployment. They are, 
therefore, wary of the panacea offered by radicals.

Conclusion
    This statement is meant to illustrate three basic points about 
Islamic charities: (1) while some Islamic charities do support violent 
Islamic groups or serve as fronts for al Qaeda, the vast majority 
simply seek to alleviate the dire socioeconomic con-
ditions of local societies; (2) Islamic charities reflect varying 
levels of religious adherence and should be understood as a diverse 
organizational community; and (3) radicals would have difficulty using 
Islamic charities as the basis for revolutionary activism. The 
consequence of such an argument is that the war on terrorism should 
refrain from generalizing about Islamic charities based upon outlier 
cases.

Suggested Reading on Islamic Charities
    Clark, Janine. Islam, Social Welfare, and the Middle Class: 
Networks, Activism, and Charity in Egypt, Yemen, and Jordan. 
Bloomington, IN: Indiana University Press, November 2003.
    Sullivan, Denis J. Private Voluntary Organizations in Egypt: 
Islamic Development, Private Initiative, And State Control. 
Gainesville, FL: University of Florida Press, 1994.
    Wickham, Carrie Rosevsky. Mobilizing Islam: Religion, Activism and 
Political Change in Egypt. New York: Columbia University Press, 2002.
    Wiktorowicz, Quintan. The Management of Islamic Activism: Salafis, 
the Muslim Brotherhood, and State Power in Jordan. Albany, NY: State 
University of New York Press, 2001.

                               ----------

                PREPARED STATEMENT OF MATTHEW A. LEVITT
                   Senior Fellow in Terrorism Studies
             The Washington Institute for Near East Policy
                             August 1, 2002

Introduction
    The synchronized suicide attacks of September 11 highlighted the 
critical role financial and logistical support networks play in the 
operations of international terrorist organizations. According to 
financial profiles released by the FBI, the attacks cost an estimated 
$500,000.\1\ Unfortunately, the network of international terrorist 
financing is both established and sophisticated.
---------------------------------------------------------------------------
    \1\ Paul Beckett, ``September 11 Attacks Cost $303,672; Plot Papers 
Lacking, FBI Says,'' The Wall Street Journal, May 15, 2002.
---------------------------------------------------------------------------
    The investigative value of following the trail of terrorist 
financing has long been known. Then-FBI Director Louis Freeh testified 
before Congress in 1999 that a shortage of funds prevented the 1993 
attack on the World Trade Center from being as devastating as it 
otherwise could have been. After his capture in 1995, Ramzi Yousef, the 
convicted mastermind behind the 1993 bombing and other attacks, 
admitted that the terrorists were unable purchase sufficient material 
to build as large a bomb as they had intended because they were 
strapped for cash. In fact, the operation itself was rushed and carried 
out earlier than planned because the cell simply ran out of money. In 
the end, the terrorists' attempt to reclaim the deposit fee on the 
rental truck used to transport the bomb provided a key break in the 
case.\2\
---------------------------------------------------------------------------
    \2\ http://www.fbi.gov/congress99/freehct2.htm.
---------------------------------------------------------------------------
    The al Qaeda suicide hijackings underscored the post-blast, 
investigative utility of tracking the money trail, but they also drove 
home the critical need to preemptively deny terrorists the funds they 
need to conduct their attacks. Early financial leads in the September 
11 investigation established direct links between the hijackers of the 
four flights, identified co-conspirators, and led investigators to 
logistical and financial support cells in Germany and elsewhere in 
Europe, as well as in the Gulf. Financial leads led investigators to 
key al Qaeda operatives and money-men such as Ramzi bin al Shibh in 
Germany and Mustafa Ahmed al Hasnawi in the United Arab Emirates. 
Financial analysis provided some of the earliest evidence proving the 
synchronized suicide hijackings were an al Qaeda operation, and linked 
the German cell, the hijackers, and Zacarias Moussaoui. Wire transfers 
between Moussaoui and bin al Shibh played a crucial role leading to 
Moussaoui's indictment for his role in the attacks. Financial 
investigation also established links between Moussaoui and the members 
of the al Qaeda associated cell of Jama'ah al Islamiah terrorists 
arrested in Malaysia.\3\
---------------------------------------------------------------------------
    \3\ http://www.fbi.gov/congress02/lormel021202.htm.
---------------------------------------------------------------------------
    Effective though it may be, stemming the flow of terrorist 
financing will not stamp out terrorism. In fact, unlike polio or small 
pox, terrorism cannot be eradicated. There will always be grievances, 
causes, conditions that, coupled with a healthy dose of evil, will lead 
people to target civilian noncombatants for political purposes or even 
as a means in itself. The primary responsibility of all states, 
however, is to protect their citizenry, and to that end it is incumbent 
upon all states to employ the full range of protective, deterrent, and 
preventive counterterrorism measures available in an effort to provide 
for the security of its populace. The fact that terrorism cannot be 
eliminated does not absolve states of the responsibility to fight it as 
vociferously as possible.
    In this regard, tackling terrorist financing represents a critical 
and effective tool both in reacting to terrorist attacks and engaging 
in preemptive disruption efforts to prevent future attacks. Often, as 
was the case in the investigation of the September 11 attacks, 
financial transactions provide the first and most concrete leads for 
investigators seeking to flush out the full scope of a terrorist 
attack, including the identities of the perpetrators, their logistical 
and financial support networks, links to other terrorists, groups, and 
accomplices. Since September, the U.S. Government has spearheaded a 
groundbreaking and comprehensive disruption operation to stem the flow 
of funds to and among terrorist groups. Combined with the unprecedented 
law enforcement and intelligence effort to apprehend terrorist 
operatives worldwide, which constricts the space in which terrorists 
can operate, cracking down on terrorist financing denies terrorists the 
means to travel, communicate, procure equipment, and conduct attacks.

The Network of Terrorist Financing
    Cracking down on terrorist financing demands an all-encompassing 
approach to have any chance of successfully disrupting terrorist 
activity, targeting the full array of groups, individuals, businesses, 
banks, criminal enterprises, and humanitarian organizations that 
finance terrorism.
    At the most macro level, financial blocking orders must include the 
terrorist groups themselves in an effort to seize any funds they may 
have in their own name. Realistically, terrorist groups tend not to 
open bank accounts under their organization's name, especially in the 
West. Nonetheless, the message is important, and there are in fact 
cases, such as Hezbollah in Lebanon, where groups operate openly and 
have accounts in their own or other known names. More significantly, 
listing the groups themselves subjects other entities that support them 
to scrutiny as well. Should the Islamic Action Front in Jordan or the 
Muslim Brotherhood in Egypt openly state their financial support for 
Hamas, for example, they could be subject to financial penalties 
themselves despite the fact that they are not listed in any of the 
terrorist lists published by the United States or others.
