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

                           THE HAMAS ASSET FREEZE AND
                            OTHER GOVERNMENT EFFORTS
                           TO STOP TERRORIST FUNDING

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

                                    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

                                   __________

                               SEPTEMBER 24, 2003

                                   __________

           Printed for the use of the Committee on Financial Services

                               Serial No. 108-53

    92-334              U.S. GOVERNMENT PRINTING OFFICE
                                WASHINGTON : 2003
    ____________________________________________________________________________
    For Sale by the Superintendent of Documents, U.S. Government Printing Office
    Internet: bookstore.gpo.gov  Phone: toll free (866) 512-1800; (202) 512�091800
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                     HOUSE COMMITTEE ON FINANCIAL SERVICES

                        MICHAEL G. OXLEY, Ohio, Chairman

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

                                C O N T E N T S

                                  ----------
                                                                       Page
    Hearing held on:
        September 24, 2003...........................................     1
    Appendix:
        September 24, 2003...........................................    39

                                   WITNESSES
                         Wednesday, September 24, 2003

    Aufhauser, Hon. David D., General Counsel, Department of the
      Treasury.......................................................     6
    Forman, Marcy M., Deputy Assistant Director, Financial
      Investigations Division, Bureau of Immigration and Customs
      Enforcement, Department of Homeland Security...................    13
    Pistole, John, Assistant Director, Counterterrorism Division,
      Federal Bureau of Investigations...............................    11
    Wayne, Hon. E. Anthony, Assistant Secretary for Economic and
      Business Affairs, Department of State..........................     8

                                    APPENDIX

    Prepared statements:
        Oxley, Hon. Michael G........................................    40
        Kelly, Hon. Sue W............................................    41
        Gutierrez, Hon. Luis V.......................................    43
        Aufhauser, Hon. David D......................................    45
        Forman, Marcy M..............................................    54
        Pistole, John................................................    60
        Wayne, Hon. E. Anthony.......................................    70

                           THE HAMAS ASSET FREEZE AND
                            OTHER GOVERNMENT EFFORTS
                           TO STOP TERRORIST FUNDING

                                  ----------

                         Wednesday, September 24, 2003

                 U.S. House of Representatives,
           Subcommittee on Oversight and Investigation,
                               Committee on Financial Services,
                                                       Washington, D.C.
        The subcommittee met, pursuant to call, at 10:14 a.m., in
    Room 2128, Rayburn House Office Building, Hon. Sue Kelly
    [chairman of the subcommittee] presiding.
        Present: Representatives Kelly, Fossella, Shadegg, Oxley
    (ex officio), Gutierrez, Matheson, Inslee, Maloney and Crowley.
    Also in attendance was Representative Ackerman.
        Chairwoman Kelly. [Presiding.] The committee will come to
    order.
        This morning we will continue the subcommittee's
    investigation into terrorist financing. We last met in March to
    review a number of important enforcement cases against
    terrorist groups threatening our way of life. Today, we will
    review recent developments in the ongoing war against terrorist
    groups, focusing on Hamas, the Palestinian organization
    responsible for many heinous acts of terror.
        Hamas has threatened the State of Israel and taken credit
    for atrocious attacks that have killed hundreds of innocent
    civilians, including Americans and other individuals from
    countries around the world. Equally disturbing, the group has
    been able to finance this terror through complex and
    sophisticated schemes that include significant assistance from
    international charities. People reaching deep in their hearts
    and pockets to ease the suffering of individuals less fortunate
    should know that they are helping their fellow citizens, and
    not contributing to the massacre of innocent men, women and
    children. It is time to stop these intolerable actions, and
    today we will explore the landscape of issues surrounding these
    efforts.
        The United States Government has set an example for the
    world by clamping down on these groups and seizing their
    financial lifeblood through the help of new tough federal laws,
    including the USA Patriot Act. Shortly after September 11,
    2001, law enforcement took down the Holy Land Foundation, a
    leading Hamas support group. Key officials from Holy Land and
    an associated computer company have since been indicted for
    their support of Hamas activities and are scheduled to go on
    trial next year. This is a significant victory for law
    enforcement, but Hamas continues to lurk in the international
    community, and we must not rest in our pursuit of terrorists
    and their financing. We have to be resilient in our quest to
    protect the American people by tracking down and draining
    terrorist funding, and in particular the Hamas funding.
        On August 22, the President displayed steadfast leadership
    with an announcement to freeze the assets of key Hamas leaders
    and specific international charities supporting the group. This
    decision demonstrates the Administration's commitment to the
    war against terror, and it sends a clear message to the world
    that organizations linked to this heinous group will not be
    tolerated.
        To drain the funding of terrorists, there must be a
    coordinated effort of countries throughout the world. America
    expects nothing less than the highest level of cooperation from
    financial institutions, international entities and foreign
    governments across the globe.
        Today, we will hear testimony from the Treasury and State
    Departments to learn how other countries are supporting us in
    this important step to rid the world of terror. I would like to
    commend the Administration for appearing here today to shed
    some light on these issues. The American people, families of
    victims and innocent civilians need and deserve to know whether
    countries that have made big promises to stop terrorists are in
    fact backing up their promises with actions.
        I am pleased that the European Union has followed President
    Bush's leadership and recently agreed to freeze the assets of
    the political wing of Hamas, a major victory for the freedom
    and security of citizens across the world. But the world has
    yet to hear a solid declaration of support from the EU for
    stopping deceitful charities, and they must at least match the
    President for any freeze on Hamas to be effective. I am hopeful
    that the international community will continue to work with us
    on these efforts to track down illicit money and help save
    lives.
        To date, it is promising that our government has
    experienced many victories with our international partners in
    the war on terrorist financing. According to the Treasury
    Department, the United States has seized or frozen nearly $200
    million in terrorist-related assets and designated over 315
    individuals and organizations as terrorists, or part of
    terrorist support networks. These are successes. They are big
    successes, and these successes have led Steven Emerson, a
    premier expert on the terrorist groups who has testified before
    this subcommittee, to assert that, ``the United States, U.S.
    law enforcement, the Department of Justice and other agencies
    have done a phenomenal job'' in fighting terrorism.
        I believe these and other major victories are attributable
    to the outstanding leadership shown by our President and this
    Administration, including the Departments represented here
    today. I would specifically highlight the work of one of our
    witnesses, David Aufhauser, the General Counsel of the Treasury
    Department. Mr. Aufhauser is the chair of the U.S. Government's
    Coordinating Committee on Terrorism Financing and a leader in
    implementing the USA Patriot Act.
        Many Americans are unaware of the countless hours of policy
    discussions here, and negotiations with foreign governments
    overseas that Mr. Aufhauser has led to jumpstart the global war
    on terrorism and protect us from future attacks. Mr. Aufhauser
    is leaving the Treasury Department, and on behalf of the
    subcommittee, sir, I thank you for your outstanding service to
    your country. We wish you all the best, and I look forward to
    hearing your views on the status of the war and any additional
    measures we should consider.
        Joining Mr. Aufhauser are important witnesses from the
    State Department, the Department of Homeland Security and the
    FBI to discuss interagency coordination, important
    investigations, and their cooperation with financial
    institutions that have led to these successes.
        The people in the country whom we are charged to protect do
    not care about bureaucratic ups or downs. They care about
    results, about stopping the evil ones from committing acts of
    mass murder. Thus far, the agencies in front of us today have
    been successful in doing that and we are very grateful to you.
    I would like to thank you for your appearance here today and I
    look forward to hearing about your efforts to protect the
    American people.
        The Chair notes that the presence of members of the full
    committee will be in and out because we have a very busy
    schedule today. We all welcome you, however. I ask unanimous
    consent that all members present today will have their
    statements, questions and the answers to those questions
    included in the record. Without objection, so ordered.
        [The prepared statement of Hon. Sue W. Kelly can be found
    on page 41 in the appendix]
        Mr. Gutierrez?
        Mr. Gutierrez. Thank you very much.
        Good morning and thank you, Chairwoman Kelly, for holding
    this important and timely hearing. I look forward to hearing
    the testimony from today's witnesses on the instrumental role
    they play in the fight against international money laundering
    and terrorist financing.
        We all know that terrorism is a global problem and that our
    fight against terrorist financing needs to be a broad-based
    effort that extends beyond our borders. Enhancing international
    cooperation between local agencies and countries around the
    world is essential to eliminating terrorist networks and
    winning the fight against international money laundering
    practices.
        I hope to hear from the agencies today about their success
    stories, as well as the obstacles that currently hinder their
    ability to permanently block and break the conduit of permanent
    financing around the world, including what they are doing to
    enhance cooperation with countries that pose challenges to the
    success in tracking down and stopping terrorist funding.
        I would like to thank them all, all of the panelists, for
    their work, and the work of their coworkers and each of their
    departments and divisions for what they have been doing. Let me
    just suggest that one of the things, Chairman Kelly, I like
    about being on the banking committee is that so many of the
    things that we do affect me personally. Whether it is getting a
    credit report or refinancing my house or, understanding the
    rules and regulations, or hiked interest rates. I mean, if it
    was about nuclear fusion, I would not have much to say about
    it.
        I recently went down to the Congressional Credit Union. The
    Congressional Credit Union gave me some advice. They said,
    well, here is a place, Congressman Gutierrez, where you can
    invest some money safely. So I did that. They issued a check,
    at my request, from the Congressional Credit Union, from
    Congressman Luis Gutierrez. And 2 weeks later, the people that
    I sent the check to sent it back to me, saying sorry,
    Congressman Gutierrez, we cannot accept this money from you,
    even though we know you are a congressman in good standing, and
    even though it was from the Congressional Credit Union because
    it was sent on a cashier's check. I think that bodes well for
    what we are doing. We want to make sure that everybody has a
    standard, even for members of Congress. A standard where
    institutions are equipped with the technology, experience and
    infrastructure to ensure transactions are for legitimate
    purposes. That is a good thing.
        I want to ask some questions later on making sure that
    Hamas and others, who want to commit terrorist attacks are cut
    off from financing to commit these attacks. I also want to ask
    questions about what kinds of strengthening we need to make,
    what kind of successes we've had and ensure that something
    other than an innocent deposit or investment is also looked at
    very, very carefully.
        So I just want to say this, the legislation worked. That is
    a good thing, I was not testing it, it just worked and I
    learned a lot about the processes involved.
        So I want to thank all of you. It is good to see you all
    again before the panel. I look forward to listening to your
    testimony, and I am happy and delighted to see the members that
    are on our panel, and I thank the Chairwoman for allowing
    members on my side of the aisle who wish to participate in this
    hearing to participate in this hearing and to ask questions as
    they feel pertinent. I welcome Mr. Ackerman, a member of the
    Capital Markets and Financial Institutions subcommittees, for
    his interest in being here this morning.
        Thank you, Chairwoman.
        [The prepared statement of Hon. Luis V. Gutierrez can be
    found on page 43 in the appendix.]
        Chairwoman Kelly. Thank you, Mr. Gutierrez.
        If there are no further opening statements, let me just
    see. Mr. Ackerman?
        Mr. Ackerman. Thank you very much, Madam Chair, for
    allowing me to participate in this very important hearing
    today. I would also like to extend my appreciation to Ranking
    Member Gutierrez for his cooperation in this regard.
        The subject of the hearing is a critical one, and I am
    eager to hear more about the efforts that the Bush
    Administration has made to finally achieve some kind of Saudi
    cooperation in preventing the movement of money to Hamas. The
    past 3 years have been tumultuous ones for Saudi Arabia, and I
    think as a result of the tragic bombing earlier this year in
    Riyadh, the royal family appears to have finally concluded that
    without a real shift in Saudi Arabia's approach to the war
    against al Qaeda, their own skins were genuinely at risk.
        Consequently, al Qaeda can no longer assume that their
    operations and personnel in Saudi Arabia are safe, and that the
    kingdom will forever remain a passive target. Al Qaeda cells in
    Saudi Arabia are being hunted down, one should note, with
    considerable assistance from the United States. There are even
    signs that the Saudi government is beginning to comprehend the
    threat posed to their kingdom from Islamic radicals and
    fanatics promoting subversion from within. There is a long way
    to go, but there are some hopeful signs.
        My concern, however, is that the initial success will be
    used not to justify additional measures, but resume passivity
    and apathy. In this regard, the obvious test for the Saudis
    will be their attitude towards Hamas. Only weeks before
    September 11, 2001, I met with the Saudi crown prince in
    Jeddah. We discussed a broad range of issues, including the
    Middle East peace process and the threat that radicals posed to
    the kingdom. At the time, the crown prince acknowledged that
    the two issues were linked. The terrorist violence against
    Israel and Israel's military responses have the effect of
    stoking Islamic hostility to so-called moderate Arab
    governments, including Saudi Arabia.
        Caught between Saudi public opinion demanding support for
    the Palestinians and their own understanding that violence was
    entirely counterproductive to Palestinian aspirations, as well
    as their own interest in regional stability, the Saudis pressed
    the Bush Administration to take a more active role in promoting
    the peace process. This tension ultimately resulted in the
    adoption by the Arab League of the Saudi peace plan, which
    recognized for the first time that a Middle East peace would
    require full and normal relations between the Arab states and
    Israel. I am not endorsing the Saudi plan, but its significance
    should not be overlooked either.
        The problem, of course, has been one of consistency and
    clarity. The very top of the Saudi Government recognizes that
    Palestinian terrorism not only destabilizes the region, but
    legitimizes the methods of al Qaeda within Saudi Arabia.
    Despite this understanding, the Saudi government has continued
    to act as though contributions to Hamas had no other effect
    besides assisting genuinely needy Palestinians. Nothing, of
    course, could be further from the truth. The idea that Hamas
    can be neatly segmented into parts which are safe and parts
    which are dangerous is ludicrous.
        Hamas is a terrorist organization overtly committed to
    wiping out the State of Israel through the use of
    indiscriminate violence. Unlike even the Saudis who have said
    they would accept full peace in exchange for a full Israeli
    withdrawal from the West Bank and Gaza, Hamas exists not to
    create a state, but to destroy one. They are a malignant
    presence in the peace process, a political tumor which
    threatens the entire Palestinian body politic. Support for
    Hamas is, by definition, harm to legitimate Palestinian
    aspirations. The Bush Administration's peace plan, the roadmap,
    was built upon the idea that Palestinian statehood is not
    possible until Hamas and other terrorist group are destroyed.
        Tragically, Saudi Arabia waited until al Qaeda struck on
    their own soil before recognizing the danger of terrorism and
    that which is posed to their own security. Will the Saudis now
    passively wait until the Palestinian advocates of a two-state
    solution to the Israeli-Palestinian conflict are pushed from
    the scene? Will they wonder how the prospect of Middle East
    peace was lost for another generation?
        Again, I want to thank the Chair and the Ranking Member for
    putting together this important hearing. I am eager to hear
    from the witnesses about what the Bush Administration is doing
    to bring about some rationality to this problem, and what
    responses they are preparing in the event that Saudi Arabia
    chooses not to match its terrorist financing policies with its
    own stated diplomatic goals. Peace in the Middle East may
    depend upon those answers.
        Thank you very much, Madam Chair.
        Chairwoman Kelly. Thank you, Mr. Ackerman.
        Apparently there are no further opening statements, so I
    will introduce our distinguished panel. We welcome the
    Honorable David Aufhauser, General Counsel of the Treasury
    Department; the Honorable E. Anthony Wayne, Assistant Secretary
    for Economic and Business Affairs at the State Department; Mr.
    John Pistole, Assistant Director of the Counterterrorism
    Division of the FBI; and Ms. Marcy Forman, Deputy Assistant
    Director, Financial Investigations Division in the Department
    of Homeland Security.
        We welcome all of you. We thank you for being here and we
    look forward to your testimony. I want to welcome you on behalf
    of all of the committee. Without objection, your written
    statements and any attachments will be made part of the record.
    You will be recognized for 5 minutes. If you have not testified
    before, the light box at the ends of the table indicate your
    timing. Green is plenty of time, but when we get to yellow, you
    have 1 minute to sum up. Of course, we all know what red means,
    stop.
        We will begin with you, Mr. Aufhauser. Thank you.

