[House Hearing, 108 Congress]
[From the U.S. Government Printing Office]





                 PROGRESS SINCE 9/11: THE EFFECTIVENESS
                  OF THE U.S. ANTI-TERRORIST FINANCING
                                 EFFORTS

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

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                      OVERSIGHT AND INVESTIGATIONS

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 11, 2003

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 108-10



88-332              U.S. GOVERNMENT PRINTING OFFICE
                            WASHINGTON : 2003
____________________________________________________________________________
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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                    MICHAEL G. OXLEY, Ohio, Chairman

JAMES A. LEACH, Iowa                 BARNEY FRANK, Massachusetts
DOUG BEREUTER, Nebraska              PAUL E. KANJORSKI, Pennsylvania
RICHARD H. BAKER, Louisiana          MAXINE WATERS, California
SPENCER BACHUS, Alabama              CAROLYN B. MALONEY, New York
MICHAEL N. CASTLE, Delaware          LUIS V. GUTIERREZ, Illinois
PETER T. KING, New York              NYDIA M. VELAZQUEZ, New York
EDWARD R. ROYCE, California          MELVIN L. WATT, North Carolina
FRANK D. LUCAS, Oklahoma             GARY L. ACKERMAN, New York
ROBERT W. NEY, Ohio                  DARLENE HOOLEY, Oregon
SUE W. KELLY, New York, Vice         JULIA CARSON, Indiana
    Chairman                         BRAD SHERMAN, California
RON PAUL, Texas                      GREGORY W. MEEKS, New York
PAUL E. GILLMOR, Ohio                BARBARA LEE, California
JIM RYUN, Kansas                     JAY INSLEE, Washington
STEVEN C. LaTOURETTE, Ohio           DENNIS MOORE, Kansas
DONALD A. MANZULLO, Illinois         CHARLES A. GONZALEZ, Texas
WALTER B. JONES, Jr., North          MICHAEL E. CAPUANO, Massachusetts
    Carolina                         HAROLD E. FORD, Jr., Tennessee
DOUG OSE, California                 RUBEN HINOJOSA, Texas
JUDY BIGGERT, Illinois               KEN LUCAS, Kentucky
MARK GREEN, Wisconsin                JOSEPH CROWLEY, New York
PATRICK J. TOOMEY, Pennsylvania      WM. LACY CLAY, Missouri
CHRISTOPHER SHAYS, Connecticut       STEVE ISRAEL, New York
JOHN B. SHADEGG, Arizona             MIKE ROSS, Arkansas
VITO FOSELLA, New York               CAROLYN McCARTHY, New York
GARY G. MILLER, California           JOE BACA, California
MELISSA A. HART, Pennsylvania        JIM MATHESON, Utah
SHELLEY MOORE CAPITO, West Virginia  STEPHEN F. LYNCH, Massachusetts
PATRICK J. TIBERI, Ohio              BRAD MILLER, North Carolina
MARK R. KENNEDY, Minnesota           RAHM EMANUEL, Illinois
TOM FEENEY, Florida                  DAVID SCOTT, Georgia
JEB HENSARLING, Texas                ARTUR DAVIS, Alabama
SCOTT GARRETT, New Jersey             
TIM MURPHY, Pennsylvania             BERNARD SANDERS, Vermont
GINNY BROWN-WAITE, Florida
J. GRESHAM BARRETT, South Carolina
KATHERINE HARRIS, Florida
RICK RENZI, Arizona

                 Robert U. Foster, III, Staff Director
              Subcommittee on Oversight and Investigations

                     SUE W. KELLY, New York, Chair

RON PAUL, Texas, Vice Chairman       LUIS V. GUTIERREZ, Illinois
STEVEN C. LaTOURETTE, Ohio           JAY INSLEE, Washington
MARK GREEN, Wisconsin                DENNIS MOORE, Kansas
JOHN B. SHADEGG, Arizona             JOSEPH CROWLEY, New York
VITO FOSSELLA, New York              CAROLYN B. MALONEY, New York
JEB HENSARLING, Texas                CHARLES A. GONZALEZ, Texas
SCOTT GARRETT, New Jersey            RUBEN HINOJOSA, Texas
TIM MURPHY, Pennsylvania             JIM MATHESON, Utah
GINNY BROWN-WAITE, Florida           STEPHEN F. LYNCH, Massachusetts
J. GRESHAM BARRETT, South Carolina


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    March 11, 2003...............................................     1
Appendix:
    March 11, 2003...............................................    53

                               WITNESSES
                        Tuesday, March 11, 2003

Byrne, John, Senior Counsel and Compliance Manager, American 
  Bankers Association............................................    36
Emerson, Steve, Director, The Investigative Project..............    29
Epstein, Matthew, Assistant Director, The Investigative Project..    31
Fisher, Alice, Deputy Assistant Attorney General Criminal 
  Division, Department of Justice................................     7
Hoglund, Richard, interim Director, Office of Customs 
  Investigations, Bureau of Immigration and Customs Enforcement, 
  Department of Homeland Security, accompanied by Marcy Forman, 
  Executive Director, Operation Green Quest......................     9
Johnson, Larry, CEO, BERG Associates.............................    32
Moynihan, John, Senior Investigator, BERG Associates.............    34
Sloan, James, Director, Financial Crimes Enforcement Network, 
  Department of the Treasury.....................................    11

                                APPENDIX

Prepared statements:
    Kelly, Hon. Sue W............................................    54
    Gutierrez, Hon. Luis V.......................................    60
    Byrne, John..................................................    62
    Emerson, Steve...............................................    69
    Epstein, Matthew (with attachments)..........................   104
    Fisher, Alice................................................   135
    Hoglund, Richard.............................................   144
    Johnson, Larry...............................................   149
    Moynihan, John (with attachments)............................   152
    Sloan, James (with attachments)..............................   166

              Additional Material Submitted for the Record

Sloan, James:
    List of Non-Cooperative Countries and Territories............   181

 
                 PROGRESS SINCE 9/11: THE EFFECTIVENESS
                  OF THE U.S. ANTI-TERRORIST FINANCING
                                EFFORTS

                              ----------                              


                        Tuesday, March 11, 2003

             U.S. House of Representatives,
      Subcommittee on Oversight and Investigations,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to call, at 2:08 p.m., in 
Room 2128, Rayburn House Office Building, Hon. Sue W. Kelly 
[chairwoman of the subcommittee] presiding
    Present: Representatives Kelly, Garrett, Murphy, Brown-
Waite, Gutierrez, Inslee, Crowley, Hinojosa, Lynch, and Oxley 
(ex-officio).
    Chairwoman Kelly. Good afternoon. Thank you all for being 
here.
    In 1993, when terrorists set off a bomb in the garage of 
the World Trade Center with the intention of killing thousands 
of innocent people and disrupting the international financial 
system, Americans saw for the first time the planning and 
organizational capabilities of the worldwide Islamic terrorist 
network.
    Since then and throughout the 1990s, terrorist forces 
continued their agenda of senseless killing by bombing the U.S. 
Marines Khobar Tower barracks in Saudi Arabia, U.S. embassies 
in two African countries, and the USS Cole, resulting in 
hundreds of deaths.
    Sadly, policymakers at that time underestimated the enemy's 
strength, skill, and fervor, and failed to treat these events 
as interconnected parts of a war for which the enemy had been 
preparing since the mid- to late-1980s.
    And then, on September 11, 2001, the enemy's attacks had 
horrifying results with the loss of close to 3,000 Americans 
with the attacks on New York and Washington and the plane in 
Pennsylvania. September 11th also exposed the vulnerabilities 
of our Nation's financial system and how our free and open 
American way of life is used by the terrorists to further their 
war against America.
    None of these attacks would have been possible without 
money, and we are now just learning the extent of how and where 
terrorists get the money they need to attack our country. The 
terrorists have developed a powerful fund-raising machine right 
here in America, cynically using charities and religious 
institutions to murderous effect. The terrorists' effects have 
yielded a moral harvest of blood money aimed not at helping the 
needy, but used instead to fuel deadly violence against 
Americans.
    Although we are making progress in the war against 
terrorist financing here and throughout the world, the enemy is 
smart, resourceful, numerous, and changes tactics frequently. 
When there is a weakness in our system, terrorists will find it 
and exploit it. One day they use phony charities, and the next, 
businesses as fronts for smuggling bulk cash, and the next day, 
coupon fraud.
    Efforts since September 11th including the passage and 
enforcement of the USA PATRIOT Act have resulted in numerous 
arrests in this area. From New York to Michigan to Florida to 
Texas, Federal authorities have disrupted this network, slowing 
the flow of money to America's enemies.
    I am sure I speak on behalf of all the members of the 
committee when I congratulate the law enforcement team 
represented on our first panel for their role in the March 1st 
capture of Khalid Shaikh Mohammed, the financial mastermind of 
al-Qaeda and the planner of the September 11th attacks. It is 
my hope that this significant development will allow law 
enforcement to piece together a money trail to help us tighten 
the noose on Osama bin Laden and break up the al-Qaeda network.
    Our principal focus today will be the activities of various 
groups and charities in the U.S. which have been raising money 
on behalf of terrorist groups such as al-Qaeda, the Palestinian 
Islamic Jihad, Hamas, Hezbollah, and other members of the 
global terrorist network. The charities have warm, caring names 
like the Benevolence Foundation, the Holy Land Foundation, and 
Global Relief Foundation, but their intentions are anything but 
benevolent.
    Federal agents and prosecutors continue to ferret out 
illegal transfers of funds from these groups allegedly aimed to 
support terrorist activities. Just last week, it was discovered 
that a Brooklyn mosque may have helped funnel millions of 
dollars to al-Qaeda. The leader of the effort, a Yemeni cleric, 
boasted that he had personally delivered $20 million to Osama 
bin Laden.
    On February 28th, five men were sentenced for providing 
material support to Hezbollah through a cigarette smuggling 
scheme. On February 26th, five men were indicted in New York 
and Idaho for conspiring to illegally raise and send $2.7 
million to Iraq through the Help the Needy charity.
    Also, on February 26th, 16 men were arrested for 
fraudulently redeeming more than $4.5 million in coupons from 
five States. The funds were laundered through a Yonkers, New 
York, check-cashing business and sent to the West Bank.
    On February 20th, four members of the Palestinian Islamic 
Jihad terrorist group were indicted and four others arrested on 
a total of 50 counts, including fraudulently raising money and 
illegal material support and wire transfers. Among the four 
arrested was Sami Al-Arian, a professor at the University of 
South Florida.
    The indictment alleges that the defendants used U.S. 
locations as the North American base for Islamic Jihad. On 
December 18th, a senior member of Hamas, his wife, and five 
brothers working at a Texas computer company, were indicted for 
money laundering. One of the brothers, Ghassan Elashi, was also 
vice president of the Holy Land Foundation, which the Treasury 
Department closed in December of 2001 for serving as a Hamas 
front.
    It is clear terrorists have learned to use our wealth and 
goodwill against us. My fear is, despite the fact that we have 
made these important arrests, this is only the tip of the 
iceberg.
    And then there is Saddam Hussein. There is plenty of 
evidence linking terrorists such as Hamas, Hezbollah, al-Qaeda 
to Saddam Hussein. Hamas opened an office in Baghdad in 1999, 
and Iraq has hosted conferences attended by the Palestinian 
Islamic Jihad.
    Published reports cite U.S. intelligence officials as 
sources for recent reports that Saddam Hussein might 
subcontract to Hezbollah and Hamas a terrorist strike here in 
the United States or abroad. And recently, before Congress, CIA 
Director George Tenet testified that Hezbollah has been casing 
and surveilling American facilities. According to Secretary of 
State Colin Powell, a senior al-Qaeda associate Abu Musab al-
Zarqawi moved his poison and explosives operation from 
Afghanistan to northeastern Iraq after U.S. forces liberated 
Afghanistan.
    This information is disturbing on its own. It is even more 
disturbing to know that millions of dollars may have been 
raised through a mosque in Brooklyn, schemes in Detroit, or 
North Carolina or elsewhere in the United States, to advance 
the efforts to help al-Qaeda, Hamas, and others who wage war 
against America.
    At today's hearing, we will review the charities and 
schemes that have allegedly been used by groups to aid 
terrorists and the counter measures that law enforcement has 
employed to smoke out and prosecute the enemy's allies. Our 
experts on our second panel work with law enforcement and can 
further tie together for us the domestic groups, the schemes, 
and the terrorists they help. Both panels, I hope, will provide 
some important lessons from these cases for the financial 
community and for this committee as we consider potential 
amendments to the USA PATRIOT Act. If another attack on America 
occurs, it will have been funded at least in part right here on 
American shores.
    We need to know how the enemy funds its operations here and 
now, and we need to know how to stop it, and that is the focus 
of today's hearing.
    I thank you all for being here today. I turn now to the 
chairman of the committee, Mr. Oxley.
    Mr. Oxley. I thank the chairlady, and I would like to take 
this opportunity to offer my thanks and appreciation to you for 
holding this particularly timely hearing.
    The issue of terrorist financing has become one of critical 
importance to our Nation, dating from the 1993 bombing of the 
World Trade Center. The hearing this afternoon will serve two 
distinct purposes. The first is to share with the members of 
this subcommittee how our government has been able to 
successfully block the efforts of terrorists whose goal is to 
destroy America, and secondly, to find ways to improve the USA 
PATRIOT Act.
    As you know, much of the legislative language drafted by 
the Financial Services Committee was incorporated into the USA 
PATRIOT Act and signed into law by the President in November of 
2001. Law enforcement's efforts have, by necessity, not ended 
there, however, for as we have seen, nearly every blocking and 
freezing of suspected terrorist funds has been met with new and 
insidious efforts to render such protocols both outdated and 
outmoded.
    While I am justifiably proud of this committee's efforts to 
date, I am also not unmindful that improvements and refinements 
will be necessary and needed. Our enemies are determined to 
pursue their ruinous efforts to bring our great Nation to its 
knees. For that reason, we are resolved to put into the hands 
of our law enforcement agencies all of the weapons that they 
will need to deal successfully with the ongoing threat of these 
terrorist activities within our borders.
    To that end, I again thank the chairlady for her focus on 
this critical effort and her good work today and in the future, 
and I yield back.
    Chairwoman Kelly. Thank you very much, Mr. Oxley.
    Chairwoman Kelly. We next turn to you, Mr. Gutierrez.
    Mr. Gutierrez. Good afternoon. Thank you for holding this 
hearing. I will be brief since the purpose of the hearing is to 
get an update from the agencies and experts that have been 
instrumental in the fight against international money 
laundering and terrorist financing.
    Our fight against terrorist financing is a broad-based 
effort, extending well beyond the al-Qaeda network. In today's 
global marketplace, it means nothing to build a concerted 
effort between financial institutions and law enforcement 
agencies at home without instituting similar actions abroad. 
Enhancing international cooperation between local agencies and 
countries around the world is essential to eliminating 
terrorist networks and to winning the fight against 
international money laundering practices.
    The USA PATRIOT Act was a critical step in giving our 
enforcement personnel the necessary anti-money laundering 
provisions to fight terrorists by blocking the schemes used to 
finance their horrific crimes. Attorney General Ashcroft 
recently said that 124 million in financial assets belonging to 
terrorist groups, including al-Qaeda, have been frozen since 
the September 11th attacks.
    Although we have made progress, we have much work to do. We 
do not know whether the frozen assets represent most or just a 
small percentage of the pool of potential money that could be 
used to finance terrorism around the globe.
    In order to truly stop terrorism, we need to strengthen the 
cooperation and coordination. Encouraging information sharing 
collaboration among local, State, Federal, and international 
law enforcement also is critical to eliminating al-Qaeda. And 
we need to ensure that our priorities concentrate equally on 
both prevention and response. State and local governments need 
to have the capacity and the resources to respond to the threat 
of terrorists, and especially when they serve our Nation's 
first responders, proper training, technical assistance and 
support is critical.
    Before I conclude, I would like to urge Treasury to 
expeditiously complete the provisions that have yet to be 
promulgated, particularly those dealing with the verification 
of identity. A recent GAO study requested by Chairwoman Kelly 
and myself regarding the use of Treasury's electronic 
transfers--excuse me--electronic funds transfer and electronic 
transfer account programs found that about 11 million Federal 
benefit recipients, about half of those receive checks from 
banks. More shockingly, the study found that approximately 55.8 
million U.S. adults are currently unbanked; that is 20 percent 
of all U.S. adults.
    GAO also found that the primary obstacle to using 
electronic fund transfer was that many Federal check recipients 
didn't have bank accounts. We all know that without access to 
banking services, individuals are forced to turn to payday 
lenders and check-cashing vendors who very often charge 
exorbitant fees, sometimes with interest reaching 500 percent.
    The inability to enter the banking center results in higher 
costs of borrowing and lack of access to home mortgages. The 
proposed rule requires a financial institution to contain 
statutorily prescribed procedures. It describes them in detail, 
certain minimum elements that each must contain. The procedures 
as proposed by Treasury require important elements that would 
further safeguard our banking system from terrorist financing 
and at the same time will not hinder the ability of unbanked 
individuals to access our financial institutions.
    I look forward to the testimonies that will be presented 
today. Thank you, Madam Chair.
    Chairwoman Kelly. Thank you, Mr. Gutierrez.
    Mr. Inslee.
    Mr. Inslee. Thank you, Madam Chair, for holding this 
hearing, a very important one given the times we are in. And I 
hope that we will focus on three areas during this hearing:
    First, I hope we will have a serious exploration of whether 
or not we have really eased up on some of our enforcement with 
some of other countries that have been associated with very 
knowing and very obvious financing of terrorism. And there is a 
concern in my district and, I think, across the land that as a 
result of some of our national interests in other pursuits, 
particularly the war in Iraq, that perhaps the Federal 
Government has not been sufficiently aggressive with some of 
the countries that have mollycoddled these folks who have 
financed terrorism.
    The most obvious suspect that my constituents are concerned 
about comes from the apparent fact that much of the financing 
for the September 11th attack came from financiers in the 
Mideast and Saudi Arabia, perhaps the United Arab Emirates, and 
that the United States Federal Government, to our knowledge, at 
least from what we hear in my district, has not been acting 
with any particular sanction against those countries to enforce 
the known need to cut off the funding for these snakes. And I 
hope that we will hear a discussion about what our Federal 
Government has been doing in this regard.
    And let me tell you why there is concern in my district 
about this. There is concern in my district that because of our 
Federal Government's current interest in pursuing the war in 
Iraq and its interest in basing some of our military forces and 
our interest in gaining support for the U.N. Resolution that we 
have not been sufficiently assertive, aggressive, and in a way 
to get a result from these countries, because we have sort of 
taken a little pressure off in order to get them to help us in 
other ways in the war in Iraq. And I think that would be most 
unfortunate and shortsighted.
    So we hope that we will hear discussion about that. We hope 
that we are wrong, and we hope those concerns are unfounded, 
but we need to address that issue.
    Second, we are going to hear testimony from the American 
Bankers Association and, perhaps, that there has been a little 
bit of misprioritization of what we have been looking for when 
we are looking for a fight against terrorism, and we have got, 
perhaps, a little something different; and we would like to 
know about that issue.
    And third, I hope that we will hear today about a way to 
make this system workable for Americans of Muslim extraction, 
many whom are great Americans--some of whom are biochemists in 
my district, engineers at Boeing, computer scientists at 
Microsoft--to make sure that they are not sort of swept into 
this when they have acted legally. And we want to make sure 
that they have confidence that their legal actions are not 
swept into an illegal misunderstanding.
    So I hope that we can address those three issues. I look 
forward to this hearing. Thank you.
    Chairwoman Kelly. Thank you very much.
    Mr. Murphy.
    Mr. Murphy. Thank you, Madam Chairman. I want to welcome 
the distinguished folks who will be talking to us today, 
because I know that these witnesses share your concern and all 
of our concern that your job is every bit as important as what 
has taken place with our law enforcement throughout the 
Nation--the CIA, the FBI, and the police--as well as our 
military overseas.
    Perhaps because I come from a health care background as a 
psychologist, I look upon this as using a disease model, and 
that is, you treat the symptoms, as one needs to do, but you 
also identify the source of the disease. You wipe out the 
disease and you prevent it from ever taking root again.
    What I want to hear about today will be the aggressive, the 
thorough, and the relentless mechanisms you are using to track 
every dollar, because I know it must weigh heavily upon your 
hearts that every dollar that gets into the hands of terrorists 
is a dollar that could be used to kill Americans or to harm us.
    Plus, also, we know that they are using that--not only 
using our economy to fund their terrorism, but in turn 
affecting our economy negatively.
    So I know you are going to give us some interesting news on 
the things that are happening, but I also want to let you know 
how grateful we are as Members of Congress for your relentless 
determination to continue to root out the sources of funding 
for terrorism, and I look forward to your testimony.
    Thank you, Madam Chair.
    Chairwoman Kelly. Thank you, Mr. Murphy.
    If there are no further opening statements, I will 
introduce our first panel:
    Ms. Alice Fisher, Deputy Assistant Attorney General of the 
Criminal Division at the Justice Department; Mr. Richard 
Hoglund, Interim Director of the Office of Customs 
Investigations in the Bureau of Immigration and Customs 
Enforcement, part of the new Homeland Security, and he is 
accompanied by Ms. Marcy Forman, Executive Director, Operation 
Green Quest; and Mr. James Sloan, Director of the Financial 
Crimes Enforcement Network in the Department of the Treasury.
    We thank all of you for taking the time to be here today 
and to testify before us, and I welcome you on behalf of the 
committee. Without objection, your written statements and any 
attachments that you have will be made part of the record.
    You will now be recognized for a five-minute summary of 
your testimony. When the light changes color on the timer 
before you, it will move to yellow, that is the time to begin 
to summarize your testimony, and then it will start blinking 
red, and that is time to stop.
    Chairwoman Kelly. So let us begin now with you, Ms. Fisher.