    Individuals who support terrorism play a critical role in financing 
terror, highly disproportionate to their numbers. Unfortunately, a few 
wealthy individuals are able to sponsor much terror. For example, 
Mustafa Ahmed al Hasnawi, the Saudi national and bin Laden money man, 
sent the September 11 hijackers operational funds and had received at 
least $15,000 in unspent funds before leaving the UAE for Pakistan on 
September 11. According to U.S. officials, Yasin al Qadi, a prominent 
Jedda businessman and the head of the Muwafaq Foundation, has supported 
a variety of terrorist groups from al Qaeda to Hamas. According to U.S. 
court documents, in 1992 al Qadi provided $27,000 to U.S.-based Hamas 
leader Muhammad Salah and lent $820,000 to a Hamas front organization 
in Chicago, the Quranic Literacy Institute (QLI). Based on their 
connection to Hamas, the U.S. Government has frozen the assets of both 
Salah and QLI. Similarly, U.S. officials maintain that the Muwafaq 
Foundation is a front organization through which wealthy Saudis forward 
millions of dollars to al Qaeda. In another example, Israeli 
authorities arrested Osama Zohadi Hamed Karika, a Hamas operative, as 
he attempted to leave Gaza via the Rafah border crossing in December 
2001. Karika was found with documents detailing the development of the 
Qassam rockets, and admitted under questioning that he was on his way 
to Saudi Arabia to brief unidentified persons on the development of the 
rockets and to obtain their funding for the project. Before his arrest, 
Karika had already made one successful trip to Saudi Arabia where he 
secured initial funding for Hamas' Qassam rocket program.\4\
---------------------------------------------------------------------------
    \4\ Amos Harel, ``Saudis Help Hamas with Rocket Project,'' Haaretz 
Daily, January 3, 2002.
---------------------------------------------------------------------------
    Investigation into al Qaeda sleeper cells in Europe in the wake of 
September 11 revealed the widespread use of legitimate businesses and 
employment by al Qaeda operatives to derive income to support both 
themselves and their terrorist activities. According to Congressional 
testimony by a senior FBI official, a construction and plumbing company 
run by members of an al Qaeda cell in an unnamed European country hired 
mujahadin (holy warriors) arriving from places like Bosnia where they 
had fought what they considered a Jihad (holy war). Cell members ran 
another business buying, fixing, and reselling used cars, and in these 
and other examples cell members deposited their legitimate salaries, 
government subsidies, supplemental 
income from family members, and terrorist funds received by cash or 
wire transfer into the same one or two accounts.\5\
---------------------------------------------------------------------------
    \5\ http://www.fbi.gov/congress/congress02/lormel021202.htm.
---------------------------------------------------------------------------
    International and unofficial banking systems have also played a 
role in terrorist financing. For example, the Treasury Department froze 
the assets of 62 organizations and individuals associated with the al 
Barakat and al Taqwa financial networks in November 2001. Federal 
agents raided these groups' offices across the United States, and 
subsequently in Europe and the Bahamas as well. In his remarks at the 
time, President Bush stated that the two institutions provided 
fundraising, financial, communications, weapons-procurement, and 
shipping services for al Qaeda. A few months later, Deputy Assistant 
Secretary of the Treasury Department Jamie C. Zarate testified before 
Congress that ``in 1997, it was reported that the $60 million collected 
annually for Hamas was moved to accounts with Bank al Taqwa.'' \6\ Al 
Taqwa shareholders reportedly include known Hamas members and 
individuals associated with a variety of organizations linked to al 
Qaeda. A 1996 report by Italian intelligence reportedly further linked 
al Taqwa to Palestinian groups, the Algerian Armed Islamic Group (GIA) 
and the Egyptian Gama'at al Islamiyah.\7\
---------------------------------------------------------------------------
    \6\ Testimony of Juan C. Zarate, Deputy Assistant Secretary, 
Terrorism and Violent Crime, U.S. Department of the Treasury, House 
Financial Subcommittee Oversight and Investigations, February 12, 2002.
    \7\ Lucy Komisar, ``Shareholders in the Bank of Terror?'' 
Salon.com, March 15, 2002; and Mark Hosenball, ``Terror's Cash Flow,'' 
Newsweek, March 25, 2002.
---------------------------------------------------------------------------
    Criminal enterprises have also serviced the spread of terrorism, 
especially as central nodes in the matrix of terrorist financing. Ahmad 
Omar Sayed al Sheikh, now on trial for the abduction and murder of Wall 
Street Journal Reporter Daniel Pearl, linked up with Aftab Ansari, a 
prominent figure in the Indian mafia, to provide al Qaeda with 
recruits, false documents, safe houses and proceeds from kidnappings, 
drug trafficking, prostitution, and other crime.\8\ Officials in the 
Balkans are equally concerned about developing links between terrorism 
and mafia activity in Chechnya and other parts of the Caucuses 
spreading to Albania, Bosnia, and beyond Southern Europe. Authorities 
in Belgium have issued an arrest warrant for Victor Bout, a notorious 
arms trafficker suspected of supplying weapons to the Taliban and al 
Qaeda as well as warring factions throughout the African continent in 
an elaborate guns-for-diamonds scheme.\9\ Al Qaeda and The 
Revolutionary Armed Forces of Columbia (FARC) each raised millions of 
dollars in drug money to support their operations. Smuggling, 
kidnapping, and extortion are also well-established techniques employed 
by various terrorist groups. For example, Mohammed and Chawki Hamoud 
are currently on trial in Charlotte, North Carolina, on a variety of 
charges including funding the activities of Hezbollah from the proceeds 
of an interstate cigarette smuggling ring. Seven other defendants have 
already pled guilty to a variety of charges stemming from this case, 
including conspiracy to provide material support to terrorists, 
cigarette smuggling, money laundering, and immigration violations.
---------------------------------------------------------------------------
    \8\ Paul Watson and Sidhartha Barua, ``Worlds of Extremists and 
Crime Collide in Indian Jail,'' Los Angeles Times, February 8, 2002.
    \9\ Donald G. McNeil, Jr., ``Belgium Seeks Arms Dealer with 
Suspected Qaeda Ties,'' The New York Times, February 27, 2002.
---------------------------------------------------------------------------
    Each of these trends is significant in its own right, and all the 
more so when applied in tandem. Humanitarian organizations, however, 
have played a particularly disturbing role in terrorist financing, and 
present a especially sensitive challenge as authorities are faced with 
discerning between legitimate charity organizations, those unknowingly 
hijacked by terrorists who then divert funds to finance terrorism, and 
others proactively engaged in supporting terrorist groups. A key 
challenge that arises in this regard as governments balance the need to 
share information linking such organizations to terrorism in against 
the cost of exposing intelligence sources and methods.

Charitable and Humanitarian Organizations
    Long before September 11, officials were aware that financial 
networks of charitable and humanitarian organizations were financing 
terror. Investigators looking into the 1993 World Trade Center attack 
traced funding for the operation back to a company that imported Holy 
Water from Mecca to Pakistan.\10\ In 1997, Canada cut all its 
government funding to Human Concern International, a Canada-based 
charity then under investigation in both Canada and the United States, 
for the group's ``terrorist connections.'' \11\
---------------------------------------------------------------------------
    \10\ Mark Huband, ``Bankrolling bin Laden,'' Financial Times, 
November 29, 2002.
    \11\ Judith Miller, ``Some Charities Suspected of Terrorist Role; 
U.S. Official See Muslim Groups Linked to bin Laden and Others,'' The 
New York Times, February 9, 2000.
