[House Hearing, 108 Congress]
[From the U.S. Government Publishing 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
____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpr.gov Phone: toll free (866) 512-1800; (202) 512�091800
Fax: (202) 512�092250 Mail: Stop SSOP, Washington, DC 20402�090001
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
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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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