 STATEMENT OF ALICE FISHER, DEPUTY ASSISTANT ATTORNEY GENERAL, 
         CRIMINAL DIVISION, U.S. DEPARTMENT OF JUSTICE

    Ms. Fisher. Thank you Chairwoman Kelly and distinguished 
members of the panel. I am honored to be here to discuss the 
Department of Justice efforts in terrorist financing 
enforcement. As Deputy Assistant Attorney General in the 
Criminal Division, I oversee the Counterterrorism Section and a 
component of the Counterterrorism Section which is the DOJ 
Terrorist Financing Task Force.
    The Department's single and overarching goal since 9/11 has 
been to prevent future terrorist acts on the United States and 
its citizens. Curtailing the financing of terrorists is a 
critical component of that effort. We take this mission very 
seriously, targeting the financiers of terrorism as 
aggressively as those terrorists who commit violent acts.
    Currently, the Department is pursuing over 70 criminal 
terrorist financing or material support investigations in 22 
States. Over the past 18 months, we have charged 61 individuals 
in cases involving terrorist support to such groups as al-
Qaeda, Hamas, Hezbollah, and Palestinian Islamic Jihad, or PIJ. 
We have charged 33 persons in cases involving the terrorism-
related sanctions program of the International Emergency 
Economics Power Act, or IEEPA. And finally, we have charged 
over 20 individuals with illegally operating an unlicensed 
money remitting service, or hawala. These charged individuals 
face lengthy prison sentences, and our message is clear: We 
will bring justice to the entire network of terror.
    Congress has been a very valuable partner in this fight. By 
passing the USA PATRIOT Act, Congress provided us with powerful 
new tools to combat terrorism financing. The PATRIOT Act 
enhanced the crime of providing material support or resources, 
18 U.S.C., Section 2339B, which now carries a penalty of up to 
15 years and, in some cases, life imprisonment.
    We have enforced this law to disrupt terrorist Jihad cells 
in Buffalo, Portland, Seattle, and Detroit. We have also used 
it to charge individuals engaged in drugs for weapons for 
terrorists, in drugs-for-weapons plots in Houston and San 
Diego. And just recently in Charlotte, North Carolina, in the 
first such case to be decided by a jury, Mohammed Hammoudeh, 
the leader of the Charlotte Hezbollah cell, was convicted and 
sentenced to 155 years in prison.
    Two recent material-support-for-terrorism cases demonstrate 
the Department's commitment to choke off support to terrorism 
and punish the perpetrators. Just last week, the Attorney 
General announced material support to al-Qaeda and Hamas 
charges brought in Brooklyn, New York, against two Yemeni 
nationals, Mohammed Ali Hasan Al-Moayad and his assistant 
Mohshen Yaha Zayed, who were arrested in Germany following an 
undercover sting operation in cooperation with German law 
enforcement.
    The complaint alleges that Al-Moayad claimed to have 
personally given $20 million to Osama bin Laden. Using an 
undercover informant, the FBI caught Al-Moayad boasting about 
his involvement in providing money, recruits, and supplies to 
al-Qaeda, Hamas, and other terrorist groups in part from monies 
he collected from collections at the Al Farouq mosque in 
Brooklyn. He also claimed to be Osama bin Laden's spiritual 
advisor.
    In Tampa, Florida, the Department charged Sami Al-Arian and 
seven other defendants, all leaders and supporters of the 
terrorist group, the Palestinian Islamic Jihad, or PIJ, with 
conspiracy to provide material support and conspiracy to commit 
murder among other charges. The indictment alleges that PIJ is 
responsible for the murder of over 100 innocent people, 
including two Americans.
    As detailed in the indictment, Al-Arian was the secretary 
of the Shura Council, or the worldwide governing group of PIJ, 
and actively engaged in PIJ operations. The defendants managed 
the affairs of PIJ, including the acquisition and spending of 
funds and administering the financial affairs of PIJ. For 
example, the indictment alleges that Al-Arian had a letter 
written from him which requested a financial donation to the 
PIJ and stated that the bombers in a recent terror operation 
had left families in debt, and urged a financial contribution 
so that PIJ could continue its terror operations.
    Al-Arian attempted to hide his support for PIJ after the 
group was designated as a foreign terrorist organization in 
1997, but court-approved electronic surveillance of his office 
revealed his continued active support for PIJ long after the 
designation.
    The Charlotte Hezbollah case is another key example of how 
the Department has aggressively pursued terrorist financing. 
What started out as the suspicion of a local off-duty sheriff 
ultimately uncovered a massive cigarette smuggling and tax 
evasion scheme which involved several Lebanese men who were 
part of the Hezbollah cell which had received instructions from 
and provided financial support to well-known terrorists in 
Beirut. These defendants purchased night vision devices, stun 
guns, mine and metal detectors, advanced aircraft design 
software, drilling and blasting equipment, laser range finders, 
and global positioning systems. As I already mentioned, the 
lead defendant received a 155-year prison sentence.
    We have also stemmed the flow of terrorist financing by 
targeting organizations that purport to raise charitable funds, 
but in fact serve as fund-raisers for terrorist organizations. 
For example, we indicted the Chairman of Holy Land Foundation, 
the Executive Director for Benevolence Foundation, who just 
last month pleaded guilty in Chicago. And a few weeks ago Dr. 
Rafil Dhafir and others were charged in Syracuse with using 
their charity, Help the Needy, to illegally transfer money to 
Iraq.
    To sum up quickly, the tools that we have been using and 
that Congress provided to us have had an impact. And I would 
just like to quote from a defendant in a conversation that he 
had with an informant in the Portland cell up in Oregon. He 
said, quote:
    ``Everybody is scared to give up any money to help us. You 
know what I am saying? Because that law that Bush wrote about, 
you know, supporting terrorism, whatever, the whole thing, 
everybody is scared. He made a law that says, for instance, I 
left, out of the country and I fought, right, but I wasn't able 
to afford a ticket. But you bought my plane ticket. You gave me 
the money to do it. By me going and fighting and me fighting 
and doing that, they can--by this new law, they can come and 
take you and put you in jail.''.
    The Department is therefore grateful for all the tools that 
Congress provided, and I am happy to answer any questions that 
you have.
    Chairwoman Kelly. Thank you so much, Ms. Fisher.
    [The prepared statement of Alice Fisher can be found on 
page 135 in the appendix.]
    Chairwoman Kelly. Mr. Hoglund.

   STATEMENT OF RICHARD HOGLUND, INTERIM DIRECTOR, OFFICE OF 
   CUSTOMS INVESTIGATIONS, BUREAU OF IMMIGRATION AND CUSTOMS 
ENFORCEMENT, U.S. DEPARTMENT OF HOMELAND SECURITY, ACCOMPANIED 
   BY MARCY FORMAN, EXECUTIVE DIRECTOR, OPERATION GREEN QUEST

    Mr. Hoglund. Chairwoman Kelly and distinguished members of 
the subcommittee, it is a privilege to appear before you today 
to discuss the efforts undertaken by Operation Green Quest and 
its role in terrorist finance. With me today is Marcy Forman, 
the Executive Director of Operation Green Quest.
    The survival of terrorist organizations is directly related 
to their ability to raise funds and transfer them 
internationally in a clandestine manner to support their 
operations. Terrorist entities often move their money by 
exploiting weaknesses in domestic and international finance 
systems. I welcome this opportunity to discussion Operation 
Green Quest's mission, methodology, goals, and successes as 
they relate to terrorist financing.
    Established in October 2001, Operation Green Quest has 
employed a broad, systematic strategy to detect, disrupt, and 
dismantle terrorist financial networks. Operation Green Quest 
has realized this goal by bringing the full scope of the 
government's financial expertise to bear against systems, 
individuals, and organizations that serve as sources of 
terrorist funding.
    From inception, Operation Green Quest has met its mission 
head on. Operation Green Quest has proactively and covertly 
targeted charities, nongovernmental organizations, illegal 
money service businesses, and alternate remittance systems, and 
various entities using bulk cash smuggling as a conduit to fund 
terrorist activity. Green Quest actively identifies and 
develops sources of information and routinely exploits Bank 
Secrecy Act data to include suspicious activity reports, 
currency and monetary instrument reports, and currency 
transaction reports.
    Examples of Operation Green Quest's successes include the 
Virginia-based charities case, which is a Bureau of Immigration 
and Customs Enforcement, BICE, led multiagency task force 
investigation of suspected money laundering, tax fraud, and 
terrorist material support violations being committed by 
individuals and companies located in northern Virginia. These 
conglomerates of businesses, charities, and nongovernment 
organizations are suspected of funneling funds to terrorist 
groups.
    On March 20, 2002, 29 search warrants were executed by 130 
Federal, State, and local law enforcement officers on 
businesses, residences, and Internet servers identified by this 
investigation. In November 2002, two multiagency search 
warrants led by BICE agents were executed on a Boston-based 
computer software company, allegedly funded by a designated 
terrorist in violation of the International Emergency Economic 
Powers Act.
    In December 2002, a BICE agent-led investigation in Seattle 
of a money remitting company with approximately 30 remitting 
agents nationwide culminated in the execution of a total of 36 
search warrants, six arrests, and 19 indictments for money 
laundering and violations of the International Emergency 
Economic Powers Act. This investigation identified 
approximately $28 million wired through the main violator's 
account, $12 million of which was traced to an embargoed 
country.
    In December 2002, BICE-led investigation in Detroit 
identified several individuals and businesses that operated as 
unlicensed money remitters that sent funds to Yemen in 
violation of 18 U.S.C. 1960, operating as an unregistered 
money-remitting business. As a result, 10 search warrants, five 
seizure warrants, and six arrest warrants were executed. In 
addition, five bank accounts were seized, totaling $234,000, 
along with a quantity of narcotics.
    In December 2002, there was an investigation that effected 
a bulk cash seizure of $280,000 in currency, concealed within 
clothing, destined for the Middle East. Subsequently, search 
warrants on businesses related to the initial seizure resulted 
in additional seizure of $2.2 million in currency and the 
arrest of the owner of the business. The owner has been 
indicted for bulk currency smuggling.
    Based in Washington and led by the new Bureau of 
Immigration and Customs Enforcement, Operation Green Quest 
serves as a command and coordination center and is essentially 
a place for one-stop shopping in terrorist finance 
investigations. Operation Green Quest collects, develops, 
manages, and disseminates leads to appropriate field offices 
for investigative action. As such, it is the repository and 
clearinghouse for terrorist financial investigations and is 
able to prioritize, identify investigative overlaps, and 
redirect resources to meet operational objectives.
    Operation Green Quest is a multiagency center, and in 
addition to the Bureau of Immigration and Customs Enforcement, 
it is comprised of representatives from the Internal Revenue 
Service, Secret Service, Office of Foreign Assets Control, 
Financial Crimes Enforcement Network, Federal Bureau of 
Investigation, Naval Criminal Investigative Service, Postal 
Inspection Service, Bureau of Alcohol, Tobacco & Firearms, and 
the Coast Guard.
    Many of these successes of Operation Green Quest can be 
attributed to the aggressive outreach of the financial and 
trade communities. Operation Green Quest views the finance and 
trade communities as the frontline in identifying suspicious 
activity and potential financiers of terrorist activities.
    In conclusion, I would like to thank the distinguished 
members of this subcommittee for the opportunity to speak 
before you today, and we invite your questions as we proceed. 
Thank you.
    Chairwoman Kelly. Thank you very much, Mr. Hoglund.
    [The prepared statement of Richard Hoglund can be found on 
page 144 in the appendix.]
    Chairwoman Kelly. Mr. Sloan.