     STATEMENT OF DAVID AUFHAUSER, GENERAL COUNSEL, DEPARTMENT OF
                              THE TREASURY

        Mr. Aufhauser. Thank you, Madam Chairwoman, and thank you
    for perhaps sacrificing what credibility you have with this
    committee with such gracious comments about me. I really
    appreciate that.
        I studied poetry in college, actually. When I arrived at
    business school for graduate work for which there might be
    hopefully a vocation, there was a mandatory accounting class
    and the class was called ``control.'' I thought the name was
    wildly overblown and contained a certain amount of conceit. But
    after 3 years's tenure at Treasury, I know that Harvard
    actually got it right. The better part of my tenure, both as a
    lawyer and as Counselor to the Secretary, and as the head of
    the Treasury enforcement after homeland security
    reorganization, has been devoted to ferreting out or dealing
    with the consequences of false accounts, accounts that
    bankrupted tens of thousands of people at Enron and in WorldCom
    and in HealthSouth; accounts that permitted the Hussein regime
    to mock the U.N. sanctions program, to rearm, and to stain the
    sands of Iraq with the blood of some of the best of our kids;
    and accounts that have been used to populate the world with
    terror and the death of many innocents.
        Nothing is more damning of our international financial
    system that the casualness that permitted such chicanery and
    lethalness. Nothing is more tragically ironic than the liberal
    use made by our enemies of our technologically advanced
    borderless financial world today, to destroy the 3,000 people
    who brought tempo, purpose and life to its very symbol, the
    World Trade Center.
        Nothing also in this shadow war against terror, in my
    judgment, is more achievable and more sustainable, and nothing
    has more real-world immediate consequence than denying
    terrorists their currency. There may be an infinite number of
    ways that a terror cell can divine how best to apply $100,000
    in funds to Holy Jihad, but all such violent invention is
    forfeit if the money never materializes.
        Let me state it differently in the context of Hamas, the
    central subject of today's hearing. Let's call it by its proper
    name, the Islamic Resistance Movement. It has killed well over
    300 people since its founding in 1994, many of them Americans,
    far too many in the past year alone. It has a charter to raise
    the banner of God on every inch of Palestinian territory. It
    rejects the peace process and coexistence. It preaches
    literally that there is no solution to Palestine except through
    holy war. And of course, that war is fought with a weapon of
    choice, which is an obscenity, suicide bombing, the premium
    targets of which are children riding on buses, buying dates or
    fruits, or even attending school.
        I do not discount the singular importance of the political
    process to try to eliminate the hate that spawns such
    malevolence, but in the meantime I want to stop the killing as
    soon as possible. You can do it, or at least diminish the body
    count, by seeking to bankrupt the organization or urging its
    contributors, its thousands of contributors around the world,
    that there are alternatives to deliver the default civil
    community services in Palestine that Hamas now delivers,
    without at the same time underwriting parallel campaigns of
    terror.
        And do not fall victim to the narcotic that a suicide bomb
    costs pennies. Hamas receives tens of millions of dollars a
    year to underwrite its political agenda. Too much of that is
    diverted to make bombs, to plan teen centers, and to advertise
    or boast of the killing. The numbers, of course, are more
    staggering when we focus on the kleptocracy of Saddam Hussein,
    but it has yet to be secured. What started with great promise
    with U.N. Security Council Resolution 1483's mechanism for
    repatriation of stolen assets, has turned unfortunately into a
    holiday or a nightmare of excuses not to comply immediately
    with our request to get that money back to Iraq for
    reconstruction. Estimates of more than $1 billion or $2 billion
    is believed to remain in Syria alone. Lebanon has pledged to
    repatriate $495 million, but the pledge remains unfulfilled.
    And Jordan's once $750 million has dwindled as local creditors
    have laid siege to the funds prior to transfer.
        As for the hidden wealth of Hussein, the security situation
    in Iraq has significantly handicapped attempts to exploit
    mountains of financial documents and scores of witnesses
    located in the country. It has in fact relegated the financial
    investigation to a non-priority status and thereby undermined
    all sense of urgency, in my judgment. Although there are
    compelling competing interests in Baghdad today, I actually
    think the strategy is penny-wise and pound-foolish. Although
    Treasury and the FBI and Customs investigations to date have
    made significant advances which we may discuss today, every
    passing day compounds the difficulty of finding more meaningful
    sums abroad. How those funds are being applied today may in
    fact be threatening of the soldier we pray to protect and
    defend. I hope that is an imagined ill, but we will not know
    unless we engaged in a professional and thorough hunt for the
    assets.
        The $500 million secured to date from the Bank of
    International Settlements, from Japanese sources and from a
    payment back of a loan through the U.N. oil program is laudable
    and validates the wisdom of the enterprise of trying to secure
    this money and get it back to Baghdad, but it should be the
    floor and not the ceiling of our ambition.
        Thank you.
        [The prepared statement of David Aufhauser can be found on
    page 45 in the appendix.]
        Chairwoman Kelly. Thank you very much, Mr. Aufhauser.
        We turn now to Mr. Wayne.

      STATEMENT OF HON. E. ANTHONY WAYNE, ASSISTANT SECRETARY FOR
           ECONOMIC AND BUSINESS AFFAIRS, DEPARTMENT OF STATE

