[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
89-957 U.S. GOVERNMENT PRINTING OFFICE
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
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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.
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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.