     STATEMENT OF JAMES SLOAN, DIRECTOR, FINANCIAL CRIMES 
      ENFORCEMENT NETWORK, U.S. DEPARTMENT OF THE TREASURY

    Mr. Sloan. Madam Chairwoman, members of the subcommittee, 
and Chairman Oxley, thank you for this opportunity to appear 
before you today to discuss the Financial Crimes Enforcement 
Network, or FinCEN, and its role in combating money laundering 
and the fight against terrorist financing.
    The recent formation of the Executive Office for Terrorist 
Financing and Financial Crimes within the Department of the 
Treasury, I think, further underscores the FinCEN's expertise 
in using the Bank Secrecy Act to help identify and track the 
financial aspect of terrorist and other criminal activity. This 
continued commitment to financial crime and money laundering is 
a significant indication that the Treasury Department expects 
to stay in the forefront of these important issues following 
the relocation of several of its enforcement bureaus to the 
Department of Homeland Security.
    My statement today will update the committee on FinCEN's 
programs, as well as the significant progress we have made in 
meeting our obligations under Title III of the USA PATRIOT Act. 
Thank you for the opportunity to submit a longer written 
statement for the record.
    As administrator of the Bank Secrecy Act, FinCEN must 
ensure that the data it collects under that authority is truly 
beneficial to law enforcement and is collected in a manner that 
represents the least burden to the financial community. We 
continually try to strike a balance between law enforcement 
needs and the burden placed upon the industry. Industry has 
been extremely responsive in complying with Bank Secrecy Act 
regulations, I believe because it recognizes that reasonable 
regulations are part of the shared price we all have to pay for 
combating terrorism and financial crime.
    The Congress and, most importantly, this committee 
recognized the need to expeditiously make additional tools 
available to law enforcement to fight money laundering and 
terrorist financing after the attacks of September 11, 2001 by 
passing the USA PATRIOT Act. This prompt action reinforced the 
importance of using data such as suspicious activity reporting 
and other Bank Secrecy Act information to help pinpoint the 
nexus between crime and its associated financial activity.
    The Act's intent that the long-term expansion of the BSA to 
broad categories of financial service providers be placed on a 
very fast track resulted in a dramatic increase in FinCEN's 
responsibilities. I will briefly highlight the progress FinCEN 
has made to date on implementing many of those provisions. I 
believe you have charts in your briefing materials, as well, 
which might help illustrate FinCEN's PATRIOT Act 
accomplishments.
    One of the most comprehensive provisions of Title III was 
the requirement that all financial institutions, as defined by 
the Bank Secrecy Act, be required to establish anti-money 
laundering programs. To cover this potentially large and 
diverse number of entities in a judicious manner, FinCEN chose 
a risk-based approach. We focused first on traditional 
financial institutions, and then proceeded to cover entities 
that are most likely the places a money launderer would go to 
launder the funds. As a result, regulations in various stages 
of the rule-making process are in place for industries as 
varied as casinos, insurance companies, credit card owners, and 
dealers in precious metals and jewels, just to name a few.
    Because of the proven value of suspicious activity 
reporting, the expansion of that reporting to financial sectors 
beyond depository institutions had been a priority even before 
the PATRIOT Act. The Act helped accelerate the process, and we 
now have suspicious activity reporting requirements in place 
for brokers and dealers, casinos, currency exchangers, and 
mutual funds.
    FinCEN has worked very hard this year to provide additional 
guidance to the industry. Today, in fact, we have issued an 
Advisory on Informal Value Transfer Systems describing 
indicators of terrorist financing and providing information 
about filing suspicious activity reports related to that type 
of suspicious activity. We have also issued two Suspicious 
Activity Reviews within the past year that provide feedback to 
industry, as well as summaries of cases in which suspicious 
activity has played an important role.
    FinCEN just issued its fifth Suspicious Activity Review, a 
copy of which I know has been provided to the subcommittee. The 
review is a semiannual report which discusses trends and 
patterns found in a comprehensive review of SAR filing. The 
latest issue focuses on terrorist financing methods that use 
nonprofit organizations, as well as Informal Transfer Systems 
such as hawalas.
    One of the most challenging tasks given to FinCEN has been 
to develop, under Section 314 of the Act, new ways to share 
information rapidly between law enforcement and the financial 
institutions, and to enable these institutions to share 
information among themselves.
    As I said, we are acutely aware that all the regulations 
come with a burden in varying degrees to diverse sectors of the 
financial industry. We are constantly trying to find ways to 
ease this obligation, but there is always going to be some 
cost, which we will work to ensure is justified by the law 
enforcement benefit.
    The implementation of 314(a) is just an example. Section 
314 gave FinCEN the opportunity to craft a tool that would fill 
a gap in our law enforcement ability to quickly respond to 
pinpoint the financial support for acts of terrorism or serious 
financial crime. FinCEN quickly developed a system that could 
transmit names of suspects to several thousand financial 
institutions and receive reports back of matches, all within 
days. The system was not meant to obtain documents or be a 
substitute for subpoenas, but rather to serve as a locator that 
could be followed up by law enforcement with a subpoena or 
other appropriate legal process.
    We met the deadline and developed the system known as 
314(a), which is designed to serve all participants from large 
corporate banks to small rural banks with limited technical 
systems; 314 has proven to be extremely helpful to law 
enforcement.
    In requesting the information, law enforcement has assured 
us that the requests are related only to the most significant 
terrorist and money laundering investigation. The FBI's 
Terrorist Finance Operations Center and the Customs Bureau's 
Green Quest are major users of the system. We will continue to 
work with them and all the participants on a regular basis to 
improve efficiency as necessary.
    Other key sections of Title III that FinCEN has been 
diligently working on include: crafting rules to comply with 
Section 326, which requires financial institutions to verify 
customer identification in connection with the opening of 
accounts; special due diligence measures for institutions that 
maintain correspondent accounts for foreign institutions; and 
Section 311, which authorizes the Secretary of the Treasury to 
impose special measures against foreign jurisdictions or 
institutions that are found to be serious money laundering 
concerns and under which Treasury designated two jurisdictions 
in December 2002, Ukraine and Nauru.
    Madam Chairwoman, in closing, the threats we deal with 
today have taken on new dimensions from those that existed when 
the legal structure for anti-money laundering was first 
created. Traditional methods for laundering have mutated over 
time to take advantage of the new technologies, diverse 
institutions, and industries.
    On behalf of FinCEN, I would like to thank you for the 
opportunity to discuss with you our accomplishments, as well as 
our unique role in the fight against terrorist financing. I 
will be happy to answer any questions.
    Chairwoman Kelly. Thank you, Mr. Sloan.
    [The prepared statement of James Sloan can be found on page 
166 in the appendix.]
    Chairwoman Kelly Ms. Fisher, Mr. Hoglund, Khalid Sheikh 
Mohammad was Osama bin Laden's money man and the mastermind of 
his most destructive operations, including the September 11th 
attack that killed 3,000 people. He was the contact man for all 
al-Qaeda operatives, what one expert called the mission man. 
Working together with Mustafa Al-Hasawi, the al-Qaeda paymaster 
caught with him, Mohammed set up and used checking accounts, 
debit cards, credit cards from financial institutions in Dubai, 
the UAE, and the United States. Hasawai is named in a false 
statements case against Al-Marri, a former Peoria, Illinois, 
man who is being held without bail in New York and accused of 
credit card fraud and lying to the FBI about calls the 
government says he made to Hasawai's phone number in the two 
months before the September 11th attacks. Al-Marri illegally 
possessed more than 15 access devices or credit card numbers, 
and his computer files contained hundreds of apparent credit 
card numbers.
    Now that we have the mastermind and the paymaster in 
custody, how much closer are we to finding Osama bin Laden and 
all of his operatives here in the United States, the people who 
have funded his reign of terror?
    And a second follow-up to that is, have you be able to 
identify a money trail that provides clues on possible future 
al-Qaeda operations? And I am specifically focusing on you, Ms. 
Fisher and Mr. Hoglund.
    Ms. Fisher, would you like to start?
    Ms. Fisher. Certainly.
    Without being able to get into any classified information 
or any intelligence information, I would want to assure the 
committee that the Intelligence Community--the FBI, the CIA, et 
cetera--are following up on all leads that we get in the 
terrorism investigation in general. And so we follow the money 
trail wherever it goes. And the case that I believe that you 
mentioned in New York with Mr. Al-Marri, I believe he is right 
now serving jail time for his credit card fraud. So, certainly 
the investigations continue.
    Chairwoman Kelly. Mr. Hoglund?
    Mr. Hoglund. We are actively pursuing the leads as they are 
developed through the Intelligence Community, and in 
conjunction with the FBI, to see, are there specific areas of 
interest that Green Quest should approach vis-a-vis perhaps 
some other areas. And so, I mean, we are chasing this down as 
the information becomes available to us.
    Chairwoman Kelly. Ms. Fisher, have you identified the money 
trail that money--I am interested in whether or not you have 
been able to identify--or maybe you just cannot say that in 
public--that the ones that--the money trails that show that 
there is money funneled from the United States to the al-Qaeda 
operation?
    Ms. Fisher. Well, certainly we have some charged cases that 
are public that show money going from the U.S. to the al-Qaeda 
operation. For example, the case that I described in my opening 
statement and that you described in your opening statement is 
part of a scheme where two individuals were funneling money, 
some of which they obtained in a mosque in Brooklyn, by one of 
the defendant's own words, to al-Qaeda, to Osama bin Laden 
personally.
    And so, clearly, those are the types of money trails that 
we constantly are following up on. And where we can and where 
it is appropriate, we charge those individuals and prosecute 
them to the fullest extent that we can.
    Chairwoman Kelly. Thank you.
    The recent indictments against the four Syracuse men for 
money laundering and providing material support to individuals 
in Iraq and the other public documents about the case allege 
the following:
    That the four defendants used Help the Needy, a charity, to 
funnel at least $2.7 million through three banks in New York 
and the Jordan Islamic Bank to the defendants' families and 
unnamed individuals in Baghdad; that they used false papers and 
I.D.s to open the accounts. They never obtained the license 
required by law to legally provide aid to Iraq. They did not 
seek the required tax-exempt charitable status from the IRS 
until August of 2002, and never filed the necessary annual 
disclosure forms for Help the Needy. They lied to contributors 
without helping the needy and the oppressed, and they had some 
financial relationship with two other so-called charities which 
were shut down for helping terrorists, the two charities being 
the Global Relief and the Benevolence Foundations.
    Without disclosing any of the investigatory details, is it 
safe to say that all Federal law enforcement is continuing to 
look for individuals living and working here in the United 
States who are providing legal--illegal material support?
    I am sorry; let me rephrase that.
    Of the people who are living and working here in the United 
States of America providing illegal and material support to 
terrorists who work with Saddam Hussein's regime in Baghdad? 
And they may be supporting Saddam himself.
    Can I just ask you three to answer that question? Is that 
too long?
    Ms. Fisher. I think I got it.
    The case that you have described, the Help the Needy case 
in Syracuse, we have charged four defendants. Two of the 
defendants, specifically for their crimes, face up to 265 years 
in prison; and they are charged with sending money to Iraq, as 
you noted, $2.7 million to Iraq without getting the appropriate 
license. And so they are violating IEEPA in doing that and that 
is what they are charged with.
    I think it is safe to say, from the Department of Justice's 
and the FBI's perspective--and I am sure that the other 
agencies will echo this, because we are all in this together--
we are following the trail of terrorist money wherever it goes, 
all groups. And whether it is illegally being funneled to Iraq 
or it is being illegally funneled to Hamas, Hezbollah, al-
Qaeda, we are aggressively pursuing it on all tracks.
    Chairwoman Kelly. Yes, Ms. Forman.
    Ms. Forman. Madam Chairwoman, if I may. We are addressing 
all those high-threat areas, specifically right now, Iraq and 
other Middle Eastern countries; and we are using all the tools 
in our arsenal to accomplish that. Operation Green Quest's 
mission is to disrupt and dismantle the funding mechanisms, and 
that is what we are targeting, those funding mechanisms that 
can be exploited.
    In addition, with our new counterparts, the Immigration 
Service, we are using our new authorities to work with them to 
identify those individuals who are still here in the United 
States so we can gather more intelligence, more information, to 
identify further targets. Thank you.
    Chairwoman Kelly. Mr. Sloan.
    Mr. Sloan. Madam Chairwoman, I would just add that, we are 
not the silver bullet nor are we an investigator, but we like 
to think, that both Justice and Homeland Security and the 
investigative resources of Treasury are using what we might 
consider to be a rather large arrow in their quiver 
successfully and following the money where it leads. We 
contribute to that success, but we don't obviously investigate 
it ourselves.
    Chairwoman Kelly. Thank you very much. My time is up.
    Mr. Gutierrez.
    Mr. Inslee.
    Mr. Inslee. Thank you, Madam Chair.
    I appreciate having the people who are really responsible 
for telling Americans where the money came from and is coming 
from for these terrorist activities, so I appreciate your being 
here.
    One of the questions I have asked a lot is, why hasn't 
America acted in regard to some of the countries that have not 
been responsible, as responsible as they should be in cutting 
off this flow of money to these terrorist organizations? And 
when you look through September 11th, the attack, what we know 
about, we know Afghanistan was associated with the attack. We 
know that Yemen was to some degree. We know there was training 
done in Germany and plotting in Germany, perhaps some in other 
countries.
    We know that--according to a nonpartisan organization, the 
Council on Foreign Relations, that published a report in 
October of this year, they stated that ``Saudi Arabian-based 
charities have been the most important source of funds for al-
Qaeda, and that for years Saudi officials have been turning a 
blind eye to this problem,''.
    There seems to be a relative consensus of those who have 
evaluated this situation. We know that 15 of the 19 hijackers, 
their nationality was Saudi Arabian. We know that in an article 
published March 10th, Al-Hasawi--and I apologize if I 
mispronounce the name--a Saudi national, has been described as 
the paymaster of the September 11th operation and its financial 
mastermind and has provided documents to the German authorities 
suggesting that he wasn't working alone.
    But to my knowledge, there have not been any sanctions 
against any other governments for their failure to act in an 
aggressive, assertive, responsible way to cut off this funding 
since September 11th, including Saudi Arabia or any other 
country, other than our action against Afghanistan, which was 
certainly a strong sanction, but no others.
    And it is troublesome to my constituents that, while we are 
about to start a war in Iraq, to our knowledge--and now I am 
going to ask you that question in a minute--there has not been 
a paper trail of funds to September 11th; we haven't acted with 
sanctions to some of these other countries that have not acted 
in a responsible fashion as international citizens to help us 
cut off these funds.
    So I have two questions:
    First, have there been sanctions against any other nation, 
associated with their failure to help us in a responsible 
manner to cut off these funds? And, if not, why not?
    That is just a general question to any of you if you would 
like to help us with an answer. I see there are no volunteers 
at the moment.
    Maybe, Mr. Sloan, I can draft you.
    Mr. Sloan. Well, you can draft me, sir, but I probably 
won't have an answer for you.
    From our perspective, clearly we like to think that we look 
at the transactions that might lead us to suspect flows of 
money that might be financing terrorism. We certainly would 
look at that from a national basis; we would turn those clues 
over--I hate to point in their direction, but we would be 
turning them over to the investigative agencies or even to OFAC 
for IEEPA sanctions.
    We don't have a role in applying sanctions to individual 
countries. However, we do pay attention and we try to encourage 
attention being paid to those jurisdictions that might be 
considered noncooperative countries and territories for the 
purpose of anti-money laundering activity. And we work very 
closely with our partners around the world in that regard to 
highlight certain jurisdictions that might present such a 
problem for us.
    Mr. Inslee. And have any countries been identified as 
noncooperating countries under that definition?
    Mr. Sloan. There are several countries that are considered 
under the Financial Action Task Force deliberations as 
noncooperative countries or territories in the anti-money 
laundering efforts.
    Mr. Inslee. And what are those countries?
    Mr. Sloan. We can provide you with a list of them. There 
are perhaps a dozen or more.
    [The following information can be found on page 181 in the 
appendix.]
    Mr. Inslee. Are any of them associated with funds financing 
the September 11th attack?
    Mr. Sloan. I mean, I wouldn't sit here today and say that 
they specifically are involved in the September 11th attack. I 
mean, they have been listed as such noncooperative territories 
for the purposes of not having systems in place.
    Mr. Inslee. Thank you.
    What countries were involved in financing the September 
11th attack? And when I say countries, I would like to define 
that broadly. Any country that had a person of their 
nationality associated with it, whether as a transmission agent 
or as a contributor, any bank that is located in a particular 
country.
    Broadly speaking, what countries were involved in some way, 
or people within those countries, with financing the September 
11th attack?
    Who would be the best person to help me on that? I hope 
some of you have some information about that. It is a 
relatively important question, so we will give you a moment.
    Ms. Fisher. My understanding is that--what has been made 
public was that there was at least some money coming through 
the UAE and some through Germany. Not to say that it was from 
those countries, but that the money--you asked about 
transmitting, and so some of the money came from those two; and 
that has been made public.
    I just want to be careful not to say anything further at 
this point because I am not quite sure what has been made 
public and what hasn't. And so, if you would like, we can try 
to get with the people over at FBI, the Terrorist Financing 
Operations Section, who are wonderful, and try to get you that 
information.
    Mr. Inslee. I would appreciate that.
    And obviously Saudi Arabia in some fashion, one of their 
nationals was involved apparently, Al-Hasawi.
    Would you bear with me, just one more question?
    Chairwoman Kelly. If we need to do another round, we can do 
it then.
    Mr. Inslee. Thank you. I will be back.
    Chairwoman Kelly. I will hold the record open, and you can 
submit the question in writing if we don't do the round.
    Mr. Oxley.
    Mr. Oxley. Thank you.
    Mr. Sloan, FinCEN recently announced its new system for 
requesting investigatory assistance from the banks as mandated 
by Section 314 of the PATRIOT Act. As you know, if set up to be 
managed properly, it is going to go a long way in providing hot 
tips in this very complicated field, and it gives us an 
opportunity for a quick turnaround by investigators. What is 
the mechanism for ensuring that requests for assistance are 
prioritized in favor of the most important money laundering and 
terrorist investigations?
    Mr. Sloan. Mr. Chairman, we have met with the law 
enforcement side of that equation, principally the FBI, Customs 
Service, DEA, and asked quite frankly that they prioritize 
within their agencies those cases that either have a terrorist 
connection or are of extremely high and sensitive priority 
relative to money laundering investigations.
    As I understand it--and I don't want to speak for each of 
the agencies because there are probably various mechanisms 
within each agency--but none of the cases surface to the 
possibility of transmission over the 314(a) process unless they 
have been cleared in a field office by the agent in charge or 
in some instances at the national headquarters. In fact, I was 
even confronted at church recently by an FBI agent, who knows I 
am director of FinCEN, who remarked about the fact that he had 
received a notice that was broadcast through the entire Bureau 
about how the criteria, at least within the Bureau, for use of 
314 needed to be strictly adhered to so that we are not giving 
the impression that we are abusing the system. So I am 
confident that the bureaus that are taking advantage of this 
are, in fact, putting in place mechanisms that will assure that 
these are the highest priority cases.
    Mr. Oxley. We want to make certain that every effort is 
made to make certain that that works smoothly. I know there 
will be some issues raised on our second panel regarding that 
implementation. I think it is a legitimate concern. On the 
other hand, the potential--upside potential is great, as you 
indicated. As you indicated in your testimony, Section 314 is a 
critical component of the PATRIOT Act; and we would plan to 
work closely with Secretary Snow towards making certain it 
works and works fairly and effectively throughout the system.
    Let me ask each one of you, you have had now some 
experience under the PATRIOT Act and specifically under the 
anti-money-laundering provisions that our committee drafted. 
Give us some sense about what tweaking perhaps may be needed, 
either administratively or from a legislative perspective, to 
make this work in an effectual manner of identifying and going 
after assets of terrorist organizations and at the same time 
protecting individual rights and also providing as much 
flexibility for the banking system as we possibly can.
    Ms. Fisher, let me begin with you.
    Ms. Fisher. I didn't come prepared with any certain tweaks, 
although others on the panel might.
    I will say that the PATRIOT Act tools that were provided by 
Congress have been very useful, particularly in the hawala 
area. We have used it over two dozen times to charge 
individuals who were engaged in unlicensed money remitting, and 
we think that that is a critical tool.
    The other one that I think that is going to become very 
useful in the future and we have used a few times now is 
Section 319(a) which allows us to forfeit funds deposited in 
foreign banks if those funds can be forfeited by the U.S. And 
the foreign bank has a U.S. Corresponding bank. We have used 
that on four occasions, one of which relates to a terrorist 
organization. So we think that that will, hopefully, be very 
useful in the future.
    Mr. Oxley. Mr. Hoglund.
    Ms. Forman. If I may, the PATRIOT Act has been useful in 
the attack of terrorist financing, specifically in the use of 
the money service businesses as well as the bulk cash statute. 
The bulk cash statute has been used increasingly in our 
outbound currency operations. And in terms of the proposal for 
modification, 1960, the money service business requirement to 
be registered, it would be useful as a predicate offense for 
Title III electronic intercept. That would be one suggestion.
    Mr. Oxley. Thank you.
    Mr. Sloan.
    Mr. Sloan. In addition to following onto your first 
question, I mean, clearly we need to be tweaking the systems 
that are in place. I think that is going to be a constant 
effort to make sure that the balance between the burden we are 
imposing upon the industry and the benefit we are providing to 
law enforcement strikes the right balance. So that tweaking 
will always continue.
    But with regard to perhaps looking at the PATRIOT Act and 
some of the requirements, the first one that comes to mind, the 
PATRIOT Act allowed us for the first time to provide in our 
arsenal, if you will, information that comes from the 8300 
Form, which is the nonfinancial institution collection of cash 
in a business. For years, it was reported only to the IRS; but 
the PATRIOT Act now allows us to provide that information to 
law enforcement but only starting with reports filed since 
January 1 of 2002. I think we would like to see the possibility 
of looking into the archived information and providing access 
to a greater database for law enforcement efforts, and that is 
one that comes to mind.
    Mr. Oxley. How does that work? Does that have to be 
requested by the FBI?
    Mr. Sloan. In a fashion not dissimilar to the currency 
transaction reports or the suspicious activity reports or, as 
Mr. Hoglund mentioned, the currency monetary instrument 
reports, they are part of a database, the BSA database. Right 
now, we can combine all of that information and try to draw a 
picture of the money flow; and they have become incredibly 
important. The problem is that we don't have access to that 
information, as good as it is, if it was collected prior to 
January 1, 2002.
    Again, I am just adding this as something that I am fully 
aware that the FBI and I have talked about.
    I am handed information, and I don't want to bore you with 
it----
    Mr. Oxley. This just in.
    Mr. Sloan. We heard by both speakers about the issue of the 
so-called unregistered money services businesses, referred to 
as hawalas. When we registered--we required the registration of 
the money services businesses. We were essentially registering 
about 10,000 or 11,000 principals and potentially a quarter of 
a million service providers, check cashiers, et cetera; and 
hawalas are part of that operation.
    State requirements for violating the registration 
requirement are that ignorance of the law is no excuse. That 
doesn't apply, I understand, in the Federal law for 18 U.S.C. 
1960. It may be an additional, important tool for law 
enforcement, particularly in the area of the informal value 
transfer systems that are trying to stay below the radar screen 
and maintain their anonymity in the transfer of funds.
    Chairwoman Kelly. Mr. Crowley.
    Mr. Crowley. Thank you, Madam Chair; and thank you for 
calling this important hearing.