---------------------------------------------------------------------------
    Only now, however, is the trend receiving the attention it 
deserves. Ambassador Francis X. Taylor, the State Department's 
Coordinator for Counterterrorism, recently noted that ``any money can 
be diverted if you do not pay attention to it. And I believe that 
terrorist organizations, just like criminal enterprises, can bore into 
any legitimate enterprise to try to divert money for illegitimate 
purposes.'' \12\ While such manipulation is a tremendous concern, an 
even more disturbing trend has 
become evident in the efforts of some charitable and humanitarian 
organizations to knowingly and proactively raise funds for terrorist 
groups. Often, leaders of such 
organizations raise funds both from individuals seeking to fund 
terrorist groups, as well as innocent contributors unwitting of the 
groups' links to terrorists.
---------------------------------------------------------------------------
    \12\ ``State's Taylor Summarizes Annual Global Terrorism Report,'' 
Washington File, U.S. Department of State, International Information 
Programs, May 21, 2002, at http://www.usinfo.
state.gov/topical/pol/terror/0202105.htm.
---------------------------------------------------------------------------
Financing Terrorism
    On December 14, 2001, Federal officials raided the offices of the 
Global Relief Foundation in Chicago and froze its assets. The group's 
offices in Kosovo were also raided by NATO forces a few days later 
after NATO was provided ``credible intelligence information'' that the 
group was ``allegedly involved in planning attacks against targets in 
the United States and Europe.'' \13\ Global Relief raised more than $5 
million in the United States last year. While much--perhaps most--of 
these funds likely went to legitimate causes, investigators maintain 
the organization served as an important front organization for al 
Qaeda. Ongoing international terrorism investigations have raised 
further reason for concern. For example, according to information 
provided by the Spanish Interior Ministry, a senior bin Laden financier 
arrested in Spain, Mohammed Galeb Kalaje Zouaydi, transferred to 
several individuals linked to the bin Laden network, including $205,853 
to the head of the Global Relief office in Belgium, Nabil Sayadi (alias 
Abu Zeinab).\14\
---------------------------------------------------------------------------
    \13\ Philip Shenon, ``U.S.-Based Muslim Charity Raided by NATO in 
Kosovo,'' The New York Times, December 18, 2001.
    \14\ Carlta Vitzthum and Keith Johnson, ``Spain Detains al Qaeda 
Financier in Flurry of Europe Terror Arrests,'' The Wall Street 
Journal, April 25, 2002.
---------------------------------------------------------------------------
    While September 11 highlighted the al Qaeda terrorist network, bin 
Laden and his terrorist affiliates are by no means the only groups 
using humanitarian organizations to finance their terrorist activities.
    On January 4, 2001, FBI agents and New York City police raided the 
Hatikva Center, a community center in Brooklyn run by followers of 
Rabbis Meir Kahane and Benjamin Kahane, father and son and founders of 
the Jewish terrorist groups Kach and Kahane Chai, respectively. The 
underlying affidavit supporting the search warrant were sealed, but it 
is clear officials seized a trailer full of material searching for 
evidence the organization was providing material support to either Kach 
or Kahane Chai, both of which are designated Foreign Terrorist 
Organizations by the U.S. Department of State.\15\
---------------------------------------------------------------------------
    \15\ Dean A. Murphy, ``FBI Raids Brooklyn Office of Kahane 
Followers,'' The New York Times, January 5, 2001.
---------------------------------------------------------------------------
    More recently, on December 4, 2001, the Bush Administration exposed 
the Holy Land Foundation for Relief and Development as a front 
organization for Hamas. According to its year 2000 tax return, Holy 
Land Foundation (HLF) total revenue 
exceeded $13 million. In a detailed 49-page memorandum, the U.S. 
Government established that these funds were used by Hamas to support 
schools and indoctrinate children to grow up into suicide bombers. 
Money raised by the Holy Land Foundation was also used by Hamas to 
recruit suicide bombers and to support their families. Five days before 
the September 11 attacks, the FBI raided the offices and froze the 
assets of Infocom, an Internet company that shares personnel, office 
space, and board members with the Holy Land Foundation, officials said. 
The two organizations were formed in California around the same time, 
and both received seed money from Hamas leader and Specially Designated 
Terrorist Mousa Abu Marzook. The HLF relied heavily on local zakat 
(charity) committees in the West Bank and Gaza to funnel funds to 
Hamas. The FBI memorandum establishes that known Hamas activists ran 
the zakat committees in question, in whole or in part. For example, the 
memorandum reported that a financial analysis of HLF bank records 
indicated the foundation donated over $70,000 to the Tulkarm zakat 
committee from 1997 through 1999. Among the senior Hamas members 
affiliated with the Tulkarm zakat committee are Hamas Mohmammed Hamed 
Qa'adan, head of the Tulkarm zakat committee, and Ibrahim Muhammad 
Salim Salim Nir Al Shams, a member of both the Tulkarm zakat committee 
and the Supreme Hamas leadership in Nur Al Shams, among others. 
According to information provided by the Government of Israel, the 
Tulkarm zakat committee ``exists to support Hamas activities.'' \16\
---------------------------------------------------------------------------
    \16\ ``Holy Land Foundation for Relief and Development, 
International Emergency Economic Powers Acts, Action Memorandum,'' FBI 
Memorandum from Mr. Dale L. Watson, Assistant Director for 
Counterterrorism, FBI, to Mr. R. Richard Newcomb, Director of the 
Office of Foreign Assets Control, U.S. Department of the Treasury, 
November 15, 2001.
---------------------------------------------------------------------------
    A key Saudi charity linked to terrorist financing is the al Wafa 
Humanitarian Organization. U.S. officials have described al Wafa as a 
key component of bin Laden's organization. One official was quoted as 
saying that al Wafa and other groups listed ``do a small amount of 
legitimate humanitarian work and raise a lot of money for equipment and 
weapons.'' \17\ For example, Abdul Aziz, a Saudi citizen, senior al 
Qaeda finance official, and Camp X-Ray prisoner, allegedly financed al 
Qaeda activities through Wafa.\18\
---------------------------------------------------------------------------
    \17\ Laurie P. Cohen, Glenn Simpson, Mark Maremont, and Peter 
Fritsch, ``Bush's Financial War on Terrorism Includes Strikes at 
Islamic Charities,'' The Wall Street Journal, September 25, 2001.
    \18\ John Mintz, ``From Veil of Secrecy, Portraits of U.S. 
Prisoners Emerge,'' The Washington Post, March 15, 2002, p. A3.