        Mr. Wayne. Thank you very much, Madam Chairwoman and
    honorable and distinguished members of the committee. It is a
    pleasure to be here and to give you this update in our efforts
    to fight the financing of terrorism.
        Before I address Hamas, I would like to underscore how far
    we have come in interagency coordination and cooperation within
    the U.S. government. We have really made enormous strides in
    working fully in an integrated manner. A lot of this has in
    fact been because of the leadership that David Aufhauser has
    brought to the interagency policy coordinating committee. So I
    want to add my words of praise as he prepares to leave us, and
    my thanks also.
        Our task, of course, has been to identify, to track and to
    pursue terrorist financing targets, and to work with the
    international community to take measures that can thwart the
    ability of terrorists to raise and channel those funds and thus
    carry out their heinous acts. We have briefed your staff in
    closed session on a number of the issues, and there may be some
    questions that we would have to reserve the answers for in a
    different setting, a more closed setting. But we will endeavor
    to give as clear and broad a picture as we can today here of
    all that has been going on.
        I think you know, Madam Chair, that a key part of this
    effort has been working under the President's Executive Order
    13224, because that order has allowed us to freeze the assets
    of 321 individuals and entities. But I want to stress that our
    activities go well beyond the public action of freezing assets.
    We very successfully used a whole range of actions which
    include diplomatic initiatives with other governments to
    conduct audits and investigations in areas under their control,
    exchanging information on records, cooperating on law
    enforcement and intelligence efforts, shaping new regulatory
    regimes where none existed before in other countries.
        So designations are just one way, a very public way, of
    acting, but in some cases they are not the most effective way
    to act. So in our interagency work, we very carefully try to
    develop the information we have on a target to make sure it is
    credible, that we have a reasonable link between the target and
    terrorism. Then we weigh the options that we have available to
    best address that target, to make sure it is an effective
    approach.
        We realize that a number of times we shift directions, and
    we shift our tactics to make the most effective overall
    strategy. We want to be right. We want to be legal, and we want
    to be effective in what we are doing. At the end of the day,
    all of these actions, all of these methods have combined to
    make it much more difficult for terrorists to move and collect
    funds around the world, and in particular through regular
    financial and banking channels.
        I want to underscore that internationally the United
    Nations has played a crucial role in this fight against
    terrorist financing, because it has helped to give an
    international impetus and legitimacy to asset freezes and to
    underscore the global commitment against terrorist financing.
    This is important because as you know most of the assets the
    terrorists use are not found in the United States. They are
    transiting other parts of the globe, and we need others
    cooperation to be effective.
        When we are talking about al Qaeda in particular, we have
    very successfully used the United Nations process where all 191
    U.N. member states are obligated to implement sanctions,
    including asset freezes. The U.N. has added some 217 names to
    its consolidated list since September 11, 2001.
        Let me mention the recent Hamas designations. On August 22,
    as you mentioned Madam Chair, the President announced the
    designation for asset freezing of five Hamas fundraisers, the
    Comite de Bienfaisance et de Secours aux Palestiniens, the
    Association de Secours Palestinian, Interpal, Palestinian
    Association in Austria, and Sanabil Association for Relief and
    Development. He also announced the designation of six top Hamas
    leaders. Earlier in the year, we had already designated for
    asset freezing another Hamas charity, the Al-Aqsa Foundation.
        Hamas's recent suicide bombings demonstrate the
    organization's commitment to undermining real efforts to move
    towards a permanent peace between Israel and the Palestinians.
    Hamas and other Palestinian rejectionist groups must not be
    permitted to undermine the aspirations of the Palestinian
    people for a viable, secure state living side-by-side with
    Israel in peace and security. This is behind the President's
    actions. Shutting off the flow of funds to Hamas is crucial in
    reducing Hamas's ability to carry out its goals and to thwart
    progress towards peace. Hamas has used its charities to
    strengthen its own standing among Palestinians, at the expense
    of the Palestinian Authority.
        In light of this, we particularly welcomed the recent
    decision by the European Union to designate Hamas in its
    entirety as a terrorist organization. As you mentioned, Madam
    Chair, previously the EU had only designated the so-called
    military wing of Hamas, the Izzadin al Kassem, as a terrorist
    entity. We have also been urging consistently governments
    throughout the middle-eastern region to take steps to shut down
    both Hamas operations and offices, and to do everything
    possible to disrupt the flow of funding to Hamas and other
    Palestinian organizations that have engaged in terror to
    disrupt the peace process and the peace efforts.
        This is a sensitive issue. Some of these financial flows
    are used to support charitable activities. But we have no doubt
    that donations to Hamas for charitable purposes free up funds
    for use in terrorism. We will continue to engage with regional
    governments to prevent any funding of Hamas and other groups
    that engage in terror.
        We are also continuing to engage with the European Union.
    In our discussion with many states and governments of the
    European Union, they have raised concerns about addressing the
    basic humanitarian needs of the Palestinian population. Even as
    we try to shut off the flow of funds to Hamas, it is important
    to remember that a significant portion of this money has gone
    to provide extensive basic services to the Palestinian
    population, services which the Palestinian Authority does not
    yet have the resources to step in and provide. This is a
    concern that the United States shares, and we are working with
    our Quartet partners and others to address this issue.
        Let me briefly comment on one issue. There is often talk
    and very useful exchanges on what we mean by ``diplomatic
    action,'' as contrasted, say, with arrests or as contrasted
    with public designations. I want to explain that we at the
    Department of State consider ourselves second to no other
    agency in the forcefulness and persuasive potential of the
    tools at our disposal, even though that may seem a bit odd to
    those who think about diplomatic activity.
        But when we talk about diplomatic approaches, what we are
    really talking about is getting other governments to cooperate
    in the war against terrorist financing by taking concrete
    actions on their own. That includes law enforcement and
    intelligence actions. It includes getting them to speak out
    publicly against terrorist groups. It includes taking actions
    to bring court cases against terrorists, to extradite terrorist
    financiers, to pass strong anti-terrorist financing
    legislation, to prohibit funds from being sent without proper
    supervision to charities overseas, and to make sure that
    companies that might be funneling funds to terrorists are shut
    down.
        So diplomatic action really is aimed at producing concrete
    action. It is aimed at improving the ability of our colleagues
    in the law enforcement and the intelligence community to work
    more cooperatively with their counterparts overseas.
        As we move forward, let me just assure you that we are
    looking at targets wherever they may be in the world. We are
    working intensively in the Gulf with the government of Saudi
    Arabia, with the other governments in that region. We are
    working intensively in Asia to continue, for example, to
    confront the challenge put forward by Jemaah Islamiyah.
        We are also looking around the world at where there are
    vulnerabilities in governments that want to cooperate with us.
    I think, as you know Madam Chair, that there are shortcomings
    in capacities around the world. So we have tried to put a good
    deal of effort working interagency together to provide the kind
    of training and the kind of technical assistance that will
    really build that capacity among the governments that want to
    cooperate with us. We are finding a real responsiveness. We are
    finding many countries now putting the legislation and the
    regulations in place to help us.
        We look forward to working with you in this process, to
    keeping you informed and to have your participation with us as
    we move forward.
        Many thanks.
        [The prepared statement of Hon. E. Anthony Wayne can be
    found on page 70 in the appendix.]
        Chairwoman Kelly. Thank you, Mr. Wayne.
        Mr. Pistole?

    STATEMENT OF JOHN PISTOLE, ASSISTANT DIRECTOR, COUNTERTERRORISM
               DIVISION, FEDERAL BUREAU OF INVESTIGATIONS

        Mr. Pistole. Madam Chair Kelly, other members of the
    committee, thank you for the opportunity of being here today.
    On behalf of the FBI, I would like to take just a couple of
    minutes to explain what the FBI's role in the war on terrorism
    financing is and how we interact with our partners and my
    esteemed colleagues here and all the individuals they represent
    in terms of terrorism financing.
        As I believe the subcommittee is aware, the FBI created the
    Terrorism Finance and Operations Section within the
    Counterterrorism Division shortly after the September 11
    attacks two years ago. The focus of the Terrorism Finance and
    Operations Section was, first, to identify all of the funding
    associated with the 9-11 hijackers, and then secondly to
    conduct terrorist finance investigations for other individuals
    perhaps similarly situated, and to try to do some type of
    predictive analysis to locate, identify and disrupt other
    terrorism financing that may be going on in the U.S. that we
    could share with our domestic law enforcement intelligence
    community partners, and also our foreign intelligence and law
    enforcement partners.
        The key to all of this is to prevent future terrorist acts.
    We have had several successes in that regard that have not been
    publicized due to their sensitivity, but let me just comment on
    four specific instances since April this year where we have
    received information from a foreign intelligence service about
    a certain financial transaction which we have been able to
    track with specific time, date, location through liaison and
    utilization of private banking and financial services industry
    contacts. We were able to take the information provided by
    those contacts, provided to the foreign intelligence service.
    They then have been able to take specific action to arrest and
    disrupt those imminent terrorist attacks, and have credited the
    U.S. government for that. So I would like to highlight those
    successes.
        We have current investigations ongoing on a number of
    different fundraisers which we believe are associated with
    terrorist activity, and those take on the two primary roles.
    One is to focus on the illegal activity that may be conducted
    here in the U.S. that would generate funds for terrorist
    activity, whether it is drug trafficking or some type of credit
    fraud or other types of fraud that money is then used to
    support terrorism overseas or here in the U.S.
        The other area that we focus in on, as has been mentioned,
    is charitable giving, and those individuals who either
    wittingly or unwittingly are giving to charitable organizations
    or nongovernmental organizations that then may divert some of
    those funds to terrorist activity. So that is the focus of our
    two types of investigations.
        We have had a number of successes. In addition to the
    actual disruptions, we have the leader in the U.S. of the
    Benevolent International Foundation, BIF, who has pled guilty
    and was sentenced to 11 years. Recently, we have a number of
    other leaders under indictment here in the U.S. Of course, not
    convicted yet, so we cannot assess their guilt at this point,
    but they are under indictment and those are outlined in my
    written statement.
        Congressman Ackerman raised the issue of the Saudi
    cooperation. I would like to just take a minute to address
    that. I have been in Saudi twice since the May 12 bombings, and
    have seen dramatic cooperation from the Saudis in terms of
    specific demonstrable steps they have taken to identify and
    eradicate al Qaeda in Saudi. Just yesterday, an individual that
    the FBI had put out information looking for this individual,
    Zabayr al-Rimi, was located in southern Saudi Arabia near the
    Yemen border. As the Mabahith, the Saudi interior service,
    tried to arrest him, they engaged in a gun battle and al-Rimi
    and another individual were killed. Notably also, a Mabahith
    officer and two others, one was killed and two critically
    wounded, which brings the total to over a dozen Mabahith
    officers who have been killed since May 12 trying to locate and
    apprehend al Qaeda individuals.
        Secondly, the sensitive matter that has not been publicized
    so I cannot go into detail, but in the last 2 days, the
    Mabahith under the direction of the Deputy Interior Minister
    Mohammed Ibn Naif and General Abdul Aziz and General Kolaad
    have taken steps to apprehend a number of individuals that were
    identified in a joint FBI-Mabahith operation. Those individuals
    have been located and apprehended in another sign of
    cooperation. Obviously, there is a still a lot to do in the
    area of terrorism financing, and we are taking specific,
    articulated, measurable steps to address that.
        In conclusion, the FBI, along with our law enforcement
    intelligence community partners here represented at the table,
    and not here, both here and abroad, have dedicated substantial
    resources to identifying and disrupting the flow of terrorism
    financing. As I have noted, we have had a number of successes.
    Are we satisfied at this point? No, absolutely not, because
    there is much more to do. Are we convinced that we can stop all
    the funding that goes to terrorist activity? No, I do not
    believe that anybody is that naive to think that we can stop
    all the funding, but if we can stop $1 that is used to buy
    bullets or bombs, then that is the success that we would like
    to follow up on.
        Thank you, Madam Chair.
        [The prepared statement of John Pistole can be found on
    page 60 in the appendix.]
        Chairwoman Kelly. Mr. Pistole, this committee would be
    interested in working with you to set up a classified briefing
    so you could give us some more information if you are willing
    to do that. We would appreciate it.
        Mr. Pistole. We would be very glad to do that, Madam Chair.
        Chairwoman Kelly. Thank you very much.
        We move now to you, Ms. Forman.

    STATEMENT OF MARCY FORMAN, DEPUTY ASSISTANT DIRECTOR, FINANCIAL
        INVESTIGATIONS DIVISION, DEPARTMENT OF HOMELAND SECURITY