    Mr. Sloan--thank you to all the panelists for being here 
today.
    Mr. Sloan, a number of previous reports indicated that the 
Treasury Department was unhappy with the level of support 
provided by some of our allies, particularly in Europe, in the 
fight against terrorism through money laundering. Could you 
discuss--and I am making reference to an article in last 
February's 2002 Wall Street Journal about particularly Germany 
and Russia and their participation and cooperation, I should 
say, with our country in this effort.
    Additionally, I would be interested to hear from you about 
two of the specific allies in south Asia, Bangladesh and India, 
and their cooperation in this war against terrorism through 
money laundering.
    Mr. Sloan. I can comment on them generally. FinCEN is 
America's FIU, financial intelligence unit, and as such, we are 
a member of the organization known as the Egmont Group. The 
Egmont Group is a group of nations that are joined together--
rather a diverse group I might add--to share information about 
financial criminal activity, money laundering and, since 
September 11, even the potential for terrorist financing. 
Russia has come on board as a member of that group, along with 
69 other nations.
    We--from that small corner of the world in dealing with our 
foreign counterparts, we are very comfortable that we, FinCEN, 
are getting good cooperation. I can't speak to the larger 
picture of cooperation relative to matters outside the so-
called Egmont group of FIUs, but I am comfortable, whether it 
is Russia or India. In fact, FinCEN did a study in accordance 
with the requirements of the PATRIOT Act, Section 359, that 
required us to develop a report on the informal value transfer 
systems and report to Congress. That report has been completed, 
and we actually worked with the Indian government's law 
enforcement community because of the prevalence of such IVTS 
activity in their nation.
    So from my corner of the world, we are getting the 
cooperation that I think is appropriate. I can't speak for the 
larger picture that I think you are moving towards, but I am 
comfortable with our exchange of information.
    Mr. Crowley. I have some other questions of the second 
panel, so what I would like to do is yield the balance of my 
time to my colleague from Washington.
    Mr. Inslee. I thank you, Mr. Crowley.
    I was asking you about what the sources of the funding for 
the September 11 attack were, and Ms. Fisher was good enough to 
identify the United Arab Emirates and Germany. I think that was 
the end of the list. Then I added Saudi Arabia, because at 
least there were some Saudi Arabian nationals, 15 of the 19. 
So, in some sense, some Saudi Arabian nationals were involved. 
But there were other countries that--I didn't hear any 
involvement from Spain, from Italy, from Yemen or, 
interestingly enough to many Americans I think if they knew 
this, from Iraq.
    It is interesting to many Americans because 42 percent of 
Americans in a recent poll I saw had the belief that Saddam 
Hussein was involved in the attack of September 11. This is one 
of the justifications that has been inserted for the propriety 
of the war that is about to start; and I just want to make sure 
I understand and Americans understand that the agencies 
represented here today, the Department of Justice, the 
Department of Homeland Security, the Department of Treasury and 
Operation Green Quest, do not have information indicating that 
Saddam Hussein financed with one dollar or one dinar the attack 
of September 11. Is that the situation?
    Ms. Fisher. I just want to clarify what I had said before, 
which is when I mentioned U.A. And Germany that it was the 
public information that I felt comfortable with testifying to, 
that there may be other information within the Department that 
has not been made public or as I sit here today I am not sure 
that it has been made public that I can't testify to. So I 
wanted to clarify the record on that.
    Mr. Inslee. Can anyone add any other information?
    Mr. Hoglund. I can't testify to your specific question, 
but, as we have said, Operation Green Quest, the purpose was to 
exploit the systems that can be used in terrorist financing, 
and we certainly have cases and evidence of funds going to 
Iraq. However, what those funds have been used for, I am in no 
position to say at this point.
    To your larger question as well, I think one example--we 
will follow the money wherever it is going. The Ptech case in 
Boston, which I can't go into any great detail, but that 
involves a specially designated Saudi Arabian business man and 
that investigation pertains to that individual's business 
dealings in the United States and where that trail, that 
business may lead in relation to that individual.
    Mr. Inslee. Well, just so you will know, I have gone to a 
lot of briefings here in the Capitol. I have been pretty 
attentive to what the President has been saying, because I 
think that is very important. I have been listening very 
carefully to the agencies that you represent--well, I think. 
And to my knowledge, at the moment, at the moment, the United 
States Government has not suggested a shred of evidence to 
indicate that there was financing for the September 11 attack 
from Iraq. That is a very important fact that I think Americans 
ought to know if it is true.
    If it is not true, if it is not true, if there is evidence 
of a financial connection between Saddam Hussein and the 
September 11 attacks, Americans need to know that; and I would 
encourage you to talk to the administration. Because if there 
is such evidence, we ought to know about it; and today we 
don't. Yet 42 percent of people have reached this conclusion, 
and I think that is very interesting.
    I yield back the remaining part of my time.
    Chairwoman Kelly. Mr. Inslee, there is more time left.
    In my opening statement, I believe that I did make a 
connection, and I will give you that passage, of the connection 
between Saddam Hussein and the financing of the terrorism. I 
will give you a copy of that so you can see that, and perhaps 
you would like to talk to some of these people in private.
    I go now to Mr. Murphy.
    Mr. Murphy. Thank you, Madam Chairman.
    I want to clarify one of the questions you were just asked. 
You are not saying there is no connection between Iraq or any 
terrorist organizations that operate within Iraq? You are 
saying at this time you have to be careful what you disclose, 
correct?
    Ms. Fisher. I think the question, as I understood it, was, 
is there any money that we have traced back to Iraq going to 
the September 11----
    Mr. Murphy. Not necessarily the government of Iraq but in 
the organization.
    Ms. Fisher. As I sit here, I am aware that some money 
flowed through the countries that I mentioned, but as to the 
source of the funds or otherwise, I am not clear in my mind 
what is public and not public, and I don't want to talk about 
things that I know are classified. I make no comment. Don't 
draw any conclusions from what I have said one way or the 
other.
    Mr. Murphy. Let me ask about other sources.
    Among some of the organizations that have been set up that 
the money has flowed through, in some circumstances it has been 
well-intended citizens who have given money intended for 
charity to help the poor or other needy within those countries? 
If so, what sort of due diligence should citizens take when 
approached to give money to charities? Is there anything else 
we need to do to require more disclosure from charities to say 
where the money is going to?
    Ms. Fisher. Clearly, I can mention that the defendants 
charged in the cases are alleged to have defrauded the people 
that donated. One is the case in Syracuse involving Help the 
Needy, where it is alleged that the people that ran that 
charity defrauded the people that actually gave money and that 
that money was filtered through to Iraq without a license but 
that there were statements made in their propaganda that either 
said they had a license or something along those lines, so they 
were actually trying to defraud them.
    Also, in the case of Enaam Arnaout, who was the executive 
director of Benevolence who recently pled guilty in Chicago, I 
believe also there were allegations that some of the victims 
didn't know that their money was actually--may be targeted, as 
alleged, to go to fund the Chechnian rebels.
    I think it is possible that some of the victims don't know.
    Mr. Murphy. They receive this through cash, checks, credit 
card or all of the above?
    Ms. Fisher. All of the above.
    Mr. Murphy. On another aspect--certainly I believe, as 
members of the committee believe, that the vast majority of 
Muslims in this country are law-abiding citizens who care a 
great deal for this Nation as well as for other Muslims 
throughout the world. Can you state for the record the level of 
cooperation you have received from other folks who are of the 
Muslim community and what they have provided you with?
    Ms. Fisher. We have gotten excellent cooperation from the 
Muslim community. The case in Buffalo, the Lackawanna cell that 
we have charged of the individuals who went to Afghanistan to 
attempt to train, the Muslim community in Buffalo was excellent 
in their cooperation. I think that, from a law enforcement 
perspective and criminal enforcement perspective, we have great 
cooperation from the Muslim community from across the country.
    Mr. Murphy. Going back to my questions then, in general, 
for the American public, anybody who is approached by any 
organization purporting to be helping the needy in Mideast 
countries, they need to check out those organizations 
themselves and ask for a license and not just be told that is 
the case. Perhaps should they follow up with law enforcement 
agencies to say that they have been approached by them?
    Ms. Fisher. Well, they certainly can. We have gotten a lot 
of inquiries from the public, and we try to help them. I think 
FinCEN has some best practices on these issues that they might 
be able to talk about.
    I would also note that there are--people dedicated as 
terrorist groups or terrorist organizations are listed, like 
foreign terrorist organizations are listed by the Department of 
State. Also, the people--individuals and organizations that are 
listed pursuant to IEEPA are also available on the Web site so 
people can check those organizations out before they donate.
    Mr. Murphy. Thank you very much.
    Thank you, Madam Chairman.
    Chairwoman Kelly. I want to call to people's attention that 
we have some slides with the interconnections of things showing 
on the back wall. You may want to take a look at that as people 
are talking. It does put some things in place.
    Mr. Gutierrez.
    Mr. Gutierrez. I get caught up in the slide up there.
    Let me ask Ms. Fisher, since 9/11, the proceeds from drugs 
appear in some cases to be very lucrative channels for funding 
criminal activity such as terrorism. Could you explain what 
percentage of your efforts are being dedicated in this area?
    Ms. Fisher. I would hate to try to quantify it, but I can 
tell you that we see this as a significant problem and a 
potential significant source for funds for terrorism.
    There is two particular cases that I have mentioned that we 
have charged in this area. One is a case out of San Diego where 
the defendants are charged with attempting to exchange heroin 
for Stinger missiles, so it was a drugs-for-weapons case. 
Another case we have charged in Houston relates to another kind 
of negotiation, drugs for weapons, with the weapons going to 
AUC which is a terrorist group of Colombia.
    So we are focusing on that. We think that drug proceeds as 
well as other proceeds from illegal activity such as the 
cigarette smuggling, which was the case in North Carolina, are 
often used to fund terrorist organizations and violent acts 
abroad.
    Mr. Gutierrez. The importance of cooperation and 
coordination among local, State, Federal and cooperation in the 
enforcement and the prevention of terrorist financing, could 
you tell me a little bit about what is going on at our level to 
help cities and States? Are we providing any financial 
assistance to those cities and States? Just what are we doing?
    Whoever amongst the panel who feels most qualified to 
answer the question.
    Mr. Sloan. FinCEN has quite a successful program known as 
Gateway. Gateway links all 50 States, Puerto Rico and the 
District of Columbia with FinCEN. FinCEN trains the individuals 
at each of the State capitols. They may be in the Attorney 
General's Office or in a division of the State police of an 
individual State, and it allows each of the States to sort of 
tap into the FinCEN network and join with their counterparts at 
the Federal level in not only sharing leads and information but 
deconflicting cases.
    We think that this has been a very important tool. In fact, 
last year alone, we had over 1,600 cases in which State and 
local law enforcement were linked with either a Federal case or 
another State and local case by virtue of coming through the 
FinCEN network.
    We meet regularly with this group. Actually, in most 
instances, having been both a local police officer and a 
Federal agent, I can usually tell you it works the other way 
around, where the Federal agency claims they are there to help 
you. In this case, the State and local activity dealing with 
Gateway is something that the Federal agencies are starting to 
join, which is making it a more successful operation, from our 
perspective.
    Mr. Gutierrez. Thank you.
    I guess if we could--maybe Ms. Fisher or Mr. Sloan, Mr. 
Hoglund can at some point after the hearing, because there has 
been this issue raised about what we have been doing in this 
country and the actions of our Federal Government vis-a-vis 
Iraq specifically and the financing and because I don't want to 
put an onus on you about what you can and cannot say, if you 
could just respond in writing at a later point and say, members 
of the committee, here is what we think. That way you don't 
have to say, God I won't say anything--because I don't want you 
to say anything. I don't. And I understand that that could be a 
problem. So think about that so we can have the information.
    Because I haven't seen it all come together. I see the 
chart up there, but I hear the testimony. I know money went to 
Bosnia. I know money went here. But I look at September 11, and 
I don't see the connection specifically in terms of the 
financing of that or other issues, and I think that that is an 
important issue.
    Lastly, let me just share with Mr. Hoglund that I think one 
of the things you might want to consider, because I know that 
the Justice Department and I know the Attorney General is 
taking many, many steps in order to watch, monitor, surveil the 
going on of people or peoples within the United States of 
America, and he wants to know what is going on here because we 
need to know. But we have got like 10 million people that he 
knows, which all of you know and which I know are in the United 
States without documentation, most of whom are working in the 
United States.
    I went to the Holiday Inn, and the young lady asked me when 
there could be a program where she could get legalized. I went 
to IKEA and as they were putting the furniture in my car, the 
guy said, Gutierrez, do you think there is going to be a 
legalization program? When I went to go get my gardening 
equipment--you get my drift--and the guy picking up my dishes 
in the restaurant--either I am a magnet for people who are 
undocumented in this country or they are everywhere and they 
are a part of our life. And I think they are a part of our 
life, whether it is the lady cleaning up my room, the guy at 
the gardening center or the one helping me put equipment from 
the IKEA.
    It doesn't matter. Given that they are here working and in 
jobs that are pretty low-paying jobs and that we have an issue 
of security, I mean, we want to know who is in the country.
    A funny thing occurred to me that I think I could identify 
for you, with you. Ten million people, I am sure they would 
give up their fingerprints, give you pictures themselves and 
tell you their life history if they could get a card. And I 
don't say this jokingly. There is 10 million of them. Issue a 
security card if they are working and obeying all of the laws 
and contributing. Maybe we should bring them in. Those will be 
10 million fewer people you will have to watch or monitor 
because you will know. They will join our banking system.
    Mr. Crowley. Now you know why he is a magnet.
    Mr. Gutierrez. Maybe we should bring them into our system, 
and I mean that genuinely, because I keep watching your efforts 
to know what is going on in the country. So just a suggestion.
    Thank you, Madam Chair, for your courtesy.
    Chairwoman Kelly. Thank you.
    Ms. Brown-Waite.
    Ms. Brown-Waite. Thank you very much, Madam Chair.
    Coming from the Tampa Bay area, the arrest of Sami Al-Arian 
was very interesting to many people. The question that I have 
is, when the whole issue began, I contacted Judy Ginshaft at 
the university and I said to her I wanted her to interview 
every single student that he had contact with and see if there 
was any attempt on his part to openly advocate violence against 
America, against any American. Her comment at the time was 
something like, well, that is not really my job; and I am not 
getting a lot of help from the Department of Justice or the 
FBI. Tell me what changed from--and this was before 9/11 that 
this call took place--tell me what changed, other than 9/11.
    Ms. Fisher. As far as the cooperation with the Department 
of Justice or what changed about his activities?
    Ms. Brown-Waite. First of all, he wasn't in the classroom 
because he was on administrative leave all that time.
    Ms. Fisher. I want to make sure I understand the question.
    Ms. Brown-Waite. What changed his activities?
    Ms. Fisher. I think that the Indictment explains. It is 
quite lengthy, and it is about 120 pages. It explains years of 
activities by Mr. Al-Arian and other defendants that are 
charged in the case that make it very clear that they were very 
involved for some time in the leadership of the PIJ here in the 
United States.
    Ms. Brown-Waite. Ms. Fisher, with all due respect, I have 
read it. It is old information that was there before 9/11. I am 
asking you again, what changed? Because that information--the 
clear majority of it was information of activities before 9/11. 
What happened that all of a sudden he is now arrested? That 
information was known and out there.
    I think my basic question is--and I didn't see it in the 
Indictment--that you were ever able to tie in any kind of 
advocating of violence that he engaged in while a professor at 
the university. And, believe me, I am not defending the man at 
all.
    Ms. Fisher. I understand your question now. I am sorry. I 
may have been a little dense as to it.
    Something very significant happened over the past year with 
regard to this case, and I think it is a great example of 
information sharing and some of the tools we were given by the 
PATRIOT Act for information sharing on intelligence and some of 
the tools we were given by the Court of Appeals for the FISA 
Court of Review with regard to now allowing our intelligence 
operation share information with our prosecutors.
    So for a long time, and as it is outlined in the 
Indictment, the activities went on, and they were monitored for 
intelligence reasons, but they weren't necessarily fully shared 
with prosecutors that were looking at criminal charges in the 
case. With the PATRIOT Act in the recent--just last year--FISA 
Court of Review opinion, it allowed us to share that 
information back and forth; and, at that point, it was 
appropriate to bring the charges. So I hope it gives a little 
bit better answer to you question.
    Ms. Brown-Waite. It does. And I wasn't here last year. I am 
a new Member.
    First of all, in response to a previous question, you said 
that the charities that are questionable are now on-line. You 
have a list of them on-line. Was this the case before 9/11?
    Ms. Fisher. Yes, absolutely. The designation process for 
IEEPA purposes has been in existence I think since 1995, and I 
believe that some of the members of PIJ had been listed as 
early as 1995--that is correct. As far as foreign terrorist 
organizations, the 36 organizations that are listed by the 
Secretary of State in conjunction with the Department of 
Justice and the Treasury, that process started in 1997. Those 
are 2 years, and they are renewed every 2 years.
    Ms. Brown-Waite. One last question. Are universities still 
insisting upon a subpoena or court order before they will 
release information when you are trying to find out whether or 
not a student is an alien in a particular college? Are some 
States still requiring that? And, if so, can you supply us with 
a list of the States that are?
    Ms. Fisher. I am not aware of any problems in this regard, 
but I would like to check and ask around a little bit because 
there may be some that we are not aware of. So if we could 
supplement an answer.
    Ms. Brown-Waite. If you could get back to the committee 
Chair.
    Chairwoman Kelly. Ms. Fisher, if you could supply that 
list, please try to do that and bring it to the committee.
    Mr. Garrett?
    Mr. Garrett. Good afternoon. Can any one of you provide us 
with more detail on the degree, if any, of foreign cooperation 
or the lack thereof--specifically, if you could address the 
countries that have strengthened their anti-laundering laws in 
response to the PATRIOT Act?
    Ms. Forman. If I could address that. We are working very 
closely with various foreign governments in Europe, 
specifically, England, Italy--we have Italy--representatives 
from the Italian police in our office today. We are working 
with Switzerland.
    We have entered into the first memorandum of understanding 
to work in international terrorist financial investigations 
where we exchange law enforcement officers to work on the case 
and ensure the timely exchange of information. We are working 
with Canada, and we are working with countries in Asia.
    We also follow the foreign leads, once again tracking and 
following the funds. We have created financial investigative 
teams solely made up of Green Quest agents and analysts, and 
sometimes in combination with the Federal Bureau of 
Investigation, and we travel overseas and meet with these 
foreign governments to track the money.
    Mr. Garrett. To follow up on that, you gave us some of the 
countries that are stepping up to the plate, it sounds like, 
working with you; and specifically on the money laundering 
side, are there those that you have reached out or we have been 
seeking assistance from and they are not giving us the 
assistance that we would prefer?
    Ms. Forman. We are working with various governments--``we'' 
being the Bureau of Immigration and Customs Enforcement, 31 
foreign attache officers. Some countries are more readily 
available to provide information, and some are less. But we are 
working to chip away at that resistance and getting some of the 
information that we need.
    Mr. Garrett. So there is none specifically that come to 
mind that we should be doing anything we can from this end as 
far as encouraging them to step up to the plate more so than 
they have done in the past?
    Ms. Forman. Not at this time. We recently just provided 
training in Qatar and Kuwait. We are working with other 
governments that have requested and we have reached out to 
provide this additional training so they know what to look for. 
In some instances, it is they just don't know what to look for, 
and they don't know what those signs are, and we are helping 
them with that.
    Mr. Garrett. Any European nations that we should be 
specifically asking more assistance from than they have been in 
the past?
    Ms. Forman. Not that I am aware of at this time.
    Mr. Garrett. I don't know if this is yours or the rest of 
the panel. Recently, the Deputy Secretary of State was quoted 
as saying, maybe the Hezbollah is actually the A team of 
terrorists, instead of al-Qaeda. There is news every day with 
regard to finding Osama bin Laden. If we were to find him 
today, tomorrow or in the near future and therefore perhaps cut 
off or decapitate the head of al-Qaeda, wouldn't Hezbollah 
still remain a significant force despite that?
    Ms. Forman. I think I will refer this to my DOJ colleague.
    Ms. Fisher. Well, I certainly think that Hezbollah and al-
Qaeda and the other terrorist organizations are a significant 
threat against the U.S., so our efforts certainly don't stop at 
al-Qaeda, whether it is in terrorist financing or the war on 
terrorism. We think it is global and that it is broad reaching 
to all the terrorist organizations.
    Mr. Garrett. Does it change your focus of your efforts or 
your energies if that capture were to come tomorrow? You would 
still be looking at al-Qaeda but would be changing your focus 
from there elsewhere or would you continue on the path that you 
are on right now?
    Ms. Fisher. I think we are continuing all paths right now. 
I mean, I think we are focused on all of the organizations that 
we think pose a threat to U.S.
    Mr. Garrett. I thank you very much for your answers.
    I yield back.
    Chairwoman Kelly. If there are no more questions, the Chair 
notes that some members who were unable to be here or even the 
ones who were here may have additional questions for the panel 
and they may wish to submit those questions in writing. So 
without objection, the hearing record----
    Mr. Crowley, I thought you went.
    Mr. Crowley. You did recognize me. Could I have an 
opportunity for a second round or maybe a possibility for a 
second round?
    Mrs. Kelly. I don't think so, because we have some planes 
that need to be caught. So if you don't mind----
    Mr. Crowley. Could I make one statement very quick?
    Chairwoman Kelly. By all means.
    Mr. Crowley. We usually tend to want to help our 
colleagues' attempts to make some questions, and I yielded some 
time. Had I known where the direction of the questioning went, 
I may not have been so quick to yield my time to my colleague.
    Because I think you failed to make the one point and that 
is Saddam Hussein has supported terrorism in the Middle East, 
specifically in Israel, in which it is my understanding he has 
given $25,000 to each family of a homicide bomber, a person who 
straps explosives on themselves and walks into a crowded mall 
or into a bus and blows themselves up. To me, there is no 
difference between a person who does that and a person who gets 
into an airplane and flies into the Twin Towers in New York 
City, killing themselves and taking innocent lives; and that is 
a connection that I think the American people can certainly 
understand.
    Chairwoman Kelly. Thank you, Mr. Crowley.
    Without objection, this hearing record is going to remain 
open for 30 days; and members will be able to submit their 
questions and place their responses in the record.
    This panel is excused, and we do thank you very much. We 
are sensitive to the fact that you have limits on what you can 
say, and we appreciate the fact that you attempted to answer 
our questions to the best of your ability. We are very grateful 
for your time, and this panel is excused with our appreciation. 
Thank you very much.
    As the second panel takes their seats at the table, I am 
going to begin the introductions. For our second panel we 
welcome Steve Emerson, the Director of The Investigative 
Project; Mr. Matthew Epstein, Assistant Director of The 
Investigative Project; Mr. Larry Johnson, CEO of BERG 
Associates; Mr. John Moynihan, Senior Investigator for BERG 
Associates; and Mr. John Byrne, Senior Counsel and Compliance 
Manager for the American Bankers Association.
    I want to thank each one of you for testifying before us 
today, and I welcome you on behalf of the full committee.
    Without objection, your written statements and any 
attachments will be made for part of the record.
    You will be recognized for a 5-minute summary of your 
testimony. When the light changes color on the timer before 
you, you should move toward the finish.
    Chairwoman Kelly. If you are all settled and ready, we 
begin with you, Mr. Emerson.