---------------------------------------------------------------------------
    The U.S. offices of a number of Saudi organizations were raided in 
Northern Virginia in March 2002. Among others, the offices of the SAAR 
Foundation, the Safa Trust, and the International Institute for Islamic 
Thought (IIIT) were raided, most of which shared office space. The SAAR 
Foundation had recently closed, but was of particular concern because 
of the close links between the Saudi Royal family its founder, the 
Saudi banker Shiekh Suleiman Abdel Aziz al Rajhi (initials SAAR). Tarik 
Hamdi, an IIIT employee, personally provided bin Laden with the battery 
for the satellite phone prosecutors at the New York trial of the East 
Africa Embassy bombers described as ``the phone bin Laden and others 
will use to carry out their war against the United States.'' \19\ Both 
SAAR and IIIT are also suspected of financing HAMAS and Palestinian 
Islamic Jihad (PIJ), including the World and Islamic Studies Enterprise 
(WISE) and the Islamic Committee for Palestine (ICP), PIJ fronts since 
closed in Florida.\20\
---------------------------------------------------------------------------
    \19\ Judith Miller, ``Raids Seek Evidence of Money Laundering,'' 
The New York Times, March 21, 2002.
    \20\ Christopher H. Schmitt, Joshua Kurlantzick, and Philip 
Smucker, ``When Charity Goes Awry,'' U.S. News & World Report, October 
29, 2001.
---------------------------------------------------------------------------
    The assets of both Ghaleb Himmat and the al Taqwa banking network 
of which he is an executive have been frozen for links to terrorism. 
Himmat, reported in a German intelligence report to have expressed 
``pleasure'' over the news of the September 11 attacks, is also a Board 
Member of the Geneva section of the Kuwiat-based International Islamic 
Charitable Organization (IICO).\21\ The IICO's Palestine Charity 
Committee (PCC), headed by Nader al Nouri, sends its funds through 
``trusted zakat committees'' in the Palestinian territories, \22\ many 
of which are linked to Hamas.
---------------------------------------------------------------------------
    \21\ Mark Huband, ``Bankrolling bin Laden,'' Financial Times, 
November 29, 2002.
    \22\ ``All Forms of Suppression Rejected: Firm Support for 
Uprising,'' Kuwait Times, November 6, 2000.
---------------------------------------------------------------------------
Facilitating Terrorism
    Several charitable and humanitarian organizations have not only 
financed terrorist groups, but actively facilitated terrorist 
operations. Several humanitarian 
organizations such as the Mercy International Relief Organization 
(Mercy) played central roles in the 1998 U.S. Embassy bombings. At the 
New York trial of four men convicted of involvement in the Embassy 
attacks, a former al Qaeda member named several charities as fronts for 
the terrorist group, including Mercy. Documents presented at the trial 
demonstrated that Mercy smuggled weapons from Somalia into Kenya, and 
Abdullah Mohammad, one of the Nairobi bombers, delivered eight boxes of 
convicted al Qaeda operative Wadi el Hage's belongings--including false 
documents and passports--to Mercy's Kenya office.
    Along with Mercy, the Kenyan government also banned the 
International Islamic Relief Organization (IIRO) after the Embassy 
bombings.\23\ From 1986 to 1994, bin Laden's brother-in-law, Muhammad 
Jamal Khalifa, headed the IIRO's Philippine office, through which he 
channeled funds to terrorist groups affiliated with al Qaeda, including 
Abu Sayyaf. In November and December 2001, Philippine police arrested 
four Arabs associated with the Moro Islamic Liberation Front (MILF) and 
described them as an al Qaeda ``sleeper cell.'' Mohammad Sabri, one of 
the four men arrested, is a Palestinian who, according to Philippine 
police, worked closely with Khalifa in running the IIRO office.\24\ In 
January 1999, Indian police foiled a plot to bomb the U.S. consulates 
in Calcutta and Madras. The mastermind behind the plot was Sayed Abu 
Nasir, an IIRO employee who received terrorist training in 
Afghanistan.\25\ In 2001, Canadian authorities detained Mahmoud 
Jaballah based on an Interpol warrant charging him with being an 
Egyptian Islamic Jihad terrorist. In 1999, Canadian officials attempted 
to deport Jaballah based on his work for IIRO and what they described 
as IIRO's involvement in terrorism and fraud.\26\ The IIRO came up in 
the investigation into the September 11 attacks as well: Hijacker Fayez 
Ahmed reportedly told his father he was going abroad to work for IIRO 
when he left for the suicide mission. Documents seized by Israeli 
forces during recent operations in the West Bank include records from 
the Tulkarm zakat committee, the same Hamas-controlled committee noted 
above, indicating that the IIRO donated at least $280,000 to the 
Tulkarm zakat committee and others Palestinian organizations linked to 
Hamas. \27\
---------------------------------------------------------------------------
    \23\ Dexter Filkins, ``Attacks on U.S. Mission Foiled, Indian 
Police Say,'' Los Angeles Times, 
January 21, 1999, Page A4.
    \24\ Jay Solomon, ``Manila Suspends Talks with Rebels After 
Allegations of al Qaeda Links,'' The Wall Street Journal, March 12, 
2002.
    \25\ Dexter Filkins, ``Attacks on U.S. Missions Foiled, Indian 
Police Say,'' Los Angeles Times, January 21, 1999.
    \26\ Laurie P. Cohen, Glenn Simpson, Mark Maremont, and Peter 
Fritsch, ``Bush's Financial War on Terrorism Includes Strikes at 
Islamic Charities,'' The Wall Street Journal, September 25, 2001.
    \27\ Israeli report provided to the U.S. Government entitled 
``Large Sums of Money Transferred by Saudi Arabia to the Palestinians 
are Used for Financing Terror Organizations (particularly the Hamas) 
and Terrorist Activities (including Suicide Attacks Inside Israel),'' 
May 3, 2002.
---------------------------------------------------------------------------
    Like many other Saudi humanitarian organizations, IIRO is part of 
the Muslim World League, which is funded and supported by the Saudi 
government (in fact, the Muslim World League and IIRO share offices in 
many locations worldwide).\28\ A senior League official in Pakistan, 
Wael Hamza al Jlaidan, is listed on the Treasury's terrorist financial 
blocking order list.\29\ In March 2002, the Northern Virginia offices 
of both the IIRO and Muslim World League were raided by a Treasury 
Department task force searching for evidence they were raising or 
laundering funds for al Qaeda, Hamas or PIJ.\30\ Attempting to mask the 
League's radical agenda, League officials recently completed a U.S.-
tour aimed at ``improving the image of Muslims among Americans,'' an 
admirable objective if not for the group's established links to 
terrorist organizations and proactive terrorist financing.\31\
---------------------------------------------------------------------------
    \28\ Laurie P. Cohen, Glenn Simpson, Mark Maremont, and Peter 
Fritsch, ``Bush's Financial War on Terrorism Included Strikes at 
Islamic Charities,'' The Wall Street Journal, September 25, 2001 and 
Stewart Bell, ``Quebec Group Tied to al Qaeda Money Web: Virginia 
Office Raided,'' National Post (Toronto), March 21, 2002, p. A1.
    \29\ http://www.treasury.gov/offices/enforcement/ofac/sanctions/
terrorism.html.
    \30\ Judith Miller, ``Raids Seek Evidence of Money Laundering,'' 
The New York Times, March 21, 2002.
    \31\ ``Saudi Group Claims Success in U.S. Tour,'' Middle East News 
Line/MENL, July 19, 2002.