        Ms. Forman. Good morning, Chairwoman Kelly and
    distinguished members of the subcommittee. It is truly a
    privilege to appear before you to discuss the ongoing
    accomplishments of the Bureau of Immigration and Customs
    Enforcement, BICE, Financial Investigations Division.
        I would like to begin by commending Congress for its
    decisive and immediate enactment of the USA Patriot Act,
    enabling law enforcement to more effectively investigate money
    laundering activities and protect the financial systems of this
    nation. BICE began conducting financial investigations after
    the enactment of the Bank Secrecy Act of 1970. BICE is
    appropriately positioned to investigate international financial
    crimes due to its unique search authority, BICE's scope of
    statutory authority, its historical role, and significant
    experience in financial investigations.
        The former Customs Service office investigations, not part
    of BICE, was committed to the identification, disruption and
    dismantling of criminal organizations, to include terrorist
    financing. The role of the BICE Financial Investigations
    Division was to defend the stability and strength of America's
    financial system, a system that is vulnerable to abuse by
    various criminal threats. BICE special agents apply their
    expertise to monitoring financial systems for vulnerabilities
    and to investigate those exploitations.
        BICE defends these systems through a systems-based
    approach. The authorities granted by Congress have allowed BICE
    to aggressively analyze, monitor and patrol cross-border
    financial activities and to enforce America's money laundering
    and banking laws. BICE will continue to enforce these laws and
    work closely with our law enforcement counterparts to
    effectively preserve the integrity of our financial systems.
        The BICE Financial Investigations Division has continuously
    evolved and matched its investigative priorities with the
    critical concerns of this nation. The BICE Financial
    Investigations Division is designed to identify vulnerabilities
    in our nation's financial systems through which criminals
    launder their illicit proceeds. In some cases, such as the
    Black Market Peso Exchange, the system itself is corrupt. In
    other cases, it is the criminal and criminal organizations that
    exploit the vulnerabilities of legitimate systems. Although
    these investigations historically involve money laundering
    associated with narcotics smuggling and distribution, BICE has
    expanded its arena of financial investigations to include
    violations of terrorist financing, illegal money service
    businesses, bulk cash smuggling, non-narcotic money laundering
    and cyber-crimes.
        In response to the events of September 11, BICE has
    redirected its expertise to better identify financial systems
    that are being exploited by criminal or terrorist groups. From
    October 1, 2001 through June 28, 2003, BICE financial
    investigations resulted in 203 arrests, 111 indictments, 67
    convictions and the seizure of approximately $33 million. The
    successful results of this focused effort are attributable to
    the experience and expertise of BICE special agents.
        BICE will continue to enhance its financial expertise
    through investigations that focus not only on the exploitation
    of financial systems, but the laundering of proceeds of drug
    smuggling, fraud, failure to report transactions, unlicensed
    money service businesses, and bulk currency smuggling.
        I would like to take a moment to briefly outline some of
    our successes. In Seattle, 13 individuals were indicted for
    money laundering for alleged violations of the International
    Emergency Economic Power Act, for transferring $12 million to
    Iraq. Several bank accounts were seized. One person, the main
    target, has been convicted so far, and additional prosecutions
    are pending.
        In Los Angeles, a seizure of bulk currency outbound to the
    Middle East totaling approximately $280,000 was made. Due to
    the enactment of the bulk currency statute under the Patriot
    Act, we were able to obtain search warrants and seize an
    additional $2.2 million and charge the individual with bulk
    currency smuggling.
        In New York, the investigation of an unlicensed money
    remitter revealed the illegal transfer of $39 million to
    Pakistan. To date, this investigation has resulted in 10
    indictments and convictions for operating an unlicensed money
    service business.
        And lastly in Miami, an individual associated with a narco-
    terrorist group, was charged with operating an unlicensed money
    remitter service and it has been revealed he has laundered in
    excess of $100 million for this organizations.
        For these efforts, BICE has developed financial expertise
    in the money laundering methods that exploit charities and
    other nongovernment organizations, money service businesses,
    alternative remittance systems, bulk currency smuggling and
    trade-based money laundering. Additionally, BICE financial
    investigations have directly benefited from the USA Patriot
    Act, specifically in the areas of expanded authority to
    identify accounts belonging to suspects and the statutory
    changes related to unlicensed money service businesses and bulk
    cash smuggling.
        In connection with the consolidation of Customs, Secret
    Service and Immigration, Secretary Ridge and Attorney General
    Ashcroft signed a memorandum of agreement on May 13 of this
    year clarifying the roles and responsibility of DHS and the FBI
    investigators on terrorist financing. The BICE Financial
    Investigation Division continues to apply its unique expertise
    in identifying means and methods used by criminal organizations
    to exploit financial systems through the transfer, laundering
    and concealment of the true source of criminal proceeds.
        This mission is pursued by BICE's Cornerstone Program which
    was launched in July, 2003. Through Cornerstone, BICE seeks to
    expand working partnerships with industry representatives, to
    share information and typologies, and to identify and eliminate
    vulnerabilities that can be exploited by criminals and
    terrorist organizations. Cornerstone will systematically and
    strategically examine financial systems that may be susceptible
    to abuse. Cornerstone relies on a worldwide network of 37
    foreign attache offices who maintain critical relationships
    with corresponding foreign law enforcement and government
    entities. These relationships facilitate the timely and proper
    exchange of investigative information.
        To aid the financial industry in its effort to shore-up
    vulnerabilities in systems and infrastructure, BICE Financial
    Investigations Division is implementing the systematic homeland
    approach to reducing exploitation, also known as SHARE. In
    concert with the Secret Service, BICE and Secret Service will
    host semiannual meetings with executive members of the
    financial and trade communities on their impact on money
    laundering, identity theft and various other financial crimes.
    ``Tripwire,'' is a quarterly newspaper that BICE will provide
    to the financial sector under SHARE to address emerging trends,
    patterns and typologies in the money laundering arena.
        In conclusion, BICE special agents have historically been
    recognized among the law enforcement community and the federal
    government for their expertise in the analysis and
    investigation of illegal international financial activity. That
    experience and BICE's knowledge has been assimilated into the
    Department of Homeland Security, expanding the scope of
    investigations to include the financial aspects of U.S.
    immigration law violations. Along with our law enforcement
    partners, BICE will continue to address future threats to our
    financial systems, regardless of the source or nature of those
    threats.
        In conclusion, I would like to thank the distinguished
    members of this subcommittee for the opportunity to testify
    before you today. It would be my pleasure to accept any
    questions.
        [The prepared statement of Marcy Forman can be found on
    page 54 in the appendix.]
        Chairwoman Kelly. Thank you very much, Ms. Forman. I have a
    couple of questions here I would like to lead off with. Mr.
    Aufhauser, what is the Treasury's vision for the role it can
    play in combating terrorist financing? And in what ways can
    this committee be of assistance in that effort? I also would
    like to know, should the Treasury continue to lead the
    Presidential Coordinating Committee on Terror Financing? I
    would like your opinion on that. So it is basically one
    question with two parts.
        Mr. Aufhauser. I am happy to answer as long as I do not
    sound presumptuous. It is the President's choice who leads his
    committee. The division thing, if I can address it, I will make
    an unremarkable statement, but I still think enlightening. I
    think the Treasury Department has two or three core functions.
    The first is to collect the revenue so you all can decide how
    it is to be appropriated. The second is to principally to
    promote and sustain the integrity of our financial systems and
    our markets, principally to promote wealth creation, which is a
    proxy for liberty, but also in this day and age of terror, to
    make sure that the financial system cannot be used as a weapon
    of corruption of, indeed, violence.
        Right now, the Treasury Department has five core national
    security responsibilities, the application, implementation,
    supervision and design of the economic sanctions program, a
    field which I will tell you in my judgment will become
    increasingly turned to as we learn that the shadow wars that we
    are fighting around the world cannot be fought with bullets,
    but need to be fought with the good diplomacy of Tony Wayne and
    the State Department, but more importantly the muscle of a
    good, smart economic sanctions program. That requires a
    particular genius because it is a very challenging task to have
    a sanctions program that visits injury where we want to visit
    injury without doing harm to innocents.
        The second core area of national security which is part of
    Treasury's mission is, of course, money laundering and our
    money laundering provisions both domestically and abroad. No
    one does that better. No one does it better because we live and
    breathe it. It has been our legacy. We have the expertise. We
    have the contact abroad to seek endorsement of standards and
    best practices. It is a critical function of the Treasury
    Department.
        The third is perhaps a subset of that, which is of course
    terrorist financing. In the terrorist financing area, there is
    always the chance that the strategic will become forfeit to the
    tactical. That is to say, in a time of war we get financial
    intelligence on a daily basis, and it is frequently shared by
    myself and Mr. Wayne and Mr. Pistole and others in Wednesday
    morning meetings that I chair, where we try to examine what we
    have learned that week about potential threats from a financial
    intelligence point of view.
        There is a bias, I think understandable, laudable, probably
    absolutely correct, to use that information to make sure that
    we properly assess the threats and employ it to see if we can
    stop an event or a future calamity. Sometimes that means taking
    resources away from where I think we really need to always
    focus.
        Chairwoman Kelly. Mr. Aufhauser, I only have 5 minutes, and
    I have a few more questions. So if you could sum that up, I
    would appreciate it.
        Mr. Aufhauser. Okay, sure. The fundamental vision I have
    for Treasury is to continue the chief responsibility for
    promoting the financial integrity of the markets and the
    financial system so it cannot be corrupted.
        Chairwoman Kelly. Thank you.
        Assistant Director Pistole, you state in your testimony
    that Hamas's annual budget is at least $50 million and it is
    impossible to differentiate between money used for social
    reform and terrorist attacks, although most money supports
    social programs and other contributions free funds for
    violence. How do you know this? Has anyone studied the issue?
    Is Hamas's money distributed to the West Bank through bank
    accounts in Europe and the Middle East? What percentage of it
    comes from the Persian Gulf?
        Mr. Pistole. Madam Chair, let me address it obviously from
    the FBI's perspective. The $50 million that I cited in my
    written testimony is based on U.S. Government intelligence
    estimates. There is no definitive number there, so it is not
    FBI information. It is simply a recitation of the intelligence
    community information. The funding that we focus on in the FBI
    is based on funds generated in the U.S. that is sent overseas
    then for overseas attacks, or for legitimate humanitarian
    causes. What I can speak to is the domestic aspect of that, and
    I would have to defer to my colleagues on the international
    aspects for their expertise on that.
        Domestically, it is safe to say that there are millions of
    dollars generated every year here in the U.S. either through
    illegal activity or through contributions through NGOs such as
    have been mentioned, that is then sent to Hamas for use. The
    key question, which I think you are getting it, is the end use.
    Who can define and who can identify that?
        The example I gave of the four terrorist acts that we
    helped to prevent with the information is specifically linked
    to that foreign intelligence service that has been able to take
    the information we provided and then action that to actually go
    out and locate individuals who were picking up wire transfers,
    for example, and then linking them to other terrorist
    operatives, and then to prevent that act. So it is kind of a
    roundabout answer to say I have some of the information, but
    there is a lot more out there that we don't have.
        Chairwoman Kelly. I wonder if Mr. Wayne could add to that.
    Do you know who studied the issue? Who is auditing this stuff?
        Mr. Wayne. We would like to have more people auditing it,
    clearly. Some of my colleagues, including those who are not
    here, could give you a more analytical and better view of this
    in a closed session, which we might want to have. But I can
    assure you that many people in this government and other
    governments have been working very carefully to address these
    questions.
        We do think there is money flowing to Hamas from Europe,
    from the Persian Gulf, probably from other places. Some of it
    is going through organized charitable organizations, the five
    that we designated. Some of it is going from private
    individuals through channels with which we are not as familiar,
    but we are looking for carefully.
        There are several different ways that we work on this. One
    is working with other governments and their information
    services, their law enforcement, their intelligence services.
    But we also have been working with the Palestinian Monetary
    Authority to help strengthen their capability to actually keep
    track of and stop illegal financial activity taking place on
    the West Bank and Gaza. We have regularly through our Consul
    General in Jerusalem and his staff conveyed our concerns about
    terrorism financing to the monetary authority.
        USAID has been working in assistance programs to build up
    the technical capacity of that Authority to track financial
    flows in and out of the West Bank and Gaza. I know that the
    Department of Treasury has also been having discussions about
    technical assistance to give to them so that those in the
    Palestinian Authority have a better capacity from that end to
    try and track the money that is coming in and out and to learn
    how it is coming in and out. But, it is an ongoing process.
        Ms. Kelly. Last week, Secretary Snow met with the senior
    Saudi officials. When he left, he indicated that Saudi Arabia
    has been a strong ally to the United States in this essential
    matter. That is a direct quote. What is the basis for this