STATEMENT OF STEVE EMERSON, DIRECTOR, THE INVESTIGATIVE PROJECT

    Mr. Emerson. Thank you for the opportunity to testify, 
Madam Chairman.
    I want to let you know that you have a very excellent 
staff. Even though there is a pay freeze right now, they should 
be compensated with lots of praise. Andy has done a great job 
and also knows how to use a Blackberry very well.
    Chairwoman Kelly. You realize what that is going to cost 
this committee?
    Mr. Emerson. You can put a supplemental in.
    It has been 18 months to the day since the horrific events 
of 9/11. The question is, where we do we stand?
    Consider this one interesting fact. In the 8 years before 
9/11, there are a total of just two prosecutions in the United 
States of terrorist financing. Since 9/11, there have been at 
least 70 criminal investigations, $113 million in frozen 
assets; and, according to informed sources, there are at least 
another 100 investigations in different preliminary stages. 
Terrorists raising tens of millions of dollars have existed in 
the United States for more than a decade. They include every 
single veritable member of militant Islamic organizations: Al-
Qaeda, Hamas, Hezbollah, Palestine Islamic Jihad. They exist 
not just in the major cities but in small towns as well as 
major cities from Seattle, Washington; Boston, Massachusetts; 
Moscow, Idaho; Syracuse, New York; Charlotte, North Carolina; 
Tampa, Florida; Dallas, Texas; Portland, Washington; 
Plainfield, Indiana; Buffalo, New York. I could go on listing 
numerous other cities.
    The question is, how did they operate here? They didn't 
list their names generically. They operated under false cover. 
They had innocent-sounding names. They operated under 
humanitarian cover, under religious cover, under human rights 
cover.
    Example, the al-Qaeda organization operated from its very 
inception under an organization called the Benevolence 
International Foundation. It was deliberately set up in the 
United States to provide a conduit for al-Qaeda in terms of its 
financing worldwide.
    Same thing for al-Qaeda in terms of Global Relief. It was 
shut down, as was Benevolence International, after 9/11. Iraq, 
as we heard this afternoon, operated--it got moneys through 
Help the Needy, a fake organization based in Syracuse, New 
York, and other places in the United States. Moneys were going 
into illicit purposes.
    Hezbollah operated a cigarette-smuggling scheme in 
Charlotte, North Carolina.
    Al-Qaeda just used recently, as the indictments in New York 
revealed last week, the Al Farouq mosque in Brooklyn.
    The Palestine Islamic Jihad, one of the most notorious 
terrorist groups in the world today, operated from at least 
1984 through the present under false cover in the United States 
under the monikers of an academic group, The World Islamic 
Studies Enterprise, the Islamic Committee for Palestine, as 
well as the Islamic Academy of Florida through the operations 
of a professor at the University of South Florida at Tampa.
    Of course, Hamas, that would also belong, I believe, 
together with Hezbollah, as the A team of terrorist groups, 
operated through an organization that received nonprofit status 
called the Holy Land Foundation for Relief and Development. 
Wiretaps by the FBI in 1993 and 1994, unfortunately and 
tragically only translated and transcribed in 2001, show that 
Hamas officials knew exactly what they were doing in setting up 
a fund-raising mechanism in the United States, knowing exactly 
how far to press the limits of the U.S. Law.
    At the end of the day, I believe we will find tens of 
millions of dollars, perhaps totaling even more than 100, that 
have been raised by militant Islamic groups from the early 
1990s through 9/11.
    What are the common denominators that are common to all 
these schemes?
    One, al-Qaeda, Hamas, Palestine Islamic Jihad deliberately 
set up in the U.S. To exploit our freedoms, religious 
tolerance, pluralism and lax financial controls.
    Number two, Saudi Arabia support for militant Islamic 
groups, including charities today that operate in the United 
States, including the Muslim World League and the International 
Islamic Relief Organization, organizations that have been 
directly tied to al-Qaeda and financing of terrorist groups and 
have not had their assets frozen, their influence is able to 
prevent acquisition and seizure of terrorist assets in the 
United States.
    Number three, the disparate and compartmented number of 
agencies collecting information made it very easy for terrorist 
groups to find the crevices and the cracks to evade any 
detection.
    And bottom line is that in the last 10, 15 years the 
terrorists had a lot of time to create elaborate financial 
schemes.
    The U.S. Government is doing a phenomenal job, I believe, 
in terms of trying to play catch-up. We still have a long way 
to go.
    In working with Federal agencies and working with those 
investigators on the ground, thousands of unsung heroes have 
emerged since 9/11; and I believe this country owes a great 
deal of dedication to them.
    Chairwoman Kelly. Thank you very much, Mr. Emerson.
    [The prepared statement of Steve Emerson can be found on 
page 69 in the appendix.]
    Chairwoman Kelly. Mr. Epstein.