---------------------------------------------------------------------------
    The Treasury Department has frozen the assets of other Muslim World 
League member organizations suspected of funding terrorism, including 
the Rabita Trust. Rabita, which U.S. officials says changed its name to 
the Aid Organization of the Ulema, is based in Pakistan and actively 
raised funds for the Taliban since 1999.\32\
---------------------------------------------------------------------------
    \32\ ``Freeze Ordered by U.S. on Assets of Pakistan-based Group, 9 
People,'' The Associated Press, April 20, 2002.
---------------------------------------------------------------------------
    The Al Rashid Trust, another group that funded al Qaeda and the 
Taliban, is closely associated with the al Qaeda associated Jaish 
Mohammed terrorist group. Al Rashid has been directly linked to the 
January 23, 2002, abduction and subsequent brutal murder of Wall Street 
Journal reporter Daniel Pearl in Pakistan. The attackers, linked to a 
motley crew of domestic Pakistani radical Islamic fundamentalist groups 
(including Jaish) operating in cooperation with, and on behalf of, al 
Qaeda, held Pearl in a two-room hut in the compound of a commercial 
nursery owned by al Rashid. Several madrassas, or Islamic schools, 
under construction dominate the immediate area around the nursery, the 
largest and closest of which is owned by al Rashid.\33\ Pakistani 
investigators uncovered twelve telephone calls placed by one of the 
kidnappers, a rogue policeman named Sheikh Adil, to an unidentified al 
Rashid Trust employee.\34\ A British Internet site called the Global 
Jihad Fund, which openly associates itself with bin Laden, provided the 
bank account information for al Rashid and other fronts and groups to 
``facilitate the growth of various Jihad movements around the world by 
supplying them with funds to 
purchase their weapons.'' \35\
---------------------------------------------------------------------------
    \33\ Karl Vick and Kamran Khan, ``Officials Say Body Probably is 
Pearl's; New Suspect Claims He Killed Reporter,'' The Washington Post, 
May, 18, 2002.
    \34\ Karl Vick and Kamran Khan, ``Al Qaeda Tied to Attacks in 
Pakistan Cities; Militants Joining Forces Against Western Targets,'' 
The Washington Post, May 30, 2002.
    \35\ Chris Hastings and David Bamber, ``British Cash and Fighters 
Still Flow to bin Laden,'' London Sunday Telegraph, January 27, 2001.
---------------------------------------------------------------------------
    Last October, NATO forces raided the Saudi High Commission for Aid 
to Bosnia, founded by Prince Selman bin Abdul Aziz and supported by 
King Fahd. Among the items found at the Saudi charity were before-and-
after photographs of the World Trade Center, U.S. Embassies in Kenya 
and Tanzania, and the USS Cole; maps of Government buildings in 
Washington; materials for forging U.S. State Department badges; files 
on the use of crop duster aircraft; and anti-Semitic and anti-American 
material geared toward children. Six Algerians are now incarcerated at 
Guantanamo Bay's Camp X-Ray for plotting an attack on the U.S. Embassy 
in Sarajevo, including an employee of the Saudi High Commission for Aid 
to Bosnia and another cell member who was in telephone contact with 
Osama bin Laden aid and al Qaeda operational commander Abu Zubayda. 
Authorities are now trying to track down $41 million of the 
commission's missing operating funds.
    In December, U.S. authorities raided the Chicago offices of another 
Saudi-based charity, the Benevolence International Foundation. The 
foundation's videos and literature glorify martyrdom, and, according to 
the charity's newsletter, seven of its officers were killed in battle 
last year in Chechnya and Bosnia. Four months later, the U.S. Embassy 
in Bosnia was shut down for 4 days on March 20, 2002, after Bosnian 
officials informed the Embassy of a possible threat. Al Qaeda 
terrorists reportedly met in Sofia, Bulgaria, where they decided that 
``in Sarajevo something will happen to Americans similar to New York 
last September,'' according to a Bosnian official.\36\ The day before 
the Embassy closed its doors, Bosnian police raided the offices of an 
Islamic charity called Bosnian Ideal Future, which is the local name 
under which Benevolence International operated in Bosnia. Officials 
seized weapons, plans for making bombs, booby-traps, and false 
passports.\37\ Two days before the Embassy reopened, Bosnian police 
arrested Munib Zahiragic, the head of the local Benevolence office and 
a former officer in the Bosnian Muslim secret police. Two weeks 
earlier, that Bosnian officials investigating foreign humanitarian 
organizations reported that funds were missing from the Bosnian office 
of Benevolence International.\38\
---------------------------------------------------------------------------
    \36\ ``Al Qaeda Terrorists Planned Bosnia Attack, Officials Says,'' 
Associated Press, March 23, 2002.
    \37\ Alexandar S. Dragicevic, ``U.S. Embassy in Bosnia Reopens,'' 
Associated Press, March 25, 2002.
    \38\ ``Al Qaeda Terrorists Planned Bosnia Attack, Officials Says,'' 
Associated Press, March 23, 2002.
---------------------------------------------------------------------------
    Most recently, on April 30, 2002, the foundation's executive 
director, Enaam M. Arnaout, was arrested in the United States on 
perjury charges for making false statements in a lawsuit against the 
government. Contrary to his and the foundation's statements, the 
documents and cooperating witnesses indicated that Arnaout had a 
personal relationship with both bin Laden ``and many of his key 
associates dating back more than a decade.'' In fact, bin Laden trusted 
Arnaout enough to host one of bin Laden's wives at Arnaout's apartment 
in Pakistan where bin Laden later picked her up. Arnaout reportedly 
facilitated money and weapons transfers for bin Laden through the 
foundation. According to the government's affidavit, senior al Qaeda 
operative Mamhoud Salim traveled to Bosnia on documents signed by 
Arnaout listing Salim as a director of the foundation.\39\ Mohamed 
Bayazid, a bin Laden operative involved in efforts to obtain nuclear 
and chemical weapons for al Qaeda, listed the foundation's address as 
his residence in his application for a driver's license. The foundation 
was established by a wealthy Saudi and bin Laden associate, Sheikh Adil 
Abdul Galil Betargy, who later transferred control to Arnaout.\40\
---------------------------------------------------------------------------
    \39\ Salim severely wounded a prison guard while awaiting trial at 
the Metropolitan Correctional Center in New York for his role in the 
East Africa embassy bombings. He pled guilty to attempted murder in 
April 2002.
    \40\ United States v. Benevolence International Foundation, Inc. 
and Enaam M. Arnaout, a/k/a ``Abu Mahmoud,'' a/k/a/ ``Abdel Samia'' 
Case Number 02CR0414, Northern District of Illinois, Eastern Division.
---------------------------------------------------------------------------
Disrupting the Flow of Terrorist Financing
    The phenomenon of terrorists funding their activities through 
charitable and humanitarian organizations, either as full-fledged front 
organizations or as unwitting accomplices, is clearly critical problem. 
Unfortunately, it can be equally difficult to disrupt. Discriminating 
between legitimate and nefarious charities is extremely difficult, 
partly because front organizations do not hang a shingle on their door 
identifying themselves as terrorists and partly because they actively 
attempt to hide their financing of terrorism among some legitimate 
causes they fund as well. It is especially sad that the largest Islamic 
charity organization in the United States, the Holy Land Foundation, 
abused the trust of so many charitable Muslim-Americans seeking to do 
nothing more than relieve the hardships of their co-religionists and 
others suffering throughout the world.