    optimistic and sort of complimentary statement? How do we know
    that the Saudi government is really ensuring the transparency
    of the charities's operations so we know that they are not
    using them to fund terrorism?
        Mr. Wayne, since you brought the Treasury into this, that
    is really a question I am asking both you and Mr. Aufhauser.
        Mr. Wayne. Let me start, and then let David follow up. The
    Saudi position is that the government of Saudi Arabia will not
    provide financial or other support to Hamas or other
    organizations. They have been providing financial support to
    the Palestinian Authority to strengthen that Authority. They
    have also regularly in the past year spoken out in favor of a
    peaceful solution and criticized those who are undermining that
    peaceful solution to the Arab-Israeli conflict. Privately and
    publicly, Saudi officials have called on Palestinian extremist
    groups to reject violence and to work for a negotiated solution
    to the conflict.
        The Saudis have also undertaken, and we can get into this
    in more detail, a number of steps in their regulatory structure
    to make it harder for charities to send money overseas without
    supervision, without checking where it is going. This was a
    major problem. They have taken a number of steps so that there
    cannot be cash transfers overseas, that money going to projects
    overseas has to be approved by the government. You may have
    seen some of the press reports. They have started taking the
    cash boxes out of mosques and the department stores and other
    places because it was too unregulated regarding where the money
    was going. We think this can help in this process.
        But let me ask David to add more.
        Mr. Aufhauser. I think Secretary Snow was relying upon
    significant strides that the Saudi government has taken. Let me
    be specific about this: Certainly a designation of a man named
    Wa'el Julaidan; certainly the restructuring of al-Haramain;
    certainly the investigation of its executive director;
    certainly the decoupling and closing of 10 of al-Haramain's
    offices around the world; new charities regimes which control
    the licensing of charities, control the accounts from which
    disbursements can be made that vet the signatories of it; that
    prohibit cash transactions by NGOs; that bar cash collections
    literally in mosques; the current vetting of clerics in their
    ranks; new anti-money laundering legislation which as we speak
    is being subject to an international audit team of Bayoffatif.
        These are all extremely promising significant strides that
    the Saudis have made. But by no means have we crossed the
    bridge of the issue of terrorist financing emanating from Saudi
    Arabia. It remains a very challenging task. Hamas during the
    Hajj alone raises enormous amounts of money and sends their
    political director there. It is not a crime to give to Hamas in
    Saudi Arabia. Let me restate that. It is not a crime to give to
    Hamas in Saudi Arabia. Individuals are free to do so. In my
    judgment, it is not enough to say the government will not be
    giving money. It is only an invitation for individuals to do
    so. So we still have many bridges to cross.
        But I do want to underscore what Secretary Snow was basing
    his judgment on. These are significant changes, sea-changes in
    Saudi Arabia, particularly post-May 11. The most important of
    which, from my parochial point of view, has been the
    establishment of the joint task force with the FBI and IRS
    agents because that gives us transparency and compulsory
    process for the first time on Saudi soil.
        Chairwoman Kelly. Thank you very much.
        Mr. Gutierrez?
        Mr. Gutierrez. Let me ask, subsequent to September 11, we
    evaluated as a nation what measures we can take to prevent acts
    such as those that occurred at the World Trade Center on
    September 11. I think the general consensus was that the
    sharing of information between the CIA and the FBI and the
    Department of Defense was not what it should have been, and had
    we shared information we might have been able to thwart
    something, and we might have been better prepared and more
    secure as a nation. We have also taken steps along the way to
    shore up and to address lack of sharing of information.
        I just want to ask the panelists, State and the FBI, there
    opinion about the current structure. I think any lay person can
    see why Treasury is involved in this--that was so eloquently
    stated by the General Counsel. State needs to help
    internationalize the process. Regarding the FBI, I don't think
    there is anyone better at doing the work and protecting our
    nation. Even if Homeland Security is new, there is no lack of
    competence in the new organization, as the new organization was
    put together to fight exactly this.
        Who is really in charge and command in fighting terrorist
    financing? I imagine you have to have a command structure so
    that someone is in charge and listening to Treasury and
    listening to Homeland Security and listening to the FBI, and
    gathering and centralizing the information, and then
    prioritizing where we are going to go so that each agency knows
    what its mission is. Who is in charge? Is there an
    organizational setup of who is in charge? How is it working
    between all of you? How are overlaps handled?
        I would like to hear about the success of interagency
    cooperation and how it works, and again reiterate what the
    Chairwoman said. Is there something we can do to help
    facilitate that? That is a long question.
        Mr. Aufhauser. No, I got it. I chair the Policy
    Coordinating Committee on Terrorist Financing for the National
    Security Council. It is the switching station, the
    clearinghouse, and the strategic policy think tank on terrorist
    financing. There are many subcommittees, one of the most
    important of which has no name. It meets every Wednesday
    morning in the situation room. It includes senior-level members
    of the relevant intelligence and law enforcement agencies where
    information is shared and discussed. Strategic targets are
    evaluated. Suggested programs for how to either develop further
    information or to take action are discussed and debated.
        From that committee, we then take to a fuller PCC the
    issues of how best to deal with this potential target, whether
    diplomatic maneuvers, whether criminal action domestically,
    whether criminal action abroad, whether administrative action,
    whether freeze orders, or whether alternative action is
    justified and can be executed well to have real-world
    consequence.
        We work largely on consensus, and that turns out not to be
    a handicap. It turns out to be a sobering and maturing process.
    Because there is so much consensus, we seldom have to take the
    matter up for further authority from the NSC. But when there
    are issues that are material or sensitive, such as let's say
    whether to take action against a particular target related to
    Hezbollah, we want to make sure we are not doing anything to
    interrupt the middle-eastern roadmap process. So we introduce
    the subject and tee it up in briefs to the deputy's committee
    of the NSC and discuss it, and ask them either to bless the
    recommendation or to amend it.
        In terms of cooperation of information sharing, it has been
    extraordinary. It has been extraordinary. These Wednesday
    morning meetings are substantive, candid, naked. The role I
    usually play is you are not giving me enough, and the role the
    professionals usually play is you don't understand how
    difficult it is to give you what we are giving you because it
    is tough to find actionable intelligence in a terror world of
    shadows.
        Mr. Gutierrez. We recently had to take up the issue. There
    was an amendment on the House floor about whether or not our
    government was going to have any financing mechanism vis-a-vis
    the Saudis which would have stopped us from bringing Saudis
    here to our country to train them. So the issue came up, and so
    it is an issue that we have to deal with in the House of
    Representatives about just where the Saudis are at. I think we
    can see, given the Chairwoman's questions and given the
    information in the debate, that there are differing opinions on
    just how committed and what actions the Saudi government has
    taken.
        So that I am clear, just for the record, I voted against
    taking that kind of punitive action against the Saudis. I
    thought it was a little premature and that we did not have all
    of the information, that was my position. I just want to make
    sure so that I can take the information from this hearing as I
    make further judgments on this.
        It is the position, then, of the Treasury Department and of
    the State Department that post-May 12 the Saudi government is
    taking genuine and vigorous measures to combat terrorism and
    the financing of terrorism, and that Secretary Snow's comments
    are well-warranted in terms of after his trip last week to say
    things are getting better there? Is it Treasury's, view that
    things are getting better that they are more cooperative and
    that we are strengthening our relationship. If you would care
    to comment, I do not want to put words in your mouth, so I know
    you are going to want to re-phrase that, just so that I get
    your best sense.
        Mr. Aufhauser. I do not mind your putting words in my
    mouth. I just don't want to put words in Secretary Snow's
    mouth.
        Mr. Gutierrez. Okay.
        Mr. Aufhauser. I am speaking as the head of the PCC on
    Terrorist Financing, probably the guy most intimate with the
    issue vis-a-vis Saudi Arabia. So I will give you my personal
    and professional opinion, which I can express with some
    impunity since I am leaving.
        My sense is that the government over there lacked
    initiative prior to the May bombings, to take significant self-
    policing actions on this issue. The history before May 11 is a
    history of some grudging and discrete cooperation. When they
    have been responsive, for example when we have asked them to
    designate Wa'el Julaidan, a prominent Jeddah merchant, al Qaeda
    merchant, or to close down the al-Haramain in Kosovo, those
    actions were welcome. They were based on almost irrefutable
    statements of the case that we presented them. It is great
    credit to them that they followed those actions.
        Having said that, whether it was done with complete
    commitment, the jury is still out. For example, it was far from
    clear from interrogations of Julaidan what was shared with us.
    Similarly, it was far from clear whether the al-Haramain
    offices in Bosnia and Kosovo were indeed in effect closed down,
    or really whether they just morphed into another name in
    another place.
        Also before May 11, there was a prejudice, I do not mean
    that in a pejorative sense, of the Saudi government to focus on
    systemic change, because it was a convenient way to avoid
    personal accountability. They focused on the charities
    commission. They focused on new laws. They focused on new anti-
    money laundering legislation, all of which are absolutely
    critical. But even on those, they publicly proclaimed and
    proudly proclaimed and should proudly proclaim those changes
    last November and December. But in March when I traveled to
    Riyadh with Cofer Black, it turned out they had not yet been
    implemented. So we, too, had to ask them and suggest to them
    that it was in their interest to follow through.
        Mr. Gutierrez. My time has expired, but I just want to
    quickly say I look forward to working with Mr. Wayne and Mr.
    Pistole and Ms. Forman on this issue, and I would like to say
    God-speed to Mr. Aufhauser in his new endeavors.
        Mr. Aufhauser. Let me just say thank you.
        Mr. Gutierrez. I think he has done his level-best to give
    us the information and to come before us and to work with us.
    We will miss you here. Thank you.
        Mr. Aufhauser. Thank you.
        I want the record to be clear, you only have less than half
    the answer.
        Mr. Gutierrez. Okay. Thank you.
        Chairwoman Kelly. Mr. Oxley?
        Mr. Oxley. Thank you, Madam Chairwoman.
        Let me also join the other members of the committee in
    thanking Mr. Aufhauser for his public service and the good work
    that he has done for our country in so many areas. We will miss
    your leadership and guidance.
        Agent Pistole, you had talked about the four cases that
    were successful. One of the frustrating things about all of
    your jobs is that for the most part these do not get headlines
    or even a story, even a little story. As the President said in
    his post-9-11 speech to the nation, a lot of these victories
    will be won in the shadows and nobody will know about it. We
    appreciate all of your work in this effort that so many times
    really does not get the kind of notoriety and so forth that the
    public should know about. We understand why they don't know
    about it.
        In your particular case and the four cases you mentioned,
    were these developed as a result of electronic surveillance,
    informants, a combination of both? In a general sense,
    obviously, and not get into detail on how those cases were
    made?
        Mr. Pistole. Yes. In general terms, it is a combination of
    excellent human sources, coupled with electronic surveillance
    and the timely exploitation of information, which we have not
    been able to do previously, prior to 9-11, simply because there
    was not a mandate or an initiative to do so, but that
    combination of items that you have highlighted.
        Mr. Oxley. Let me interrupt. Was that as a result of the
    Patriot Act?
        Mr. Pistole. In these examples, the Patriot Act helped in
    the sharing of intelligence that the FBI can gather, and then
    transform that into actionable information without a cumbersome
    process. So yes, that has been beneficial.
        Mr. Oxley. So the predicate was the ability to share
    information that heretofore was not available?
        Mr. Pistole. Yes. And in that regard, obviously we hope to
    continue with those successes which, if publicized, would
    actually change the way people do business, is our estimation.
    So we hope to continue that by protecting those sources and
    methods.
        Mr. Oxley. As you know, there are a lot of folks out there
    and in Washington that are very upset about the Patriot Act and
    have urged that Congress not renew the Patriot Act. As you
    recall, the Act had a sunset provision in it, something that I
    think was not wise. So I think those of us who supported the
    Patriot Act and believe in it and what it has been able to
    accomplish need to figure out a way that we can get the
    information out to the public so that they better understand
    what is at stake here and what this Act has been able to do in
    a positive way.
        Mr. Pistole. I agree, sir. As you know, Attorney General
    Ashcroft has been out visiting a number of cities and
    highlighting as best he can in an open forum some of the
    successes and some of the compelling reasons why we in the
    United States who are charged with responsibility for
    protecting U.S. citizens from future terrorist acts need the
    tools available under the Patriot Act and actually would like
    to have additional tools such as administrative subpoena power,
    which we have in drug investigations, healthcare fraud
    investigations, a number of, quote ``routine'' criminal
    investigations, and which we do not currently have. So there
    are a number of reasons to expand within reason, the Patriot
    Act.
        Mr. Oxley. You make an excellent point. Here is a case
    where traditionally that power has been used against all kind
    of common ordinary crimes, and yet when we are dealing with the
    very threat to our security, law enforcement does not have that
    ability. It is frankly beyond me why people would make such a
    fuss about it.
        Mr. Pistole. Just to take a moment to cite a specific
    example within the last week, where we had several suspicious
    individuals who checked into a hotel on the West Coast. We went