     STATEMENT OF MATTHEW EPSTEIN, ASSISTANT DIRECTOR, THE 
                     INVESTIGATIVE PROJECT

    Mr. Epstein. Chairwoman Kelly, distinguished members of the 
panel, thank you for the opportunity to testify.
    In 1993, Osama bin Laden told senior al-Qaeda lieutenants 
that three Muslim charities provide the primary sources of al-
Qaeda financial support, including the Muslim World League and 
Benevolence International Foundation. Far from nebulous, back-
room organizations in faraway lands, these charities set up 
major operations right here in the United States. Just as the 
security and strength of our financial and corporate 
institutions attract unparalleled investment capital, they also 
attract financiers of al-Qaeda terrorist organizations.
    In 1989 and 1990, the Muslim World League based in Saudi 
Arabia established branch offices in Falls Church, Virginia, 
under the operational arm, the International Islamic Relief 
Organization and Sanabel Al-Kheer. In the United States, the 
board of trustees of these organizations included two suspected 
al-Qaeda financiers. From 1991 through 1999, IIRO laundered 
millions of dollars through private U.S. Front companies, 
including a privately-held Islamic investment bank financed by 
two specially-designated terrorists and a chemical company 
located in Chicago, Illinois, that was raided by FBI agents in 
1997 as part of a terrorism and money laundering investigation.
    An accountant at the Islamic bank told the FBI that he 
feared that moneys transferred overseas may have been used to 
finance the East African embassy bombings. IIRO's tax forms 
revealed that the vast majority of the money was channeled to 
operations in Bosnia, which we now know supported al-Qaeda 
infiltration into Western Europe.
    In 1993, al-Qaeda operatives established the Benevolence 
International Foundation in Chicago, Illinois. From 1993 to 
1999, BIF collected over $12 million by way of personal checks, 
wire transfers and stock donations. Moneys were then 
transferred overseas by wire to al-Qaeda-controlled accounts 
and ultimately withdrawn in cash to support al-Qaeda 
operations.
    As seen in the recent Palestinian Islamic Jihad out of 
Tampa, Florida, money is the lifeblood of terrorist 
organizations.
    The PATRIOT Act has made major impact in slowing terrorist 
financing. However, continued vigilance is mandatory as 
terrorist organizations quickly adapt to U.S. Counterterrorism 
legislation.
    Indeed, following the passage of the 1996 Antiterrorism and 
Effective Death Penalty Act, FBI wiretaps caught senior 
terrorist leaders in the United States discussing exceptions in 
the material support restrictions for medical aid. As a result, 
U.S.-based front charities began using medical equipment as 
currency for terrorism support.
    As a new generation of al-Qaeda leaders mature, we need to 
remain flexible and nimble in identifying and quashing all 
forms of financial support for international terrorism. 
Deserving particular attention are, one, charities, businesses 
and individuals with operations in conflict areas, including 
Bosnia, Chechnya, Afghanistan and the Sudan; two, financiers 
holding interests in dozens of shell companies in the United 
States with substantial overseas financial activity; three, 
unorthodox leasing activity and real estate transactions.
    Our enforcement agencies and task forces, including 
Operation Green Quest, the Criminal Division of the Department 
of Justice, the Department of Treasury, the FBI, IRS, INS and 
Customs, as well as the numerous U.S. Attorneys throughout the 
country have made great strides in shutting down financial 
operations. Continued vigilance and interagency cooperation is 
necessary as al-Qaeda regroups to press our Nation's resolve.
    Chairwoman Kelly. Thank you very much, Mr. Epstein.
    [The prepared statement of Matthew Epstein can be found on 
page 104 in the appendix.]
    Chairwoman Kelly. Mr. Johnson.

        STATEMENT OF LARRY JOHNSON, CEO, BERG ASSOCIATES

    Mr. Johnson. Pleased to be here today with my partner and 
friend, John Moynihan.
    Oftentimes, you don't get the chance to do this on the 
Hill, but John, on October 21, was up here before this 
committee. He was the one who suggested you need to do 
something about the unlicensed money remitting business. 
Congress did something, this committee in particular; and, as 
we heard in the panel before, it has been one of the most 
single important acts in going after the terrorist network.
    Terrorists need two things to thrive and prosper. They have 
to have a safe haven, which means they either have a state that 
sponsors them or they are set up in a dysfunctional state and 
they need money. You cut the money out from under them, you 
take their heart away, because money requires--you have to 
train people, you have to feed them, you have to transport 
them. In reality, the money part of this and the work this 
committee has done has been more important than anything that 
the Department of Defense has done in killing them. I am in 
favor of killing the terrorist, but when you take the money 
away, you go a long way towards helping protect us.
    What we do in our company, we are fortunate to support the 
Department of Justice in some investigations, but we also work 
in the private sector and get out in areas such as the Colon 
Free Zone of Panama and some of the other free zones. We see 
these merchants that operate within the international financial 
system, and that international financial system is much like a 
superhighway that provides those who want to engage in 
terrorism a road that they can get things done.
    The most significant change we have seen with terrorist 
activity vis-a-vis financing is with the end of the Cold War 
and the real dramatic decline in state sponsorship--while it is 
true Iran, Iraq, Syria continue to provide sponsorship--what we 
have seen is those groups that do remain have engaged in the 
whole spectrum of economic activity, ranging from criminality 
to setting up legitimate businesses with charitable 
organizations in the middle.
    I would like particularly to make reference to the case 
cited with Hezbollah in North Carolina. Those individuals, when 
they finally arrested them, they had two-page rap sheets. That 
means they had committed felonies prior and misdemeanors and 
had not been prosecuted because the crimes were considered 
below the threshold.
    The other part of that case, the point that needs to be 
made which is so important, these folks that are engaged in 
these terrorist activities understand how to game our system; 
and if they can get underneath the law, they can break it but 
not be prosecuted, they will do so. As John will be able to 
elaborate in more detail, we are still seeing that.
    I have a power point presentation that I would like to run 
through to illustrate how the charitable organizations have 
done this.
    This was a case that was conducted out in Chicago--still 
active. It was done as a civil forfeiture, civil seizure. The 
FBI agent on it was a man named Bob Wright.
    The Quranic Literacy Institute set itself up as a 
charitable organization, ostensibly to teach people how to read 
the Koran. The names that are listed there was the president, 
the corporate secretary and trustee. The person to the side, 
Mohammed Salah, has a question mark by his name, because when 
he went and presented documents to a bank to get a loan he said 
he was an employee of that organization and he had letters from 
the president that said he was an employee of the organization 
and yet there was no corroborating information, no paycheck, no 
W-2, no contract. The man was a pseudo employee using this 
charitable organization as a device by which to conduct 
operations which you will see led to terrorist financing of 
Hamas.
    If we go to the next slide, here we see one of the 
individuals that was alluded to by the previous panel by the 
name of Yassin Kadi, a Saudi citizen. He is also involved with 
the Ptech case. This individual, Tamer Al-Rafai, had a 
corporation, Golden Marble. He was asked to go purchase a piece 
of property. To purchase that piece of property, what can only 
be described as a gift from Mr. Yassin Kadi, who sent the money 
to him. No loan agreement, no requirement to pay it back, sent 
him the $820,000, gave him instructions. They prepared three 
different checks of different amounts that were then passed to 
the Quranic Literacy Institute for being cashed later. They 
held onto those checks until they got the 501(c)(3) status as a 
charitable organization; and, ultimately, later on, they used 
that property as an asset to draw money from it to then shift 
into the hands of a terrorist group in the Middle East, Hamas.
    If we go to the final slide, this shows the kind of money 
laundering activity that you would see with drug organizations. 
But it is important to note, this is not typical money 
laundering. This does not start with a predicate crime. It 
starts with legally raised money, in some instances. But what 
they have done in this case, money came from Faisal Financial 
Services of Geneva, that is King Faisal of Saudi Arabia, who 
diverted some money directly into the bank account of Mohammed 
Salah. Other funds were sent to Ubu Marzook, the political 
director of Hamas. Two other individuals, one known and one 
unknown, Gazi Abu Samah and someone in Dubai, also sent money 
directly to Ubu Marzook. Marzook then channeled this money to 
Mohammed Salah, who carried it to Middle East; and it was used 
both to pay for families of people engaged in suicide terrorist 
attacks as well as to fund terrorist operations.
    I would like to tell you that this is an exception, but 
what Steve and Matt talked about and what John will talk about, 
it is typical of how these groups can exploit charitable 
operations.
    I think the work the committee has done on this front has 
been important, and I commend you for it.
    Chairwoman Kelly. Thank you very much, Mr. Johnson.
    [The prepared statement of Larry Johnson can be found on 
page 149 in the appendix.]
    Chairwoman Kelly. Mr. Moynihan.

     STATEMENT OF JOHN MOYNIHAN, SENIOR INVESTIGATOR, BERG 
                           ASSOCIATES

    Mr. Moynihan. Thank you, Madam Chairwoman.
    On the occasion of my last appearance before the committee, 
I testified about BERG experiences with the understanding of 
the numerous and formal financial systems that operate around 
the world. At that time, the committee had great interest in 
hearing about my experiences with hawala, black market peso and 
other parallel money markets and how money moves in these 
underground financial systems. We helped shed light on the ways 
to implement programs to stem the flow of illicit dollars 
within criminal terrorist groups like al-Qaeda.
    The committee may recall I specifically recommended a 
Federal law criminalizing the act of engaging in money exchange 
without a license needed to be adopted. Indeed, the PATRIOT 
Act, enacted within a few months, modified the law, Section 
1960 of Title 18, U.S. Code, making it a more important, 
effective tool in the use of prosecution of unlicensed money 
remitters. We would like to applaud the actions of the 
committee in moving that legislation amendment forward and 
making the law a more effective tool to combat international 
organized crime and terrorism.
    Likewise, we would like to applaud the efforts of the 
various Federal law enforcement agencies which have 
aggressively investigated and penetrated these hawalas, black 
market financial systems over the past 18 months. You should 
know that our work as a government contractor brings us in 
close personal contact with Federal investigations. From a 
variety of Federal agencies we can personally assume, the 
committee, that good use is being made of Title 3 of the 
PATRIOT Act. Important investigations are being conducted, and 
significant advances in the war against organized crime and 
international terrorism are being made using the 
recommendations within these Chambers of 1960, Title 18.
    With that said, more needs to be done. Today we would like 
to address another important area of international money 
movement which in our experience has proven to be a very 
effective means of laundering criminal proceeds 
internationally; that being the use or, more correctly, abuse 
of cash letters, sometimes referred to as an international 
pouch.
    So what is a cash letter? In layman's terms, a cash letter 
is an interbank transmittal letter that accompanies checks or 
cash instruments that are sent from one bank to another 
internationally. Large banks receive cash letters on a daily 
basis from correspondent banks. These cash letters can often 
contain hundreds or thousands of checks that are bundled 
together and sent to a corresponding bank for collection.
    Once received, the checks must be sorted and processed and 
ultimately forwarded to the payee banks for collection. Checks 
are often routed through the Federal Reserve System and other 
bank or regional check processing centers for collection.
    In short, the cash letter agreement between banks is a 
depository action that is in place to ensure that foreign banks 
get paid for checks they accept for deposit from abroad.
    In recent years we have personally noticed an increase in 
the use of cash letters as a vehicle for international money 
laundering. As wire transfers and other forms of traditional 
laundering have come under increased scrutiny regulation, 
organized crime groups and terrorists have turned to other 
methods of moving their money internationally. Consequently, 
the international movement of bulk quantities of personal 
checks now figures prominently in money laundering or money 
movement schemes.
    First some relevant background. Banks open bank accounts 
for other banks. These are known as correspondent accounts. 
These correspondent accounts are used for the movement of funds 
between banks. Many times the correspondent will send monetary 
instruments from the overseas locations to the United States to 
be deposited into the correspondent bank account. Those checks, 
money orders, cashier's checks, et cetera, are accompanied by a 
deposit slip that details the value of the instruments with the 
date and the accompanying checking account number that the 
funds are to be deposited into. This in essence is a cash 
letter.
    These cash letters are sent to designated areas of the bank 
for processing. Some banks handle as many as 5- to 7 million 
checks a day for processing. Therefore, when these cash letters 
are delivered to the banks by shipping companies in pouches and 
overnight bags from abroad, it would be extremely difficult to 
ensure that those instruments are not the subject of or 
facilitating money laundering.
    How do these instruments end up in the hands of 
correspondent banks abroad? There are many ways in which this 
could happen. As an extension to the last time we were here 
regarding 18 USC 1960 involving unlicensed money remittances, 
many people seek to send monies abroad.
    In the interest of time, I am going to cut short this 
speech and cut to the chase. Here is the deal. These checks 
come from abroad, they land in our banks; they are accompanied 
by a deposit ticket. Once these millions of checks arrive, they 
are deposited into accounts. These accounts then--correspondent 
accounts are credited for the value of these checks. But what 
we miss in our investigations is the offsetting credit that 
goes along with the deposit of these checks abroad. For 
instance, if a series of checks were sent to a Middle Eastern 
bank, those checks are accepted. They are then put in a pouch, 
U.S. Denominator checks, and they are sent here to the United 
States and deposited into the corresponding account. It is 
those credits on the other side of the ocean that we miss all 
the time. It is those credits that are then funneled back to 
the folks in those foreign countries. It is those credits that 
are used for criminal activities.
    Here in the United States we should be able to recognize 
that the way these checks come in, the huge volumes of these 
checks come in, and the way they are purchased, structured, and 
enumerated are examples of money laundering. We need to capture 
this, and 18 USC 1960 could be better aided if we were able to 
establish that people who do these types of crimes either 
through correspondent accounts or personal accounts should be 
held to the standard of having a presence here. The mere fact 
that an individual has an account here should constitute 
presence in the law, and that is something that should be 
addressed for further prosecution.
    Thank you.
    Mrs. Kelly. Thank you very much.
    [The prepared statement of John Moynihan can be found on 
page 152 in the appendix.]
    Mrs. Kelly. Mr. Byrne.

