[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
____________________________________________________________________________
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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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