    to the hotel to obtain registration information. The hotel
    said, sorry, we cannot give that to you without a subpoena. So
    we had to go back to the U.S. attorney's office, and of course
    this is the middle of the night, to try to track somebody down,
    an assistant U.S. attorney, to obtain a federal grand jury
    subpoena to obtain this information.
        If we had the authority to use administrative subpoenas, we
    obviously could have produced one right then, and if there was
    anything imminent about what these individuals were planning
    over the next several hours, perhaps something would have been
    missed because of the inability to obtain that background
    information so we could do our record checks, we could do
    foreign intelligence service checks, we could do all those
    things that are attendant to preventing future terrorist acts
    here.
        Mr. Oxley. If those same people had been involved in
    organized crime, it would have been an entirely different
    scenario, correct?
        Mr. Pistole. Well, drug trafficking, anyway, or healthcare
    fraud, white collar crimes, something that is not a threat to
    the security of the United States in terms of terrorist acts,
    yes.
        Mr. Oxley. I want to ask Mr. Aufhauser and Assistant
    Secretary Wayne this one question. I know we have a vote, Madam
    Chairwoman. All the countries who are supposed to be our allies
    follow the President's lead in freezing assets of Hamas-related
    charities. Leaders in the European Union have recently targeted
    the political wing of Hamas. The EU has not, to my knowledge,
    cut off the charities as the President did. The Jordanian
    government imposed such a freeze, but then did a 180,
    apparently after they were criticized by Hamas.
        I would like to ask both Mr. Aufhauser and Secretary Wayne,
    what action is the Administration considering to persuade the
    EU and Jordan to impose the freeze, in the case of Jordan to
    reimpose? Or should the Congress put a stamp on the process in
    some way?
        Mr. Wayne. Thank you. It is a very good question. First, we
    are very happy that through a lot of work by many people,
    including the Palestinian Authority, the EU foreign ministers
    did decide to designate Hamas. It was important that it was not
    only the United States saying they should designate Hamas, but
    they were hearing from the Palestinian Authority that this
    group was undermining the peace process through its violence,
    that that did help make a difference.
        There is still a deliberative process, a debate going on in
    Europe about how to act against the charities that have been
    associated with Hamas. Up until now, the argument in some of
    the countries had been, we need to have specific concrete proof
    that will stand up in court that money that goes to the
    charities is actually going to terrorist activities. There is a
    court case going on in Germany against the freezing of the
    funds of the Al-Aqsa Foundation, that is questioning, which is
    a Hamas-related charity that is questioning along these lines.
        Chairwoman Kelly. Mr. Wayne?
        Mr. Wayne. Yes?
        Chairwoman Kelly. We need to go and vote.
        Mr. Wayne. Sorry.
        Chairwoman Kelly. Can you finish that answer when we come
    back?
        Mr. Wayne. Sure.
        Chairwoman Kelly. The Chair would announce a 10-minute
    recess while we go vote. Thank you.
        [RECESS]
        Chairwoman Kelly. The committee will come to order. If we
    could have our witnesses take their seats please.
        Mr. Oxley asked if I would finish a question that he had
    started. The part that I believe he did not ask is what action
    the Administration is considering to persuade the EU and Jordan
    to impose the freeze. The other question was whether or not
    Congress ought to be putting their stamp on this. I am going to
    throw that open to all of you.
        Mr. Wayne. Thank you, Madam Chair. Let me take up, if not
    exactly where I left off, somewhere in between.
        There was a big step forward in the EU decision to
    designate Hamas as an organization. We have been working for a
    long, long time to try and persuade the European Union that it
    really did not make sense to try to differentiate between a
    political and a military wing of Hamas or a charitable wing of
    Hamas and a military wing; that if you are funding the
    organization, even if there are many charitable activities
    going on, there is some fungibility between funds. You are
    strengthening the organization. At a minimum, it is gaining
    credibility, and it has the opportunity to recruit people
    through its charitable activities.
        So we think that this has been a big leap forward. The EU
    is now absorbing that decision that they have taken. Up until
    now, there was not only this debate about the two wings, there
    has also been in the court system in various countries a very
    high standard that has been put in place, a high evidentiary
    standard if you were going to act against a charitable
    organization. That is why in Germany there is now a case
    challenging the decision of the German government to freeze the
    assets of the Al-Aqsa Foundation which is a Hamas fundraiser.
        Similarly, in the United Kingdom, they have in their
    charities commission the same standard that they feel they need
    to look through before they could act against, in this case,
    the Interpal organization. What we hope to do in the weeks and
    months ahead is to provide them additional information, and
    also now to get them to take a different look at this because
    they have admitted that the overall organization is indeed a
    terrorist organization. So that is a whole different
    perspective of looking at the challenge of Hamas.
        I think it is also important to note that Hamas has in fact
    provided a lot of charitable services. There are concerns in
    Europe, in the Middle East, in places like Jordan, that
    Palestinians be provided some of these basic services and their
    needs met. So we do need to give very important attention to
    meeting these basic needs of Palestinians at the same time.
        Maybe I will stop there and invite Mr. Aufhauser.
        Mr. Aufhauser. On the question of Jordan specifically, Mr.
    Wayne and I coincidentally met with the Prime Minister of
    Jordan last week on Iraq matters and helped put together a trip
    during the first week of October to discuss those matters in
    Amman. We now have a new item for the agenda.
        With respect to Europe, I do not have the patience of Job
    that my friend Tony has with respect to their failure to follow
    through on the designation of the fundraisers that we have now
    designated. Once they drop the sophistry that there was a
    distinction between the military and the political arm of
    Hamas, you no longer have that as an evidentiary burden to show
    that the money given goes to do violence rather than to build
    charities.
        The short answer to Chairman Oxley's question is we should
    be going abroad, and I am confident we will, the State
    Department and/or Treasury Department, and urging our allies to
    do the principled thing which is now that they have crossed the
    rubicon in naming Hamas as a foreign terrorist organization, as
    a European Union matter, then all funding for that organization
    should be barred, and those who knowingly fund it should have
    their assets frozen. I cannot see any contrary argument.
        Chairwoman Kelly. Thank you very much.
        Ms. Maloney?
        Mrs. Maloney. I thank the Chairwoman for her consistent
    focus on this very important issue. She has chaired and
    initiated a number of briefings on it. I thank the panel very
    much for their appearance today and their hard work in working
    towards cutting off funding. It is one of the keys to stopping
    terrorism. Like any business, if you are out of money, you are
    out of work. I know that a number of dollars have been frozen
    worldwide and in America.
        I would like to ask the FBI and Treasury, last year in a
    letter I sent to the State Department Assistant Secretary for
    Legislative Affairs Paul Kelly. He likewise wrote that the
    department has requested from the FBI and CIA any information
    that they may have regarding whether the families of any of the
    19 hijackers who attacked the U.S. on September 11 have
    received funds from any charitable or other organization. I
    would like the members of the panel to address that question.
        Also I would like to ask about the Al-Quds Intifada. On
    March 21, 2001 the Royal Embassy of Saudi Arabia posted a
    statement on its web site stating that the Saudi Government had
    given up to $50 million to the organization. Can you confirm
    that the Al-Quds sent Saudi Government funds to the families of
    Palestinian martyrs, and what is the status of the Al-Quds
    today? I have a letter into former Secretary O'Neill on this,
    in a bipartisan with four other of my colleagues.
        Lastly, I would directly like to follow up on Mr. Oxley's
    question. He was not able to address it to the FBI, so I would
    like to specifically ask the FBI if it is your opinion that
    Saudi Arabia is cooperating or is a model for other countries
    when it comes to money laundering and terrorist financing? Are
    they a model country when it comes to opening up their country
    to the investigation of terrorist attacks against Americans on
    Saudi soil? I especially would request the FBI to answer.
        Thank you.
        Mr. Pistole. Thank you, Congresswoman. Let me address the
    first question concerning the families of the 9-11 hijackers.
    Just to put it in context, as a result of the investigation
    conducted by the Terrorism Financing Section of the FBI
    concerning the 9-11 hijacking scheme, there was only about
    $500,000 that was used in total for the 9-11 hijackers to carry
    out this scheme. That includes pilot training. That includes
    lodging, meals, everything they did in terms of travel, casing,
    flying first-class across the country, and doing all those
    things. So just in terms of context, it does not take a whole
    lot of money to run a successful terrorist campaign.
        Mrs. Maloney. But did their families receive any donations
    from charitable organizations?
        Mr. Pistole. The FBI has no information that any family
    members of 9-11 hijackers received any money either from a
    government such as the Saudi Government, where 15 of the 19
    hijackers were from, of course, or from an NGO or other
    charitable organization. That is in response to your first
    question.
        On the second question, I will have to defer to my
    colleague if they have information about the $50 million in Al-
    Quds Intifada. I do not have that information.
        The third issue, the Saudi cooperation, you asked whether
    we assess them as being a model country. I think again we need
    some context there, where they have come a long way in terms of
    cooperation. I would not describe what they have or what the
    relationship has been as a model of cooperation, but there are
    a number of ongoing initiatives which give us cautious optimism
    that we are moving in the right direction. That is, that we
    have FBI agents on-ground in Saudi right now, in Riyadh,
    working with Mabahith, the Saudi interior service, to address
    both identifying and locating al Qaeda members in the kingdom,
    and also identifying and targeting, whether it is NGOs or
    private citizens, who may be supporting al Qaeda either
    wittingly or unwittingly. So those things are ongoing.
        Additionally, for the first time the FBI is providing
    terrorism financing training to Mabahith. That is ongoing right
    now. We have a team in-country right now that is training 20
    Mabahith officers specifically focusing on terrorism financing.
    So those are all positive steps that we see that the Saudis are
    opening to the initiatives that we presented. They have come up
    with some initiatives. As was mentioned earlier, they are
    shedding their own blood now, as recently as yesterday, with a
    Mabahith officer being killed in the attempted arrest of al-
    Rimi who was killed in a shootout.
        So there are a number of tangible measurable things that we
    see as positive signs.
        Mrs. Maloney. And the Al-Quds question? Treasury?
        Mr. Aufhauser. Answer one is I have to refer to that letter
    and get back to you on it. But answer two, more generally, we
    have engaged in Riyadh in meetings with SAMA, by way of
    example, the Saudi Arabian Monetary Authority, to get
    assurances that certain accounts established to forward
    charitable monies to what is alleged to be victims of the
    Intifada, that there is an accounting of that money.
        In particular, there is an account called Account 98, and
    we have been engaged in dialogue now for 6 months to make sure
    that at least the shareholders of the banks where Account 98s
    were compelled to be established by royal edict, to assure that
    those shareholders have an opportunity to make certain
    themselves, exercising due diligence, that the money is not
    going as blood money.
        Mrs. Maloney. But is the Al-Quds still functioning?
        Mr. Aufhauser. Again, on that I have to get back to you. I
    do not know the answer to whether Al-Quds is still functioning.
    I do know the Account 98s are still alive and well. Whether
    they are one and the same, I cannot answer you today.
        Chairwoman Kelly. I am sorry but the gentlelady's time is
    up.
        Mrs. Maloney. Thank you.
        Chairwoman Kelly. If you have a question, you are certainly
    welcome to submit it in writing.
        Mrs. Maloney. I will. I lost, as the gentlelady knows, 500
    constituents on 9-11 and my constituents are very concerned
    about this whole area, so I will be writing to you. Again, I
    appreciate the gentlelady for holding this hearing and for her
    persistence on this extremely important issue.
        Chairwoman Kelly. We lost a great number of people in my
    district as well in New York.
        Mr. Shadegg?
        Mr. Shadegg. Thank you, Madam Chairwoman. I echo the
    comments of the previous speaker. I commend you for holding
    this hearing on this important topic. I also commend all the
    members of our panel for spending time with us and for their
    efforts to track down these assets and to try to cut off the
    funding of Hamas so that it does not continue to do what it has
    done in terms of destabilizing the area and causing death and
    carnage.
        I want to focus on an issue that I have focused on before,
    and that is precisely what assets are going to be used for
    which purposes. Mr. Aufhauser, as you know, I am interested and
    concerned about the losses suffered by American citizens in the
    original invasion of Kuwait by Saddam Hussein. Your testimony
    refers to the fact that there are some $6 billion that Saddam
    was able to hide in the Oil for Food Program. On page two, you
    make a reference to that.
        It is my understanding from your testimony that we have
    recovered perhaps $500 million of that $6 billion. I am
    interested in what efforts we are making to recover the
    remainder of that money, but also specifically, and I will give
    you both questions so you can answer them and have time to
    answer them. In testimony before this committee in May of this
    year, you indicated that the claims of those Americans who
    suffered losses in the invasion of Kuwait needed to be dealt
    with by the new government of Iraq, the Iraqi Authority. And
    you made a reference specifically to using the wealth of the
    nation, specifically oil-generated wealth. I understand that
    oil-generated wealth is part of the wealth of the nation, but
    it seems to me that $6 billion in hidden oil-generated wealth
    is also a part of the wealth of the nation.
        The question I would have of you is, recognizing that most
    of that $6 billion is going to go, if it is recovered, to
    rebuilding the country, whether or not the Treasury Department
    or the Administration would be willing to support the
    allocation of some of those funds to the payment of claims by
    people who suffered as a result of the Iraqi invasion of