STATEMENT OF JOHN BYRNE, SENIOR COUNSEL AND COMPLIANCE MANAGER, 
                  AMERICAN BANKERS ASSOCIATION

    Mr. Byrne. Thank you, Madam Chair, Chairman Oxley, members 
of the subcommittee. The ABA appreciates this opportunity to 
discuss the myriad of challenges faced by the financial 
industry and the government in addressing the scourge of 
terrorist financing. Our members have been diligently working 
to assist the government, and our comments today are offered to 
simply improve the system.
    Seventeen months after the enactment of the USA PATRIOT 
Act, an act the ABA strongly supported, the effects of these 
new laws and regulations on terrorist financing and money 
laundering are still being assessed. ABA was particularly 
pleased to learn of the Treasury Department's commitment to 
continue to provide oversight in this area after the 
regulations have been finalized. The creation of a Treasury 
task force on the PATRIOT Act as well as the creation of the 
Office on Terrorist Financing and Financial Crimes are welcomed 
developments.
    Our association has offered the following as needed areas 
of improvement to USA PATRIOT Act oversight: The creation of an 
office for USA PATRIOT Act oversight; immediate development of 
a staff commentary for PATRIOT Act and Bank Secrecy Act 
interpretation; a review of the 314(a) demands for record 
searches that were discussed earlier today; formal commitment 
from all functional regulators for uniform and consistent 
PATRIOT Act exam procedures; coordination between the 
Treasury's Office of Foreign Assets Control and the financial 
institution regulators to improve advice to the regulated 
community; and improved guidance and communication on all SAR-
related issues, particularly in the area of terrorist 
financing.
    We provided detail on all of these recommendations in our 
written testimony, and some of these are being addressed by our 
government partners, but I would like to briefly cover several 
issues.
    There is no clearer example of a positive public policy 
goal not being met than the implementation of section 314 of 
the USA PATRIOT Act. While we recognize that government is 
faced with tremendous challenges to track terrorist funds, 
section 314 warrants a thorough review to ensure consistency 
with both congressional intent and the need to establish a more 
workable system.
    In November of 2002, FinCEN and the primary Federal 
regulators put into place a brief moratorium on section 314(a) 
information requests. This moratorium was a direct result of 
the confusion faced by the recipients of the request to our 
industries. In several instances the information requests went 
to employees no longer with the bank, came in bunches several 
times a day, and had a very quick 7-day response deadline. In 
addition, many of our members complained that there was no 
apparent connection to terrorism or money laundering in the 
requests. In fact, the requests seemed to be a dumping ground 
for law enforcement cold cases clearly not anticipated by 
Congress.
    Since that time, I am happy to report, the regulators, 
FinCEN, and Treasury have made adjustments and revised the 
process to address a number of logistical issues and to develop 
additional guidance. The announced changes include some of the 
following: The 314(a) requests from FinCEN are to be batched 
and issued ever 2 weeks rather than every single day unless 
otherwise indicated in the request. After receiving a 314(a) 
request, institutions will have 2 weeks rather than 1 to 
complete their searches and respond with any matches.
    While these changes appear helpful, the initial responses 
we are getting from the industry are that there are still 
tremendous operational and communication problems with the new 
round of 314(a) demands. We urge this subcommittee to seek a 
status report from FinCEN and law enforcement on how the new 
system is working. We should point out, however, that the 
Treasury Department and the regulators just this morning met 
with several of us from the industry to try to assess our 
concerns, and they are committed to improving the system. We 
appreciate the efforts from Treasury, the regulators, and 
FinCEN, but we must have law enforcement cooperation for that 
system to be improved.
    Finally, similar to PATRIOT Act interpretive issues, there 
remains an ongoing need for regulatory agencies, law 
enforcement, and FinCEN to assist Suspicious Activity Report 
filers with issues as they arise. This need is particularly 
obvious in the area of terrorist financing. This crime is 
difficult to discern as it often appears as normal 
transactions. We have learned from many government experts and 
our experts today on this panel that the financing of terrorist 
activities often can occur in fairly low dollar amounts with 
basic financial products. Guidance is extremely necessary. The 
only real guidance we have received to date comes from FinCEN's 
SAR activity review, but we need more.
    Madam Chair, the ABA has been in the forefront of industry 
efforts to develop a strong public-private partnership in the 
areas of anti-money laundering and now terrorist financing 
detection. We continue to support the policy goals expressed by 
Congress, but there needs to be a workable and efficient 
process. We encourage Congress to stay involved in this 
important oversight effort. Thank you.
    Mrs. Kelly. Thank you very much, Mr. Byrne.
    [The prepared statement of John Byrne can be found on page 
62 in the appendix.]
    Mrs. Kelly. I would like to start the questioning with just 
a couple of questions.
    Mr. Emerson and Mr. Johnson, what can you tell us about the 
recent arrests of Iraqis in the United States who are aiding 
terrorist groups financially? I am sorry. The recent arrest of 
the Iraqis in the United States.
    Mr. Emerson. The arrests that were announced recently show 
that Iraq and some of its front groups and front organizations 
were raising money in very sophisticated ways, carefully 
utilizing the loopholes in the financial reporting requirements 
for charities as well as the lack of enforcement in the IRS 
nonprofit division, which is unfortunate, not owing to their 
deficiency, but rather a lack of resources in the past in terms 
of enforcing and investigating the nonprofit component--the 
veracity of the nonprofit components that are being declared by 
these groups.
    So Iraq--I think this is, to be quite honest, the tip of 
the iceberg. I think we have not seen large numbers of 
prosecutions because the monies raised in the ways raised by 
Iraq have been much more circuitous than some of the 
traditional, if I can use that word, methods used by Hamas and 
let us say the Palestine Islamic Jihad. I think Iraq has been 
much more adept at using private citizens in the United States 
and using third-party conduits, and the monies as we see in the 
indictment announced out of Syracuse went to bank accounts in 
Jordan, which were then filtered into Iraq to support the 
regime in ways that we still have yet to uncover.
    Mrs. Kelly. Thank you.
    Mr. Johnson.
    Mr. Johnson. Just add to that--look, Iraq under the U.N. 
Security Council Resolution 587 back in 1991 was supposed to 
stop sponsoring terrorism; not just give up weapons of mass 
destruction, but end support for terrorism. And for the last 12 
years they have continued, we know--forget about al-Qaeda. They 
are directly involved with financing Arab Liberation Front, 
Palestinian Liberation Front, and carrying out terrorist 
attacks inside Israel.
    Part of the problem we had for years with al-Qaeda is, 
because al-Qaeda's activities didn't rise to the threshold, it 
was basically--it was a problem, but not attacked. And the same 
thing is possible with Iraq where, yeah, they are killing some 
Israelis, but they are not killing us,so it is not a problem.
    I think the issue is you have got to go after the 
financing. And clearly they have been involved in the United 
States and raising money that is going back to Iraq. Trying to 
be able to put all the pieces together to show a direct link 
why the change to the actual violence is difficult.
    And one final point that goes back to a point raised in the 
other panel. The intelligence information ofttimes is very 
right and has a lot to offer, but is not shared with law 
enforcement. And we saw that in the case of Sami al-Arian. I 
don't know right now what the Intelligence Community has within 
its hands that is not getting into the hands of law enforcement 
where they can prosecute, but my friends within both the 
Intelligence and Law Enforcement Communities say that is still 
a problem. That wall has to come down further.
    Mrs. Kelly. Thank you.
    I want to go now to Mr. Byrne and ask you about a question. 
Mr. Moynihan suggested something regarding the correspondent 
accounts. I am sure you heard what he said. I would be very 
interested in what your response is to what his suggestion was.
    Mr. Byrne. Madam Chair, there are a variety of ways in 
which obviously money laundering can occur, and I have been 
working on these issues for 20 years, and every time we stop a 
system, a new system opens up. The PATRIOT Act does in general 
say that institutions have to have certain due diligence 
regarding correspondent bank activity and private bank 
activity, but the bottom line still remains unless there is 
some protection at the entry of the system, that no matter what 
we do on our side, we are only--it is only going to be half the 
battle. So if we are getting checks or we are getting other 
instruments from another institution, we can do our due 
diligence with that institution; but John has already pointed 
out, we are talking millions of transactions sometimes in the 
same day. So we really need a lot of guidance in this situation 
from law enforcement, from the government to say what to look 
for. Otherwise, I think to pull out pouches and cash letters 
and have us go through all the checks based on the fact that 
they have come from a certain country or certain institution 
may not be sufficient.
    So while I am not discounting what he has raised, I think 
it is fairly complicated. It just really shows the need for 
partnership both with the government and the private sector and 
with our international counterparts, which we don't always get.
    Mrs. Kelly. Do any of you know roughly the volume of cash 
letter agreements between the biggest banks in the United 
States? And if you do or if you don't, can you help us in 
starting some inquiries into this so we can find out?
    Mr. Moynihan. I don't have the quantified total value, but 
when the inquiries are made, it is clearly billions. It is 
billions of dollars. And it is not just between correspondent 
accounts--and I tried to get to that in my statement, but I ran 
out of time--it is also individuals open off-shore companies, 
they come to the United States and they open accounts, and our 
banks will, in fact, do their due diligence. A lot of times 
they do the best that they can on some of these things. It is 
just then individuals use those accounts as a mechanism for 
cash letter agreements.
    So it is not just correspondent banks. I am in the middle 
of four criminal cases right now doing this, and it is going on 
on a massive level. It is really quite large. And why 
individuals would do this would be to bypass--not all cash 
letter agreements are money-laundering vehicles, but in the 
cases that I am involved with, individuals who don't want to be 
identified in a wire transfer as a beneficiary or an originator 
might want to write a check, as Mr. Byrne had pointed out, in 
small dollar amounts. The pooling of those checks will be sent 
abroad. Someone might collect 2- or 300 of these checks. Those 
checks are presented to a foreign bank. That foreign bank, 
because they are U.S. denominator dollars, will send them back 
here for credit. You can't put a U.S. dollar check into a dinar 
account, so those checks are sent back here. It is thousands 
and thousands; it is millions of checks in billions of dollars. 
It is a big business, and, as Mr. Byrne pointed out, it is very 
tough to police. And as Mr. Inslee has asked a number of times 
about which countries should be involved, international 
cooperation is extremely important on this because it is a 
tremendous vulnerability in the money-laundering area right 
now.
    Mrs. Kelly. Thank you very much.
    My time has run out. Mr. Inslee.
    Mr. Inslee. Thank you.
    Thanks for joining us today. I am not sure if you were here 
when we were talking earlier, but I and many of my constituents 
have a concern that we have not been sufficiently assertive 
with other countries in their obligations to assist in this 
international problem of terrorism. And you may have heard me 
say this, but the Council on Foreign Relations concluded, 
quote: Saudi Arabian-based charities have been the most 
important source of funds for al-Qaeda, and that for years 
Saudi officials have been turning a blind eye to this problem, 
close quote.
    This morning some of our agency officials told us that some 
of the money came for the September 11th attack through or by 
or in some sense associated with the United Arab Emirates. I am 
sure there are a number of countries that you could express 
concerns about.
    The question I have is--and to my knowledge, the United 
States has not given any sanction to any of these countries, at 
least the two that I mentioned, Saudi Arabia or United Arab 
Emirates, for what appears to be a failure to come to terms 
with elements in their society that have been consciously, 
willfully, and, unfortunately, successfully funding these 
terrorism networks.
    Now, just starting with Saudi Arabia and the United Arab 
Emirates, I would like to know if any of you share that 
concern. And I ask you generally the question: Have we been 
sufficiently assertive with these governments? Have we sort of 
taken a dive, so to speak, because we have other interests that 
for some reason or another administrations have thought were 
paramount that would not allow us to really use our economic 
force and otherwise to compel them to get down to brass tacks 
and cut off this money?
    If you can tell me if any of you share that concern or you 
think that is misplaced, I would appreciate any of your input.
    Mr. Emerson. Congressman Inslee, I think you raise a very 
valid point. I think that because Saudi Arabia, frankly, and 
the other Persian Gulf oil producers have amassed so much money 
in oil wealth and now petrodollars investments, they have 
essentially purchased clout. And while I--what I think is going 
on in the United States Government today is essentially you 
have the Justice Department and FBI willing to pursue wherever 
criminal investigations lead, including Saudi Arabia 
financiers. On the other hand, the State Department has a role 
in what indictments are issued and what STGs in terms of 
terrorist groups are designated.
    And I think the State Department together with other 
members of the government that are more sensitive to foreign 
policy issues in terms of good diplomatic relations with the 
Saudis have basically been part of what I call the Saudi lobby, 
not because they are doing the bidding of the Saudis, but this 
goes back 15 years. It goes back through the Clinton 
administration; it goes back even prior to the Clinton 
administration in terms of the amount of money and influence 
garnered by the Saudis in terms of insulating themselves from 
the very effects of an aggressive consistent counterterrorism 
policy that treats all nations as equally. And Saudi Arabia has 
been able to evade some of the sanctions, unfortunately, that 
would have applied if they didn't have the money.
    There has been an--I say uneven application of 
counterterrorist sanctions within the regime itself. There have 
been some Saudi citizens that have been placed under house 
arrest officially, like Yassin al-Qadi or Mohammad Jamil 
Halifal, only for us to find out that they are free to go about 
and continue their financing. We even find that members of the 
bin Laden family were not as compartmented out from bin Laden 
himself, and that there are intercommingling relationships 
between the Saudi royal family, between the radical Islamic 
clergy and radical Islamic charities that had a hand in 
financing, sustaining the al-Qaeda infrastructure.
    I know one of the questions you asked before was what about 
the 9/11 and Iraq, 9/11 and Saudi Arabia. Now, let me just 
briefly state that there is no evidence that Iraq was involved 
in 9/11, but there is plenty of evidence that Iraq has been 
involved in terrorism, number one. Number two, there is no 
evidence that Saudi Arabia was involved in 9/11 itself, because 
the transactions came from Dubai or Germany, I think one from 
Spain. But in terms of sustaining the al-Qaeda infrastructure, 
Saudi Arabia was absolutely critical, pivotal to the survival 
and sustenance of al-Qaeda. If it wasn't for Saudi Arabian 
protection--recently the wife of a major suspect in the United 
States was secretly spirited back to Saudi Arabia unbeknownst 
to the FBI and the State Department by the Saudi Embassy in 
Washington, even though we wanted to investigate her and her 
husband's ties to 9/11.
    Mr. Inslee. Well, let me tell you at least one Member's of 
Congress reaction to this. We are sending our men and women to 
defend some of these countries right now with their lives, and 
to me it is scandalous that we have not exercised the authority 
of the United States Government granted by Congress, and it is 
probably multiple administrations, as you have indicated, to 
crack down on these networks. And, to me, we have got to get 
serious about this. And I am going to--I appreciate your 
answer.
    One quick question if I can, Mr. Byrne, And this is 
switching gears for a minute. I represent a lot of folks who 
are in the high-tech industry, biochemists, engineers, computer 
scientists who are of the Muslim faith and who are great 
Americans, pay their taxes, raise great kids, pillars of the 
community. You would trust them like anybody else. And they 
have been, many of them, very afraid because they don't want to 
get lumped into the terrorists. And they are very afraid now, 
any time they have any transaction with any of their family 
members back in the Mideast, that they are going to end up 
swept up in this web. And it is a real concern. I have met with 
quite a number of them that have, I think, sincere concerns 
about that.
    Is there any advice you could give to them or to the 
government how to have an effective system to cut off this 
terrorist financing and yet give confidence to law-abiding 
citizens that do have international transactions that they 
don't get swept up in this?
    Mr. Byrne. Congressman Inslee, there is a regulation that 
is due to be final in the next month or so out of the PATRIOT 
Act, section 326, that is going to require all financial 
institutions to have account opening, what I call, due 
diligence. No matter who you are, you will have to provide 
certain identification information, your name, address, your 
date of birth, your Social Security number if you have it. And 
the banks, investment companies, and others will have to try to 
verify that information. So whether you are Muslim, or whether 
you are Irish, it is not going to matter. So everybody will be 
treated the same.
    And so my advice would be to individuals that want to open 
up accounts at financial institutions, recognize that no one is 
being singled out. That will actually have a dual benefit, I 
think, of helping those that fear identity theft, because 
actually we will be making sure that everybody has to do some 
sort of verification. It will have to be either by passport, by 
driver's license, or some other document; or, we have to verify 
the information.
    I think that alone at the entry point, provided it is done 
for everyone no matter who you are, as a new customer will 
raise the comfort level of everyone to let them know that we 
are not singling any particular group out. And obviously we 
rely on the government to tell us what countries are problems, 
what types of transactions are problems. And we get that 
information, we put them into our systems.
    But the bottom line is good solid citizens should have 
nothing to fear to simply provide information about who they 
are when they open up accounts. And I think that will have a 
dual benefit, both to comply with the law, and also it is going 
to apply to everyone.
    Mr. Inslee. Thank you.
    Mrs. Kelly. Thank you very much, Mr. Byrne.
    Mr. Inslee, I just want to make one remark with regard to 
what you said. I think what you meant was U.S. troops are 
amassing to disarm Iraq, not they are not out there to try to 
defend a country. They are defending our country by trying to 
disarm Iraq. I just wanted to kind of----
    Mr. Inslee. Well, let me, if I may, respond just briefly to 
that. Listening to the President, my understanding is that he 
has given multiple reasons for this, which certainly includes 
the security of the United States, but as I have heard him, he 
also believes that he is protecting the neighboring countries, 
as we protected Kuwait and reinstalled the monarchy after the 
first war. So that is the nature of my statement. I was trying 
to give credit to the President for that motivation.
    Mrs. Kelly. Thank you.
    Mr. Oxley.
    Mr. Oxley. Thank you.
    Let me first say what a most interesting hearing this has 
been, I think mostly educational for the Members, and we 
appreciate all the testimony from this panel as well as the 
previous one.
    Let me address this to Mr. Johnson and to Mr. Emerson now. 
We had an opportunity to hear you on a number of occasions both 
here and on television, and we appreciate your expert opinions. 
And I think it is particularly helpful for my constituents to 
get a better understanding of this whole issue that on 9/11 was 
thrust in front of them so fiercely that it was very difficult 
for people to come to grips with the fact that we were victims 
of terrorism, and that this feeling of invulnerability that we 
had was shattered in the aftermath. I think your lucid 
explanations on television have been very, very helpful in that 
regard, and I want to thank you for your service.
    As you know, the PATRIOT Act was multifaceted. Our 
committee's participation involved the anti-money laundering 
section. But just as effective were--in my estimation were the 
electronic surveillance capabilities, enhanced surveillance 
capabilities for the FBI and other law enforcement agencies. It 
is also true that those sections were sunsetted for 4 years, 
and so the clock is essentially ticking on those provisions as 
we speak. I have grave concerns that it sends a signal that 
somehow we think that at the end of 4 years, the war on 
terrorism will be over, and I wonder if you would--both of you 
gentlemen would speak to that and perhaps give some advice as 
to what may very well transpire.
    Mr. Emerson.
    Mr. Emerson. Mr. Chairman, I share your concerns. One of 
the issues, of course, before the House and the Senate today is 
the issue of adopting legislation that might amend the FISA law 
to basically prevent the situation that occurred in August of 
2001 when Zacarias Moussaoui was the subject of a Federal 
investigation, and the FBI agents in Minnesota were not able to 
get FBI headquarter permission to apply a FISA to him.
    Now, of course, as you know from the PATRIOT Act, the 
biggest gainer of the--there have been major generators of 
intelligence, but what the PATRIOT Act did was to allow a lot 
of the electronic surveillance to be used in criminal 
investigations, and that was a major boon and a major step 
forward in the prosecution of the Islamic Jihad in Florida, 
because there have been for years collected pursuant to 
wiretaps that were FISA wiretaps, but could not be used in 
criminal prosecutions.
    If any of this enabling legislation that would allow the 
use of FISA material to be denied to prosecutors in 