    While difficult, disrupting the flow of funds to terrorists is not 
impossible. Through analysis of the financial information collected on 
the September 11 hijackers and their accomplices in Europe and in the 
Gulf, the FBI quickly developed a financial profile from the hijackers' 
bank accounts and financial activity. This 
included profiles of the domestic accounts, financial transactions, 
international financial activity, and nonfinancial information gleaned 
from financial documents. Pattern analysis focused the direction of the 
ongoing international investigation toward specific countries, 
especially in Europe, and played a central role in the FBI's predictive 
effort to foil the terrorist attacks intelligence information indicated 
were still being planned.
    Since September 11, the Bush Administration has issued a series of 
financial blocking orders targeting terrorist groups, including 
terrorist organizations, front companies, and individuals. In total, 
the U.S. Government has designated some 191 individuals, organizations, 
and financial supporters of terrorism as SDTG's from around the world, 
including over $34 million in terrorist assets. Other nations have 
reportedly followed the U.S. lead. The Secretary of the Treasury 
reported that 150 ``countries and jurisdictions'' have blocking orders 
in force, and have blocked more than $70 million in assets.\41\ 
According to U.S. officials, intelligence information indicates that 
terrorist operatives are finding it increasingly difficult to gain 
access to funds needed to escape the international dragnet targeting 
them, communicate effectively between cells in different parts of the 
world, and conduct further operations.
---------------------------------------------------------------------------
    \41\ http://usinfo.state.gov/topical/pol/terror/01110711.htm.
---------------------------------------------------------------------------
International Cooperation
    Targeting a wide array of groups and organizations funding and 
transferring terrorist funds is critical, but must be conducted as part 
of a well-coordinated international effort. Many nations have followed 
the U.S. lead in this regard, blocking millions of dollars in 
terrorists' assets. This is a particularly sensitive issue, especially 
in the Middle East. In November 2001, for example, a senior U.S. 
delegation went to Saudi Arabia to solicit greater cooperation in the 
arena of tackling terrorist financing. Secretary of the Treasury Paul 
O'Neill visited again 3 months later, agreeing to quietly broaching 
concerns regarding specific humanitarian organizations with Saudi 
officials before putting them on U.S. terrorist lists. The new tactic 
fits the mold of traditional U.S.-Saudi diplomacy, and quickly bore 
fruit: the U.S. and Saudi governments jointly froze the accounts of the 
Bosnian and Somali offices of the Saudi-based al Haramain Humanitarian 
Organization just days later.\42\ Subsequent reports, however, already 
indicate that U.S. authorities are concerned that Saudi authorities are 
glossing over the terrorist connections of other humanitarian 
organizations, including the Wafa Humanitarian Organization, the 
International 
Islamic Relief Organization (IIRO) and its parent the Muslim World 
League.\43\
---------------------------------------------------------------------------
    \42\ http://www.treas.gov/press/releases/po1086.htm.
    \43\ Eli J. Lake, ``U.S. Demands Data on Islamic Charities,'' UPI, 
March 22, 2002.
---------------------------------------------------------------------------
Gaining Saudi Support
    Saudi officials have at minimum a clear pattern of looking the 
other way when funds are known to support extremist purposes. One Saudi 
official was quoted as saying that an organization created to crack 
down on charities funding terrorism does little because ``it doesn't 
want to discover top people giving to charities.'' \44\ Prince Bandar 
bin Sultan, the Saudi Ambassador to the United States, acknowledged the 
problem of tracking the money trail in a New York Times/Frontline 
interview. Bandar stated that Saudi officials ``found money leaves 
Saudi Arabia, goes to Europe and we can follow it, goes to the United 
States, America, and we lose contact with it.'' \45\
---------------------------------------------------------------------------
    \44\ Christopher H. Schmitt, Joshua Kurlantzick, and Philip 
Smucker, ``When Charity Goes Awry,'' U.S. News & World Report, October 
29, 2001.
    \45\ PBS/Frontline interview with Prince Bandar bin Sultan, at 
http://pbs.org/wgbh/pages/frontline/shows/terrorism/interviews/
bandar.html.
---------------------------------------------------------------------------
    The Saudis have taken steps to battle money laundering and to 
freeze accounts related to the September 11 conspirators, and recently 
passed new regulations governing private fundraising. Saudis are now 
encouraged to donate funds in fulfillment of their zakat obligations 
only through established groups operating under the direct patronage of 
a member of the royal family. However, as the recent case in Bosnia 
attests, many of these groups are themselves suspected of financing 
terrorism.
    Moreover, Saudi Arabia's calls for the United States to play a more 
engaged role in Middle East peacemaking appear to be self-serving in 
light of its funding of terrorist groups that seek to undermine 
Israeli-Palestinian peacemaking like Hamas. Documents made public by 
Israel indicate not only that the Saudi Ministry of the Interior funded 
Hamas, but also that it specifically highlighted the funding of 
families of ``martyrs'' who conducted ``quality attacks'' against 
Israeli civilians. \46\
---------------------------------------------------------------------------
    \46\ Israeli report provided to the U.S. Government entitled 
``Large Sums of Money Transferred by Saudi Arabia to the Palestinians 
are Used for Financing Terror Organizations (particularly the Hamas) 
and Terrorist Activities (including Suicide Attacks inside Israel),'' 
May 3, 2002.
---------------------------------------------------------------------------
Working With Europe
    Nor are divisions over terrorist financing exclusive to the Middle 
East. U.S. officials complain that European allies have contributed few 
names to the list of alleged terrorist financiers subject to financial 
blocking orders, that they have yet to act on all the names already on 
the list, and that those names European allies have added to the list 
are primarily domestic groups such as Basque and Irish groups. 
Europeans, in return, have repeatedly expressed their frustration with 
U.S. requests to add people or groups to terrorist lists while 
supplying insufficient evidence, if any.
    On May 3, 2002, the European Union (EU) added eleven organizations 
and seven individuals to its financial-blocking list of ``persons, 
groups, and entities involved in terrorist acts.'' Unfortunately, while 
the list marks the first time the EU has frozen the assets of non-
European terrorist groups, it adopts the fallacy of drawing a 
distinction between the nonviolent activities of terrorist groups and 
the terror attacks that they carry out. By distinguishing between the 
terrorist and welfare ``wings'' of Hamas, for example, the EU lent 
legitimacy to the activities of charitable organizations that fund and 
facilitate terrorist groups' activities and operations.
The American Bureaucracy
    Even within the U.S. intelligence and law enforcement community the 
financial war on terrorism has been hamstrung by bitter turf wars 
between the Departments of Treasury and Justice. The Departments have 
reportedly launched parallel task forces that do not communicate or 
share information.