    Kuwait.
        Mr. Aufhauser. Thank you, congressman. The $6 billion is a
    gross figure. I do not for a minute believe that it is still
    all there. I believe a lot of it was misspent. I believe a lot
    of it we will never find.
        Mr. Shadegg. But you believe some is hidden outside the
    country.
        Mr. Aufhauser. Yes. I think it is worth the candle to do
    the endeavor. As I said in my opening, which you might have
    missed, I have been disappointed at the alacrity with which it
    has been pursued. I certainly, in answer to one of your
    questions of efforts, have had the Treasury Department expend
    extraordinary efforts. We have gone abroad to more than 200
    countries and been in contact in cables, face-to-face meetings.
    I have met with the Swiss. I have met with the French. I have
    met with Russian representatives. We have investigators on the
    ground in Jordan. We have investigators who have met with me in
    Switzerland to discuss the matter with Swiss authorities. So we
    are pursuing it. A great deal of energy is being devoted to it.
        What we lack is access to the mountain of records that are
    in Baghdad today, and the very, very important witnesses that
    are in Baghdad. By the way, the most important witnesses in
    these kind of forensic examinations is not the boss who is
    detained because he was a name on a deck of cards. It is his
    secretary who is sitting in an apartment right now in Baghdad
    and no one is asking her the right questions.
        With respect to whatever money, how will it be applied, I
    have to give you my frank answer. The money belongs to Iraq.
    Treasury does not have the power to allocate that money. I
    presume that they will make the allocation in terms of the
    security interests of the country and its citizens first.
    Unfortunately, our U.S. citizens will be creditors of the
    nation just like many citizens are around the world today. I
    have to be that frank.
        Mr. Shadegg. I appreciate that. It is a perfect transition
    to my question for Mr. Wayne. Mr. Wayne, given that the Oil for
    Food Program is now not functioning and not producing money,
    and that that was the source of money for the U.N.C.C. process,
    what efforts is the Administration making to fund the payment
    of claims by U.S. citizens who have substantial unpaid claims
    arising out of the invasion of Kuwait by Saddam Hussein?
        Mr. Wayne. I believe, Congressman, if I have it right, that
    in the existing U.N. Security Council resolution, there is a
    provision that some of the funds going into the DFI,
    Development Fund for Iraq, will be reserved to deal with the
    compensation claims, because that U.N. process, the U.N.
    Consultation Commission, still exists and still has a mandate
    to work through those claims. I think you know the facts and
    figures enough from the last hearing. Though I understand
    things got lost on the way and I am very sorry for that, we did
    promptly respond, it just did not get to you, I gather.
        Mr. Shadegg. I received the answer. The problem is that the
    written answers do not solve the problem.
        Mr. Wayne. No.
        Mr. Shadegg. Part one of the question is, the U.N.C.C. is
    not currently paying those claims and it is not completely
    clear that there are adequate funds to pay the outstanding
    claims. My question of you is, is the State Department looking
    at that issue, and how do we go about assuring that there are
    adequate funds to pay those claims?
        Mr. Wayne. We are looking at that issue. I do not have an
    honest answer for you as to how do we assure that all claims
    will be met, but we are dedicated to continuing to work on this
    process. I think I can safely say that there has been no
    government more dedicated to assuring that U.S. claimants have
    their claims fairly judged and looked at. We have more work to
    do on that and we will continue to work with you very closely
    in this process.
        Mr. Shadegg. I appreciate your candor. Thank you.
        I yield back.
        Chairwoman Kelly. Thank you.
        Mr. Shadegg, in May Mr. Aufhauser and Mr. Wayne I believe
    indicated that the responsibility for approaching the secretary
    sitting in the apartment in Baghdad is in fact the
    responsibility of the Department of Defense. If you would like,
    we can direct that question to the Department of Defense. Would
    you like us to do that?
        Mr. Shadegg. It seems to me that Mr. Aufhauser's testimony
    certainly paints the picture that we ought to be aggressively
    going after these resources, and if it is the Department of
    Defense that should be interviewing those people, I would
    certainly support pressuring them to do that. I know they have
    lots to do, and I get some assurance out of Mr. Aufhauser's
    acknowledgment that there is still hope and that we are still
    pursuing.
        I have some concern that he says we are not aggressively
    interviewing those people, but there is a lot on our table in
    Iraq and I can understand that. I certainly just hope that over
    time we do pursue those people and find them and question them,
    and hopefully track down whatever assets or resources we can.
        Chairwoman Kelly. Would you like this committee to direct
    the written question to the Department of Defense?
        Mr. Shadegg. Yes, Madam Chairwoman, I would appreciate
    that.
        Chairwoman Kelly. With unanimous consent, we will do it.
        Mr. Inslee?
        Mr. Inslee. Thank you.
        Mr. Aufhauser, you had a statement in your opening
    statement that I found pretty astounding. I want to ask you
    about it. You related the known fact that tyrant Saddam Hussein
    abused the Oil for Food Program and through graft and various
    means siphoned money off it. I think that is pretty well
    accepted. You then went on, this is on page two of your
    testimony, you said that ``money and those credits purchased
    the goods and services that kept Iraq a threat against all
    reason and international law. That is the cost of turning a
    blind eye to laundered funds. We all witnessed a second cost
    when the World Trade Center vanished before our eyes 2 years
    ago this month.''
        The reason that statement caught my attention is that after
    almost a year of the Administration implying that Iraq was
    directly associated with this heinous attack on us on September
    11, the President a few days ago, as I understood it, came out
    and flatly said that he had no evidence that Iraq was directly
    connected to this attack on our nation on September 11. And yet
    you come before us today, and as I understand what you are
    telling us, you say that Saddam's abuse of the Food for Oil
    Program used that money to attack us on September 11.
        Why, after the President of the United States, after
    implying for a year that Saddam was behind September 11, then
    coming out and saying he was not associated with September 11,
    you tell us today that the money for September 11 came from the
    Food for Oil Program.
        Mr. Aufhauser. Congressman, with all respect, and maybe it
    is because of the language I used, that is not the intent and
    purpose, and that is not what I said. The intent and purpose
    was, as I stated in my oral statement, my experience at
    Treasury has demonstrated that there has been a laxity in the
    financial system that has caused great grievance on many
    accounts. One of those is the way that Saddam Hussein mocked
    the U.N. sanctions program and used it to buy embargoed goods,
    including the kind of parts necessary to keep his jets flying
    and his army armed. That is point one.
        But point two was also, with no connection to Hussein's
    money, that the same laxity in the international financial
    system permitted money to be spirited across international
    borders that led to the disintegration of the World Trade
    Center. If it reads the way you say it reads, then I should be
    reproached. That is not my point. I have no connection between
    the two of them. It is the principle I was trying to establish,
    which is that loose money laundering controls can lead to
    calamity in many ways.
        Mr. Inslee. So do you or your Department have any evidence
    that money from Iraq was used to finance the attack on this
    nation on September 11?
        Mr. Aufhauser. No, sir. No, sir.
        Mr. Inslee. If that is true, why didn't you tell America
    that fact while we were debating the President's decision to go
    to war in Iraq? Why did you not tell Americans that there was
    no connection financially as far as you were aware of between
    Saddam Hussein and the attack on September 11?
        Mr. Aufhauser. One, I was not asked. Two, it was not part
    of my agenda. And three, I do not think there was any
    implication to the contrary.
        Mr. Inslee. The President was implying this for about a
    year in at least a dozen speeches. Did you ever contact the
    White House and suggest that that was not in compliance with
    the facts as you knew them?
        Mr. Aufhauser. I did not know facts to the contrary either.
    It was not part of my agenda.
        Mr. Inslee. Were you aware that we had a substantial debate
    in this nation about whether to go to a war in Iraq at the
    time?
        Mr. Aufhauser. Of course I was.
        Mr. Inslee. And were you aware that you had information
    that would suggest whether or not Iraq was associated with this
    attack?
        Mr. Aufhauser. Let's be clear. I have no unique
    information. I am a consumer of intelligence in law
    enforcement. There is not an asset in the Treasury Department
    today that is a developer of intelligence. So what I knew is as
    a consumer of information from the CIA or the FBI or the NSA.
        Mr. Inslee. Let me ask you, in your statement as well, you
    said something that I very much agree with. You said that
    ``most of the capital we are attempting to freeze is beyond the
    reach of the United States. Acting unilaterally is often an
    empty gesture, an action without an effect. Therefore, we need
    our allies to join with us in a coordinated manner.'' I think
    probably we would all agree with that.
        Do you think we are doing as good a job as we can on all
    our international policy, including what is going on in Iraq,
    in encouraging international cooperation rather than unilateral
    action?
        Mr. Aufhauser. I do not want to be presumptive in judging
    the entire State Department and worldwide global diplomatic
    efforts of the Administration. I can speak for myself from my
    own parochial point of view. The whole effort of the Treasury
    Department has been multilateral since the beginning. We have
    recognized that this is a reckless act, this terrorist
    financing issue, to do it alone.
        We have forged remarkable bonds, in part through IFIs, that
    is the World Bank, the IMF and in part through international
    organizations like APEC and the G-7 and the G-10, to get
    international standards that require people to pay attention to
    the kind of money that is spirited through their banking
    systems, with enormous effect. I am actually quite proud that
    we have been able to forge. More than 180 countries today have
    a new language. They have new laws and the laws can be enforced
    against terrorist financing, both criminally and
    administratively. I think it is great feat and I think it is a
    great credit to the President.
        Chairwoman Kelly. Mr. Inslee, your time is up.
        Mr. Inslee. Thank you. I will be back.
        Chairwoman Kelly. Mr. Fossella?
        Mr. Fossella. Thank you.
        Good afternoon, gentlemen and ladies. One of the issues
    that I don't know if it was brought out, I apologize if it was,
    is in the Treasury and FBI's testimony. It deals with tracking
    the money from the Federal Reserve. For example, money that was
    seized in Iraq flowed directly from the United States Federal
    Reserve.
        One of the issues that came up in a conversation that I had
    recently with some folks back in New York, was as I understand
    it, the process works if we send $100 million, for example, to
    another government, that government can in turn break that
    funding down in $10 million increments and then distribute it
    to 10 primary banks.
        Is this an issue in terms of being able to track the
    currency from start to finish? Some have suggested, for
    example, bar-coding the currency so that if ultimately our
    dollar or greenbacks are identified and discovered, narrowing
    the scope in terms of where it has been? Or is this just a
    bizarre question?
        Mr. Aufhauser. No, you are right on. It is not a bizarre
    question. The Federal Reserve has very sophisticated resources
    devoted to assuring tracking. Frankly, I would like to respond
    to you more in a closed hearing about the manner and the means
    of doing so.
        Mr. Fossella. Fair enough. Okay.
        Agent Pistole, in the first paragraph of the second page of
    your testimony, you mention that in the past several months,
    TFOS has capitalized on its capabilities by conducting real-
    time financial tracking of a terrorist cell, providing specific
    and identifiable information to a foreign intelligence agency,
    which resulted in prevention of four, as you mentioned earlier
    with Mr. Oxley, potential deadly attacks. Can you explain a
    little more clearly what real-time financial tracking consists
    of? And tell us how, if at all, Congress can provide you with
    better tools to track those financial assets?
        Mr. Pistole. Thank you, Congressman. I can describe in
    general terms the tracking that goes on. It is through a
    collaborative relationship between the U.S. government and
    these particular case, the FBI and U.S. financial services
    businesses that have allowed us to access on a real-time basis
    information about, for example, just talking in general terms
    in an attempt to protect sources and methods for future use,
    but for example a wire transfer that a foreign intelligence
    service may have information about either through a human
    source or through technical surveillance in another country to
    say we believe there is going to be a wire transfer from one
    location to another, can you help us with that? The FBI through
    our liaison with those financial services companies has been
    able to do that at least four times since last April, which
    resulted in, according to the Foreign Intelligence Service, the
    prevention of terrorist acts abroad.
        Chairwoman Kelly. Ms. Forman, have you comments you would
    like to add here?
        Ms. Forman. I would like to add in regards to the tracing
    of funds from the Federal Reserve, we have had and we still
    have three deployments of BICE agents on the ground in Iraq,
    and we have worked with the Federal Reserve to track some of
    those funds. We have actually identified accounts overseas
    where those funds go to. Working with our 37 foreign attache
    offices, they are in the process of working with their foreign
    governments to see where the funds have gone from there.
        Mr. Fossella. I guess we will follow up at another time as
    to what degree that is sufficient or can it be improved and in
    what capacity. Okay. I appreciate that.
        The key element that is not here is the private banking
    system as well, in terms of helping you and collaborating. I
    know a lot of folks are dedicating a lot of time on assuming
    responsibilities and costs, burdens. Is there anything you
    think can be provided as an incentive to the banking community,
    the financial services community, to make that relationship
    even better and stronger? The cornerstone of this is just an
    incentive to do a better job, not to say they are doing a bad
    job, but can it be done better, and if so what incentives can
    be put in place to achieve that?
        Mr. Pistole. I, for one, would like to highlight the
    cooperation of the U.S. banking financial services community in
    working with us in specific examples which I mentioned, but in
    a number of other areas which we do not necessarily publicize,
    but which they do an excellent job across the board of working
    with us on a real-time basis, all the time while protecting the