counterterrorist investigations, this would be a major step 
backwards in terms of shutting down terrorist groups.
    In addition, I agree with you that to the extent that 
terrorist groups or their supporters understand that the sunset 
legislation has now got a clock ticking, and now we are 3 years 
away from certain provisions of the enhanced electronic 
surveillance from being going into sunset, then they will have 
a great incentive; just wait out the 3 years, and resume their 
activities the day after they know that the law has gone out of 
existence.
    Mr. Johnson. I would just second what Steve said. I think 
part of the problem we run into, we keep trying to fragment 
this, that we are going--I hear the FBI--well, the FBI is going 
to focus on terrorism, and DEA is going to deal with drugs. 
Well, you know, it is a--you know, a news flash. The folks that 
engage with drug trafficking also engage with terrorism, and 
to--part of the problem we get is when we keep trying to slice 
the salami so thin to fit with different law enforcement 
agencies, that the fragmentation we saw before 9/11 where the 
picture really was pretty clear if you could have integrated 
it.
    So I think it is important, if nothing else, to try to 
prevent the sunsetting of those provisions, because more often 
than not we are not going to be talking about hundreds of 
thousands of cases. The good news is it is a relatively small 
but active group of people, and it is just--it is the same 
thing that police see in normal, everyday crime. The people 
that commit most of the crimes are criminals that have already 
been in the system. It is not, you know, Joe average American 
that wakes up someday that says, I am going to do this. And if 
there is concern about civil liberties, which I think are 
justified, there are ways, I think, that you can put together a 
committee of wise people that can go along with the FISA judge 
to weigh up on a case by case to ensure that it is not abused.
    But just as Steve pointed out, these folks are so agile 
when they are engaged with this activity to make money, whether 
it is to process drug proceeds or to engage in terrorism, and 
that they are much faster than our bureaucracies in adapting to 
change. So I think instead of giving them a green light saying, 
hey, wake up, wait it out 3 years, and then you are back in 
business, I think we ought to take that off the table.
    Mr. Emerson. Let me just point out one interesting fact, 
that I think--I am not 100 percent sure--that there are only 
113 extra approved wiretaps pursuant to the PATRIOT Act since 
its passage last year. That was it. Even though there are major 
cries that this is going to invade thousands of Americans and 
there would be incredible spying on Americans, 113 or whatever 
the number, 120 is relatively a small number that was approved 
pursuant to the provisions of the enhanced electronic 
surveillance of the PATRIOT Act.
    Mr. Oxley. And, in fact, the provisions of acquiring the 
capability is still in the law, still followed. You still have 
to jump through all the hoops; you have to get the approval of 
the court, you have to show probable cause, you have to show a 
reliable source. All of that information has never changed, and 
I think sometimes that is lost in the debate. And I appreciate 
you gentlemen bringing that to the attention of the committee.
    Let me ask Mr. Byrne, and you may have already commented on 
this, but you heard the testimony for Mr. Sloan from FinCEN 
earlier in the first panel particularly regarding section 314 
of the act. Are you uncomfortable with that, the provisions 
that he spoke about and that I asked him about, in terms of the 
hot tip concept, cooperating with banks? And if not, what 
suggestions would you give to make that work better?
    Mr. Byrne. We think the section, Mr. Chairman, is a worthy 
section. I agree with you, it gives you an opportunity for a 
quick, you know, hot tip, if you will, that these five 
individuals are being investigated. What we didn't want to see 
and we saw prior to November was a flurry of requests over 
several days, hundreds of names.
    I think FinCEN is in a tough position, because their role 
is not really to be the gatekeeper for the information; they 
simply are a conduit from the different agencies. So it is 
really up to the FBI and Customs to have a gatekeeping function 
so that they will not let everything go through the system.
    I think that is starting to happen. This morning we met 
with the regulators in Treasury and hope to meet with law 
enforcement about that issue. We want it to work. But the first 
week that it was rolled back out last week, we would see 108 
names, 200 aliases. Frequently the names would be simply just 
the last name or some other variation, which is very difficult 
to search, especially for small banks that have to rely on 
outside vendors.
    So there is a lot of operational issues that I think we can 
fix.
    The bigger picture on whether or not there will be a 
gatekeeping function is really, I think, for you folks to make 
sure that it occurs. That is not our venue, but we would feel 
more comfortable that it wasn't simply an agent trying to say, 
well, this is a case I haven't looked at for a while; let us 
see what we find here. If you use it for priorities, our 
members are more than willing to search. But we think the 
volume has gotten a little out of hand the first time. I am 
confident they will fix this, and that is what we hope to see 
happen.
    Mr. Oxley. Thank you.
    Thank you, Madam Chairwoman.
    Mrs. Kelly. Thank you, Mr. Oxley.
    Mr. Hinojosa.
    Mr. Hinojosa. Thank you, Madam Chair.
    My first question is addressed to Steve Emerson. Experts 
believe that numerous other charitable organizations, both in 
the United States and abroad, may be funneling at least a 
portion of their funds to terrorist groups. In the broadest 
terms, have the United States and the international community 
cut off the largest players already, or have you just scratched 
the surface of more entrenched networks of funds?
    Mr. Emerson. You raise an excellent question. We know what 
we know, and unfortunately we don't know what we don't know. We 
know that in the United States we have shut down at least three 
or four major conduits in the last year and a half. We know 
worldwide we have shut down probably three or four dozen major 
conduits. There have been more than 100, 150 actual seizures or 
freezing of assets or actual designation of terrorist groups or 
their front organizations.
    Now, I think that these constitute the first primary tier 
of support, but it is the only ones that were manifest to U.S. 
investigators or to other law enforcement agencies. I think 
there is a second tier out there of third-party bankholders, of 
front companies, of actual commercial companies that are 
holding the assets, of very, very thickly disguised veneers 
that make it almost impossible to identify the terrorist 
component within the organizations that exist under the veneer 
of being very normal, existing as a regular organization or 
charity, and that is the real problem.
    The number of investigators required to make one single 
case in the United States can number in the hundreds to 
disentangle the incredible sophisticated labyrinth of financial 
transactions. And you apply that number to how many cases could 
be made, you just don't have that number of investigators.
    And so I think that we have seen a major dent, but I think 
that the Islamic terrorist groups have been able--they have 
been very pragmatic in readjusting. And I think that once they 
discover that the air is squeezed in one side--money is 
fungible, and they find other conduits.
    So we are almost fighting the last war, and I think one of 
the things that I see very aggressively done by the Treasury 
Department, which I think is very effective, is trying to get a 
handle on what the future context of terrorist apparatus would 
be in terms of their financial distributions in the United 
States and worldwide.
    Mr. Hinojosa. Thank you.
    The next question I want to address to John Byrne with 
American Bankers Association. Earlier I believe that 
Congressman Gutierrez from Illinois spoke about the 
undocumented workers in the United States. I don't know how 
many million we have, but they certainly are here in the United 
States. And I understand that we have several million who, of 
course, do not have a bank account. So the Matricula Consular 
has been discussed in our committee by a lot of the members of 
this Financial Services Committee, and we think that there will 
be a response by the Treasury on this section 326 of the 
PATRIOT Act.
    My question to you is what is the opinion of the members of 
ABA about using them?
    Mr. Byrne. Congressman, the membership is split not 
necessarily 50/50, but there are banks that accept--gladly 
accept the matricula card and have seen certainly that value in 
terms of reaching out to that community, and they have seen 
extensive increase, obviously, in those that want to bank with 
our financial institutions. Others have taken a wait and see 
approach for a couple of reasons. One is that the Treasury, as 
you know, has told us that it is acceptable to use that card 
for identification under the soon to be finalized 326 
regulations, but it is not required. And then there have been 
some groups that have been sending out basically threatening 
letters and faxes to some of our banks in, I think, Nebraska 
and North Carolina, saying by accepting the matricula card, the 
banks are violating, of all things, the U.S. Constitution, 
which obviously isn't correct at all.
    We have reported that back to Treasury. We expect that the 
Treasury will say ultimately that it is up to the institution; 
that it is an acceptable form of identification for 326 
purposes, but there is a risk-based analysis that has to go 
into effect. So a bank that decides that that card alone isn't 
enough may ask that particular customer for some evidence of 
residency, be it a utility bill or apartment lease. What we are 
going to say in terms of our association is it is really up to 
the bank. We will tell them how many banks are using it, talk 
to those banks, and try to understand the successes they have 
had, for example; but if you want to decide to take a wait and 
see approach, you can talk to other institutions.
    So we are kind of in the middle on this because we don't 
have clear guidance yet, but we certainly have a number of 
banks who have found it very successful, and we certainly think 
that we would put other banks in touch with those institutions, 
but we obviously need some guidance from the Federal 
Government, because we could say clearly one thing or the 
other. But at this point you will find a number of banks that 
are willing to accept the card as a primary form of 
identification.
    Mr. Hinojosa. If the Treasury rules in the way that you 
anticipate, are the banks prepared with Spanish-language forms 
that would be easy for those individuals to be able to use it 
for opening bank accounts and encouraging them? And do you have 
individuals in the banks who can speak Spanish so that it would 
make it easier to communicate?
    Mr. Byrne. That is a very valid question. It is a bank-by-
bank answer. I don't know the answer to that. I know, for 
example, Wells Fargo and Bank of America certainly have those 
capabilities and have those individuals. I can't tell you all 
the banks that accept the card have set up those systems, but 
certainly that makes a lot of sense, obviously, and we would be 
happy to find out from the banks that are accepting the card 
what their systems are. But certainly that is a valid point, 
but we really would have no way of knowing that without polling 
all of our members.
    Mr. Hinojosa. Thank you. Appreciate your answer.
    And thank you, Madam Chair.
    Mrs. Kelly. Thank you.
    Mr. Garrett.
    Mr. Garrett. Thank you.
    I want to follow up on the question that you were just--the 
line that you were just raising, but before I do that, one 
quick question.
    Can you speak for a moment on the differences that banks 
would have with regard to reporting requirements for terrorist 
funding--financing, which we have been hearing about, versus, I 
guess, old-fashioned traditional money laundering?
    Mr. Byrne. Congressman, we have a 20-year history of money 
laundering examples, and certainly there are companies that 
provide software and systems to detect what is ostensibly 
monies derived from a criminal activity and in an attempt to 
disguise the source of the funds by putting it into an 
institution. That is what money laundering generally is.
    Terrorist financing is taking monies and getting it to 
criminals. Very difficult to determine. The FBI has briefed us 
that the 9/11 hijackers did what they did for less than 
$300,000 over 26 different accounts and 2- or $3,000 checking 
accounts.
    We need a lot of help in that area, And, as I said in my 
testimony, to date FinCEN's SAR activity review that gives us 
examples of terrorist financing is really the only concrete 
examples we have seen thus far. Operation Green Quest has 
offered some examples regarding charities, and certainly these 
gentlemen have given us additional information, but it really 
is difficult without government help to set up a system to 
detect the financing of terrorism. We really have to rely on 
our partners in the government, unlike money laundering where 
we can set up systems and maybe find that ourselves.
    Mr. Garrett. I see. Thank you.
     What I have seen here today, and what we have known before 
on the graphs that you have shown show the sophistication that 
goes into the entire money-laundering process, or, I should 
say, terrorist-financing process, and that it is not just your 
common criminal that is engaged in these activities, so to 
speak. So could any of you speak to the issue of how difficult 
is it now for them to obtain the needed documentation to either 
travel outside of this country into the foreign countries and 
back again? Or, more importantly, maybe going along this line, 
how difficult is it to get the documentation that they need to 
do to get the jobs here to do either legal or illegal 
activities?
    Mr. Johnson. Well, let me give you one first-hand 
experience with an individual. He is a Lebanese Muslim out of--
living in Panama, runs one of the largest businesses there. He 
is not directly involved with terrorism, but people that he 
knows are. And I was dealing with him because he was involved 
with making and selling a counterfeit product that was knocking 
off a U.S. manufacturer's product. I threatened him in his 
office with the possibility that he could lose his U.S. visa 
because he had a visa to travel. He laughed at me, opened his 
drawer. He pulled out--he had a Canadian passport, he had a 
Dutch passport, he had an English passport. He was fine. You 
know, he didn't need a visa.
    And the point is that the individuals that are going to get 
involved with these financing schemes, whether you are trying 
to take dirty money and clean it up or take money that comes 
from legal sources and move it into criminal channels for 
either, you know, conventional criminality or terrorist 
activity, they are--they come out, if you will, out of a 
merchant background. They are very creative and very 
entrepreneurial, and they know how to game the system.
    Mr. Garrett. If I may interrupt there. The comment before 
Mr. Byrne was we need to have fairness as far as within the 
banking community as far as requiring people coming in to ask 
everyone for their identification. And we shouldn't feel put 
upon that they are going to be asking me or my wife now for 
some sort of identification, even though I have lived in the 
town for 20 years, and I have been working with this banker in 
Rotary for the last 20 years, and he knows who I am.
    Mr. Johnson. Sure.
    Mr. Garrett. So isn't there a sense, though, of a degree of 
let us have a little common sense as far as who we should be 
asking this documentation from if we know that these people can 
get it?
    Mr. Johnson. In our experience--and we have been--made 
money laundering cases that have led to seizures right now and 
close to $180 million over the last 4 years. We say that the 
ideal world would be a world in which you had the requirements 
that Panama has to open a bank account in Panama with the 
enforcement that you have in the United States, because, very 
candidly, the requirements for opening accounts in the United 
States are not near what they are in Panama. And we see this--
we have seen this over and over again with checks.
    You know, Colombian drug lords would offer people vacations 
to come up to the United States. They had to open five 
different accounts. We had people that open up--you know, they 
would use different names, and they would take those starter 
checks back, and that was funding the black market peso 
exchange, some of which funds have been used for terrorism.
    So I think there is an important role for making sure that 
the people that go in and open an account, that you can verify 
that they do live where they live and have a business where 
they live. We are right now involved with a case where an 
individual submitted seven checks; it was worth $800,000, two 
different individuals. They are up in the New York City area. 
None--and they are ostensibly business checks. None of the 
business names check out with the addresses, and this is a 
major U.S. bank.
    Mr. Garrett. But if on the one hand you are telling me that 
these individuals in this trade are able to open up a drawer 
and pull out all the documentation they need, then it is the 
legitimate citizen who is put upon to say that I have to go out 
and prove myself in a case. And now we are hearing that the 
Treasury may be even considering using consular cards, which is 
basically documentation from--which we have absolutely no 
control whatsoever as to who is getting those. And my 
understanding is that basically you are talking about illegals 
who are using consular cards in the primary sense.
    Mr. Johnson. But still, the individual using those 
passports, it is still--they are legitimate legal documents. 
And the point is do the compliance to verify that the name on 
the document fits with an address and a place, because a lot of 
times what we are seeing are names and addresses that don't fit 
with the place, and that should be a tip to get someone alerted 
to say we need to look at that.
    Mrs. Kelly. Mr. Johnson, I just want to ask a follow-up to 
that. Would biometrics help?
    Mr. Johnson. Yeah. I mean, it is just going to confirm that 
the person--at last when you make up the ID, that the person 
whose fingerprints or iris is put on the card with the 
photograph is, in fact, the person that you are looking at. So, 
yeah, that would help.
    Mrs. Kelly. Thank you.
    Mr. Matheson.
    Mr. Lynch. I am Mr. Lynch.
    Mrs. Kelly. Mr. Lynch, I apologize.
    Mr. Lynch. It is okay, Madam Chair; I am new.
    First of all, I want to thank the members of the panel for 
helping the committee with its work and the Congress and its 
work, and also helping our Nation deal with our antiterrorist 
financing efforts.
    I have two questions. And I understand your efforts, and I 
am actually reassured by your successes, but I am also very 
concerned about the scope of the problem that you have 
described today. And my question is in two parts.
    One, is there a framework that exists now--and I have heard 
Mr. Byrne mention section 226 of the PATRIOT Act, the amendment 
that is being suggested or offered. Is there a framework that 
we can use in the first instance to detect some of the money 
laundering and terrorist activity that is going on in these 
financial institutions at the front end? And are there 
mechanisms where, as Mr. Johnson described, there are some 
thickly veiled institutions or businesses that might have some 
level of legitimate business there, but they are actually 
funding money to terrorists? Is there a framework that we can 
use to adopt to address that situation as well?
    And the second part of my question is we have been talking 
about the operation of U.S. banks basically today. What has 
been your experience? And you have all had extensive 
experiences with these global investigations. What has been 
your experience in dealing with the EU, the European banks and 
Asian banks? Are they coming forward with a legitimate and 
genuine effort to deal with a lot of this illegal and 
terrorist-related financing?
    Mr. Johnson. Let me start with your last question and then 
work backwards.
    I think the need for international cooperation is critical, 
and one way in the door for that--because of the United States 
and the role of the U.S. dollar in the international economy, 
we do have some definite leverage there, and one leverage, I 
think, is through correspondent banking relationships, because 
ultimately when people are wanting to move money, whether it is 
with the cash letters that John described earlier or with wire 
transfers, you are ultimately trying to get dollars, and those 
dollars go through our system at some point.
    I think it is important then to work with the banking 
industry, but to raise the level of compliance requirements to 
ensure that those banks or those countries which want to play 
out on the margins than pay a penalty. There was an article 
about the Iraqi bank, the Rafidian, and you can see in that 
article as they describe that there are different branches in 
Cairo and Amman. Depending on who you call and what you say you 
want to do, you get a different answer. And ultimately at the 
end of the day, if you want to send money to Iraq or move funds 
which shouldn't be moved, you can.
    So I think the leverage should come from the correspondent 
banking relationship.
    Also within that, it is imperative that each bank do good 
compliance internally. We saw in the Bank of New York a Russian 
money laundering case that we worked on as well, that the 
problem was there, they didn't follow their own internal 
policies; that the internal policies for monitoring and 
compliance were not complied with.
    At the end of the day, we don't want to interfere with 
normal economic activity, but what we can find is you can 
usually tell what is a normal economic activity and what is 
abnormal. If you are a manufacturer of farming equipment in 
Illinois, as an example, and you are selling a tractor into 
Colombia--and this is a real case--and you are getting paid out 
of a checking account in Wisconsin? That is no knock on 
Wisconsin. But if you are buying a tractor in Colombia, it 
ought to be on a draft or a wire transfer out of Colombia, not 
on a U.S. bank account in Wisconsin. That is where the warning 
signs should go up.
    Mr. Lynch. Thank you.
    What about the second part of the question, which is the 
Europeans, Asians?
    Mr. Johnson. You know, that is where I get to, their--you 
know, it is uneven. When you look at like HBSC banks----
    Mr. Lynch. Are you being generous when you say it is 
uneven?
    Mr. Johnson. Yes.
    Mr. Lynch. Okay.
    Thank you.
    Mrs. Kelly. Thank you very much. There are some Members, I 
am sure, who have additional questions for this panel, and they 
may wish to submit those in writing. So, without objection, the 
hearing record will remain open for 30 days for Members to 
submit written questions to the witnesses and to put the 
responses in the record.
    Mrs. Kelly. The second panel is excused with the 
committee's great appreciation for your long time here.
    I want to briefly thank all the Members, and especially our 
staff, for their assistance in making this hearing possible. 
This hearing is hereby adjourned.
    [Whereupon, at 4:54 p.m., the subcommittee was adjourned.]


                            A P P E N D I X



                             March 11, 2003


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