    While disconcerting, operational inefficiency and territorialism 
between agencies pales in comparison to the more strategic gap in 
policymaking circles. Cracking down on terrorist financing, especially 
in the case of charitable and humanitarian organizations that 
camouflage their funding of terrorism by funding legitimate groups and 
causes as well, requires a political will that was markedly absent 
until September 11. Terrorist financing through charitable 
organizations is not unique to Islamic charities, per se, but the fact 
is that the majority of terrorist groups operating in the world today 
and targeting the United States are of the radical Islamic variety. 
Radical Islamic terrorists dominate the U.S. Government's various 
terrorist lists, and it therefore stands to reason that the majority of 
charitable organizations engaged in terrorist financing are Islamic 
organizations. While these investigations should be conducted in a 
careful and judicious fashion, sensitive to the fact that while some 
organizations are front organizations for terrorist groups other are 
unwittingly hijacked by rogue individuals, they should not be confused 
with ``Muslim bashing.''

Conclusion
    Terrorism will always exist, which is why there is no exit strategy 
to fighting terrorism. Counterterrorism is a form of conflict 
management, not conflict resolution. To bear any fruit, 
counterterrorism techniques must be as comprehensive, ongoing, and 
cooperative as possible. Cracking down on terrorist financing will only 
succeed in dismantling terrorist groups' logistical and financial 
support networks, and by 
extension preventing terrorist attacks, if the governments and agencies 
involved in the effort act in concert and, at a minimum, mirror the 
resolve, commitment, and dedicated displayed by the terrorists.

                               ----------

                        STATEMENT OF INTERACTION
                             August 1, 2002

    InterAction appreciates the opportunity to present this statement 
to the Subcommittee on International Trade and Finance of the U.S. 
Senate Committee on Banking, Housing, and Urban Affairs.
    InterAction is the largest alliance of U.S.-based international 
development and humanitarian nongovernmental organizations. With more 
than 160 members operating in all developing countries, we work to 
overcome poverty, exclusion, and suffering by advancing social justice 
and basic dignity for all.
    InterAction is greater than the sum of its parts, a force 
multiplier that gives each member the collective power of all members 
to speak and act on issues of common concern. InterAction convenes and 
coordinates its members so in unison they can influence policy and 
debate on issues affecting tens of millions of people worldwide and 
improve their own practices.
    Formed in 1984, and based in Washington, DC, with a staff of 
thirty-five, InterAction includes members headquartered in 25 States. 
Both faith-based and secular, these organizations foster economic and 
social development; provide relief to those affected by disaster and 
war; assist refugees and internally displaced persons; advance human 
rights; support gender equality; protect the environment; address 
population concerns; and press for more equitable, just, and effective 
public policies.
    Reflecting both the generosity of the American people and their 
strong support for international development and humanitarian 
assistance, our members receive more than $3 billion in annual 
contributions from private donors. Neither InterAction nor its members 
bear lightly the responsibility of the trust the American people place 
in us. As such, members ascribe to InterAction's Private Voluntary 
Organization Standards that help assure accountability in the critical 
areas of financial management, fundraising, governance, and program 
performance. Our PVO Standards are a public document, available on our 
website at www.interaction.org. The PVO Standards define the financial, 
operational, and ethical code of conduct for InterAction and its member 
agencies. The Standards are at the heart of members' commitment to 
accountability to their donors and to transparency in their operations. 
They assure appropriate use of funds.
    Among the Standards are requirements for audited financial 
statements, annual filing of Form 990 with the U.S. Government, annual 
reports, board approval of operating budgets, accountability for use of 
funds from the moment they are received until they are used in a 
project or for services, truth in advertising (including no material 
omissions), control of all fundraising activities conducted on their 
behalf, and defined procedures for evaluating, both qualitatively and 
quantitatively, their programs and objectives. The guidelines, which 
are part of the Standards, recommend that member organizations meet the 
standards of the National Charities Information Bureau and the 
Philanthropic Advisory Service of the Council of Better Business 
Bureaus. Many members are among those charities rated by the Better 
Business Bureau.
    Given their fiduciary responsibility for the funds they receive, 
InterAction members have long-established procedures to prevent theft, 
embezzlement, and other 
diversions of funds and supplies. Increasing care is taken in vetting 
new employees, in their training, in their supervision, and in creating 
environments in which they will consider themselves genuine team 
members.
    In the post-Cold War era insecurity has become a growing menace to 
the operations of NGO's, particularly those disaster response agencies 
trying to assist refugees, internally displaced persons and others 
exposed to death and injury in civil conflicts. Both governments and 
nonstate actors have ignored their obligations to permit humanitarian 
organizations to have access to the victims of war. Indeed NGO's, the 
United Nations agencies, and the Red Cross Movement have seen their 
personnel killed, injured, raped, taken hostage, and otherwise abused 
in growing numbers. In this environment humanitarian organizations have 
been compelled to pay increased attention to personal and 
organizational security.
    With generous support from USAID's Office of Foreign Disaster 
Assistance or OFDA, InterAction developed the curriculum for a one-week 
course in NGO security, which has become the foundation for courses 
currently being offered by its members, as well as by unaffiliated 
NGO's and commercial firms. Thousands of NGO employees have taken part 
in these trainings. The courses put heavy emphasis on security 
awareness, threat assessment, and personal comportment. In addition, 
InterAction developed guidelines for development of individual agency 
and post security plans. This framework is incorporated in OFDA's own 
guidelines for those preparing project proposals. With further support 
from OFDA, a Security Seminar for CEO's was staged in September 2000 to 
encourage agency heads to institutionalize security awareness in their 
organizational cultures. At the request of the CEO's, InterAction 
researched good practices in the provision of security for national 
employees of InterAction members operating abroad, developing a set of 
Essential Steps on the Security of National Staff, which is now being 
incorporated in our PVO Standards.
    InterAction members are well aware of their obligation to see that 
resources entrusted to their care are not stolen or diverted by anyone, 
including terrorists. The enhanced security measures they have adopted 
are intended in large measure to stiffen their defenses against misuse 
of their names, funds, and other property.
    Disaster Response NGO's are obliged to remain neutral in conflict 
situations. Like the Red Cross movement, their employees are unarmed 
and often work in areas where substantial elements of the local 
population are suspicious, resentful, and violent. It is imperative 
that the NGO's avoid identification with belligerents. Most subscribe 
to the Code of Conduct developed by the International Federation of Red 
Cross and Red Crescent Societies together with leading NGO's engaged in 
disaster relief. The Code of Conduct requires humanitarian agencies to 
maintain high standards of independence.
    Thank you once more for the opportunity to inform the Subcommittee 
about InterAction, its members, and our collective efforts to insure 
that resources provided by donors are not diverted or otherwise 
misused.

                               ----------
                     STATEMENT OF KHALIL E. JAHSHAN
            Director, Government Affairs Affiliate, NAAA-ADC
                        Executive Vice President
         The American-Arab Anti-Discrimination Committee (ADC)

                              June 4, 2002

    Thank you Mr. Chairman Bayh, and Members of this distinguished 
Subcommittee. It is a privilege to appear before the International 
Trade and Finance Subcommittee to testify about the role of charities 
and nongovernmental organizations in the financing of terrorist 
activities. I am grateful for this opportunity and I would like to 
commend the Subcommittee for initiating this hearing and seeking 
balanced representation on this panel of witnesses.