    client's privacy and attendant issues. That relationship has
    especially developed since 9-11 and has allowed us to focus on
    the prevention of future terrorist acts. So I would like to
    compliment the industry on that.
        Chairwoman Kelly. The gentleman's time is up.
        Ms. Forman, were you going to respond to that?
        Mr. Fossella. Just if there was anything that can be done,
    any incentives to better or improve that relationship and the
    work that is being done.
        Ms. Forman. The largest request we get is feedback, and
    typologies or investigations. We have a program now called
    Cornerstone which is exactly what we are going to do. We are
    going to have subject-matter experts in the various financial
    systems, money service businesses, traditional banking, that
    will work on a daily basis with the financial institutions to
    provide feedback, anomalies, track patterns and trends that we
    actually see on a real-time basis. So they know and they can
    help us do our job.
        Mr. Fossella. Thank you very much. Thank you folks.
        Chairwoman Kelly. Thank you.
        Mr. Ackerman?
        Mr. Ackerman. I thank the Chair for focusing like a laser
    on this particular topic. It is much needed here.
        There are several questions I would like to just lay out.
    But first, Mr. Aufhauser, I just want to say that I, for one,
    and I know many of us are sorry to see that you will be leaving
    your position. It is going to be a major loss losing talent
    such as yours. I wish you well in your future endeavors.
        I was very impressed by the fact that you were a student of
    poetry. And perhaps somewhere in your studies you came across
    the works of a Persian poet of the 11th century who went by the
    name of Omar Khayyam, part of the region which we are talking
    about right now, which is of course Iran. In a major powerful
    and poetic work that he did, he said ``the moving finger
    writes, and having writ, moves on. Nor all your piety nor wit
    can lure it back to cancel half a line, nor all your tears
    erase a single word of it.''
        There is a lot to be learned from that, and the job that
    you and the others here have is to prevent those things
    happening that will cause our tears and lamentations to undo
    the things that have been done, but rather to not allow to be
    done the things that would be done by some who intend to cause
    of discomfort and great harm.
        That being said, in your testimony you spend a good deal of
    time talking about Executive Order 13224 and the Patriot Act
    and all sorts of other executive orders going with that,
    stating that we basically have all of the tools that we need to
    exercise what we have to do against terrorists, terrorist
    organizations, financial institutions, et cetera.
        The first question I would ask is, can't this be used
    against Syria to stop support for Hezbollah? And have we at all
    used it against Saudi banks, particularly those that do
    business in the United States, to freeze their assets for
    sending money to Hamas, in as much as we have all of that
    authority?
        Further in your testimony, you state that no economic
    sanctions programs exist at the U.N. for Hamas. That would lead
    me to ask the question of Mr. Wayne, why? And why not impose
    this as a condition for the roadmap within the region? And Mr.
    Wayne, I agree with a lot of your testimony, but in it you said
    that Hamas's social services were filling a gap that the PA
    could not fill for lack of money. I believe that that is just
    not true. The PA has wasted millions and millions and millions
    of dollars through corruption and thievery and hiding it in
    different places and buying arms and paying off terrorists and
    things like that. What are we going to do to change that?
        And finally, I would like to ask the entire panel,
    including Ms. Forman, what does one's credit score have to do
    with the likelihood of being a terrorist? Why has your agency
    insisted that it has the authority to ask credit bureaus for
    people's credit scores? Maybe Treasury can explain the
    connection of whether or not I pay my mortgage on time will get
    me on a plan early. And Jet Blue having sent to a Pentagon
    contractor personal information about 1.1 million people who
    fly their airline, and they then apologize for violating their
    own privacy rules. Maybe somebody could make those connections
    to me, because I am dumbfounded by them.
        Thank you, Madam Chair.
        Mr. Aufhauser? Indeed, we are sorry that you will be out of
    the House.
        [Laughter.]
        Mr. Aufhauser. I want to be careful about not talking about
    current operational issues in the area of terrorist financing.
    But I will represent to you that economic sanctions vis-a-vis
    Syria and its institutions remain and are a current high
    priority of the Administration. It was evidenced publicly in
    Secretary Powell's visit several months ago. It was followed up
    by other senior-level visits. It was followed up by ambassador
    meetings with me. It was followed up by a mission of technical
    specialists that went in from Iraq sponsored by the Treasury
    Department. It remains a very current issue of focus of the
    national security community. So that is the answer to number
    one on Syria.
        As for whether or not we propose or have any ambition to
    take action against financial institutions emanating out of
    Saudi Arabia, again I do not want to talk about specific
    targets, but I want to give you the assurance, and you have to
    take this as an article of faith, but I am telling you the
    absolute truth, no institution or person in the gulf is immune
    from our punitive action if we have the evidence to pursue
    them. Financial institutions are well on the radio screen, as
    are NGOs.
        Some of the other questions about the U.N. and Hamas, I
    think I will turn to Mr. Wayne.
        Mr. Wayne. Thank you very much, Congressman, for your good
    questions. I think you pointed out something with which I very
    much agree. I would not contest that there has been money that
    has not been well spent, that has been wasted, that has been
    spent from Palestinian sources on things other than social and
    charitable services that really could have helped that. You are
    correct in that.
        What I may be ineptly getting at is that there was a gap in
    providing social services, charitable activity caring for
    people. Hamas took advantage of that and has built up a
    favorable image in parts of the West Bank and Gaza because of
    what they have done there. It is in our interest very much to
    have charitable activities and social activities that are
    private groups.
        Mr. Ackerman. We can stipulate to all of that. It was just
    a concern that the PA did not have the money. My point is that
    they did, but squandered it.
        Mr. Wayne. Yes. You have an excellent point.
        Mr. Ackerman. Before my time is up, if somebody can just
    respond.
        Chairwoman Kelly. Actually, Mr. Ackerman, your time is well
    up.
        Mr. Ackerman. I think I have an orange light.
        Chairwoman Kelly. No, you have a red light. You are 2
    minutes over, actually.
        Mr. Ackerman. I am sorry. Could we just have an answer? I
    am through with the question.
        Chairwoman Kelly. If it can be a fast answer, a rapid
    answer, please.
        Ms. Forman. If you are referring to the question on the
    credit rating, credit cards is a system, a system that can be
    abused, and bust-out schemes in particular are schemes where
    credit cards are taken to the max, and the funds may be used
    for illicit means. That is one of the reasons why the credit
    card reports and the ratings are utilized, as red flag
    indicators of potential wrongdoing. They are used as a law
    enforcement tool to determine whether violations may or may not
    be occurring.
        Mr. Ackerman. I would suggest the Chair may want to at some
    future time pursue that particular issue of the privacy rights
    and what credit has to do with it, because I am not
    particularly satisfied with my understanding.
        Chairwoman Kelly. I appreciate your question. As a matter
    of fact, we have just been sitting here conferring on follow-
    ups to this and that is one of the things we can include if you
    would like.
        Mr. Ackerman. Thank you.
        Chairwoman Kelly. I appreciate the candor of the panel
    today.
        Mr. Crowley?
        Mr. Crowley. Thank you, Madam Chair. I appreciate this
    hearing as well. I think it is an important hearing and I want
    to thank the panelists for their testimony and discussion
    today.
        It was 2 years ago that the President issued an Executive
    Order that gave the federal government the power to freeze bank
    accounts, and cut off the flow of funds from organizations that
    are suspected of terrorist ties. Since that evidence suggests
    that there is a different standard for American enforcement of
    this order when it concerns a listing of organizations that
    have links with high Saudi officials. I am going to piggyback a
    little bit on what Mr. Ackerman was talking about.
        All the while, Mr. Aufhauser, you have described Saudi
    Arabia as the epicenter of terrorist financing. We know in fact
    that 50 percent of Hamas's current operating budget comes from
    the people in Saudi Arabia, a number that has not diminished
    since the attacks of September 11.
        I understand that there was an attack in Saudi Arabia in
    May 2002, an attack on their own soil. That, in turn, brought
    them into joining forces with the United States in a joint task
    force to crack down on terrorist financing. My question is, why
    did it take this attack, a full 8 months after the attacks of
    September 11, to bring the Saudis into compliance with the
    joint task force in the United States and its fight against
    terrorism? And to get them to crack down on terrorist funding
    within Hamas? And if it took that long to get a supposed friend
    to join forces with us, how can we expect those who have less
    than better relations with this government to comply with this?
    What signs can we look for in terms of the Saudis to show they
    are in compliance and actually are cracking down on Hamas?
        As it pertains to Lebanon and their support of terrorism as
    well, we saw what happened to the Lebanese central bank, the
    head, when they were going to reveal accounts of six Hamas
    leaders. The Lebanese Government, its president, rebuked the
    chief of the bank for doing so. We know the support of the
    Lebanese for Hezbollah. They continue support for that
    terrorist organization. We also know that Syria is pulling the
    strings in that country. What are we doing to bring them into
    compliance as well?
        Mr. Pistole. Congressman, I would like to address the first
    part, if I could, concerning Saudi cooperation since the May 12
    attacks in Riyadh. That night, there were three nearly
    simultaneous attacks which killed 34 people, including the
    suicide bombers and a couple of Americans also. I believe that
    those attacks were a wake-up call for the Saudi government that
    al Qaeda was willing to attack Saudi interests on Saudi soil.
        Since that time, there have been additional raids and
    seizures of imminent plans that al Qaeda was planning to attack
    other government installations or other individuals in the
    kingdom. What has been forged since that time was the
    development of a relationship which existed prior to May 12,
    but which has been given a new impetus and new initiative
    because of Saudis being killed, and a new approach by al Qaeda
    where they were willing to kill fellow Saudi citizens in an
    effort to attack western interests.
        Mr. Crowley. Are you suggesting that because al Qaeda was
    now focusing on Saudis that that spurred them to a greater
    interest to joining forces with the United States in terms of
    the war against terrorism, unlike some of our other allies,
    Great Britain for instance, who did not need that to
    necessarily happen in order to do so.
        Mr. Pistole. It is a very complex issue in terms of just
    law enforcement intelligence, not even involving diplomacy or
    any of those issues. But yes, from that perspective, where the
    impetus to be allies in a collaborative effort to attack al
    Qaeda in the kingdom has been significant in several respects,
    in terms of having a fusion cell of law enforcement and
    intelligence community members working with the Mabahith in
    Riyadh to locate, identify and locate, and arrest if possible
    al Qaeda there in the kingdom.
        The joint financial task force that has been referred to
    earlier is also significant because for the first time we are
    working on scene with Saudi authorities to assess how NGOs and
    fundraisers in Saudi and around the world may be using money
    that could be funneled to al Qaeda or other terrorist groups
    such as Hamas to further terrorist activities. The training
    that we are providing right now is unprecedented because that
    has not been a focus previously, at least that we have been
    aware of.
        So there has been a transparency that we have seen since
    May 12 that we had not experienced primarily for the reasons
    you articulated.
        Mr. Wayne. Congressman, if I could add to that. I think we
    all agree that May 12 resulted in a quantum change, but it is
    not that there was no cooperation going on ahead of that in all
    the different channels, law enforcement, intelligence,
    diplomatic. As we noted earlier, the Saudis did join us in
    designating one very important al Qaeda financier and two
    branches of a Saudi charity overseas, al-Haramain, at the
    United Nations. Those were very public acts together.
        We had a very active senior-level dialogue that began well
    before this period of the attacks in May. But clearly, the
    attacks in May were a wake-up call and very much intensified
    much of the cooperation that was underway. Just one example of
    what had already been going on, the Saudi Arabian Monetary
    Authority had ready to issue in May a whole new set of
    regulations for handling donations to charities that they had
    been working on up until that point. Those are now being put
    into practice. They are being put into law. The are being
    reviewed, as Mr. Aufhauser noted earlier, by outside experts as
    well as Saudi experts.
        What May did was really speed this process up
    significantly. We do not want to give the impression that we
    think that the Saudis are where they should be. There is a lot
    of work still out there to do, but they have shifted gears
    significantly. They are headed in the right direction and we
    are committed to working with them, but we very much will judge
    them on the continuing cooperation, the continuing performance,
    the implementation of the good things that are underway now.
        Chairwoman Kelly. Thank you very much, Mr. Crowley.
        The Chair notes that some members may have additional
    questions for the panel and they may wish to submit them in
    writing. So without objection, the hearing record will remain
    open for 30 days for members to submit written questions to
    those witnesses and to place their responses, as well as other
    pertinent information, in the hearing record.
        Mr. Aufhauser, again we want to thank you so much for your
    service to this country. I appreciate your willingness to
    appear here today, as the committee appreciates the willingness
    of all of you, Mr. Wayne, Mr. Pistole, and Ms. Forman. You have
    really given us a lot to think about. Stay tuned. I think we
    will probably have at least one, if not two more hearings. So
    thank you so much for your help.
        The panel is excused with the committee's great
    appreciation for your time.
        I want to thank all members and staff for their assistance
    in making the hearing possible.
        This hearing is now adjourned.
        [Whereupon, at 12:36 p.m., the subcommittee was adjourned.]

                                A P P E N D I X

                               September 24, 2003

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