    I am presenting this testimony, Mr. Chairman, on behalf of NAAA-
ADC, the government affairs affiliate of the American-Arab Anti-
Discrimination Committee (ADC). ADC is the largest Arab-American 
grassroots organization in the United States. Our agenda is focused 
primarily on civil rights and Middle East foreign 
policy. ADC is essentially a secular, nonpartisan organization--our 
membership includes Americans of all faiths and all walks of life who 
share our political platform on civil rights and foreign policy.
    The issue of the relationship between charities and NGO's, on the 
one hand, and international terrorism, on the other, is a very 
important topic for the whole Nation as we continue to assess the 
political, social, and economic repercussions of the September 11 
terrorist attacks on the United States. This matter is also a top 
priority issue for the Arab and Muslim communities throughout the 
United States because it impacts directly on the function, reputation, 
and very survival of various charities serving the humanitarian and 
philanthropic efforts of approximately eight million Arab and Muslim 
Americans. More importantly, it is of serious consequence to the civil 
liberties and constitutionally protected rights of American citizens to 
contribute to and associate with humanitarian causes with which they 
have a strong moral and political affinity.
    Much has been said about this important matter since the events of 
last September. The issue has been at center stage since the 
Administration sought to identify, track, and block the flow of funds 
to al Qaeda and other terrorist groups. One thing is clear: Al Qaeda 
derived its funding from a variety of sources including bin Laden's own 
wealth, contributions from sympathizers, extortion, smuggling, and 
other illegal activities. What is not equally clear is the extent of 
charitable funds being wittingly or unwittingly funneled to al Qaeda. I 
would like to focus my remarks on four specific points that, in my 
humble judgment, must remain at the heart of this Subcommittee's 
deliberations and subsequent legislative actions.
    First, the issue before us is a global issue that requires a global 
approach and a global solution. Indeed, terrorism is a global 
phenomenon and we must resist adopting an oversimplified approach by 
narrowing the scope of the problem to Islam, Muslims, and Islamic 
institutions to satisfy our yearning for quick answers. By limiting the 
scope of our definition of this global problem to ensure instant 
political or psychological gratification, we risk setting up our global 
war on terrorism for failure by focusing too narrowly on the immediate 
component of the problem and failing to keep our eye on the larger 
picture. In addition, by narrowly defining the threat of global 
terrorism, we also risk alienating key Arab and Muslim allies who are 
equally threatened by terror and who could bring vital resources to 
this long-term battle.
    The sad fact is that we have been there on several occasions in 
recent history. I remind you of at least two separate occasions when 
Congress and the Administration dealt with the issue of terrorism in 
two specific contexts: Ireland and Palestine. In both cases, we 
investigated funding, outlawed fundraising, restricted travel, and 
withheld diplomatic contacts. The real impact was limited and short-
lived. The issue, Mr. Chairman, cannot be artificially limited to the 
IRA, the PLO, HAMAS, Hezbollah, PKK, the Shining Path, FARC, or the 
Basque ETA. Terrorism is a global phenomenon and it must be dealt with 
in global terms.
    Second, the issue is a very complex one that requires a consistent 
solution void, to the greatest possible extent, of selective moral 
consideration and double standards. I have two concerns in mind: One 
pertains to definition and the other deals with implementation of 
policy.
    With regard to definition, it is of vital importance for the United 
States to spend some effort and time to come up with a universal 
definition of terrorism in order to maintain the broadest possible 
coalition against terrorism. I am fully aware and I understand the 
reasoning for the long-standing resistance in Washington to such a 
consistent and detailed definition. However, these are unique times 
with challenging crises ahead that require unconventional means to meet 
these challenges successfully. In short, the politicized and selective 
definition we have espoused in the past will not do any longer.
    As for implementation, our selective approach and double standards 
in dealing with the issue of terrorism in the past have diminished our 
credibility and will continue to do so in the future unless we become 
more consistent in formulating our policy and in implementing it across 
the board.
    For example, in the aftermath of the recent fighting in the Jenin 
refugee camp, the United States responded by extending some 
humanitarian aid to the Jenin area. USAID distributed some $200,000 in 
aid to the Palestinian inhabitants of the camp and to al Razi Hospital 
in Jenin. No questions were asked about family connections to suicide 
bombers and USAID did not profile the recipients of American aid. Yet, 
these are the same issues that were raised in the case of the Holy Land 
Foundation which the Administration placed on the terrorist list and 
froze its assets for allegedly, among other things, aiding some of the 
orphans and families of suicide bombers and for contributing to al Razi 
Hospital in Jenin which is managed by the local Islamic Zakat 
Committee. Why is it legal for USAID to assist these same recipients 
that are deemed untouchable terrorists when it comes to Islamic 
charities?
    Third, in seeking practical answers for the problems associated 
with this issue, it is incumbent upon this Subcommittee to avoid 
throwing out the baby with the bath water. Terrorism is a complex 
phenomenon that has a direct impact on our national security as a 
Nation, but it also has an important link to the daily life and 
survival of millions of human beings throughout the world. Islamic 
charities, like Christian, Jewish, or secular charities, fulfill an 
important and vital human need. Millions of people worldwide benefit 
from Islamic charitable contributions. Where abuses exist, they must be 
confronted and stopped in an effective and permanent manner. However, 
cracking down on abusers should not be allowed to hinder or prevent 
otherwise legitimate acts of charity from fulfilling their intended 
objectives.
    Of particular concern to my constituents is the chilling effect 
created by the crackdown on American Islamic charities without due 
process or convincing public explanation, leaving many legitimate 
questions unanswered and many legitimate human needs unmet.
    Fourth, it is vital for Members of this Subcommittee to realize 
from the outset of this discussion that a significant number of 
charities and NGO's in the Arab and Muslim worlds are politically or 
religiously affiliated, making it virtually impossible in certain 
countries to separate charity from politics or religion. In Palestine, 
for 
example, civil society emerged and multiplied in the absence of a 
Palestinian government to meet the basic humanitarian needs of the 
Palestinian population living under 35 years of Israeli occupation. 
Over the years, groups like Fatah, the PFLP, and DFLP established their 
own NGO's to compete for the hearts and minds of their Palestinian 
constituents. Since its establishment in the 1980's, HAMAS followed the 
same pattern. With the establishment of the Palestinian Authority after 
Oslo, some of these NGO's were dismantled while others began to 
distance themselves from their political factions. The fact remains, 
however, that some of the key and most successful NGO's today, who form 
the backbone of civil society in these countries, cannot be totally 
divorced from their political or religious milieu.
    This phenomenon is not just unique to Palestine. Similar patterns, 
although to a lesser extent, may be found in Lebanon, Jordan, and 
Egypt. As a matter of fact, some of these NGO's and charities have 
become more efficient than their respective governments in meeting the 
needs of their societies, particularly in the fields of health, 
education, human rights, welfare, and emergency assistance, to name 
just a few. Consequently, states in the Middle East have always felt 
threatened by NGO's and thus sought to legally control these 
organizations, limit their activities, and occasionally to eliminate 
them altogether.
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