[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]
THE HAMAS ASSET FREEZE AND
OTHER GOVERNMENT EFFORTS
TO STOP TERRORIST FUNDING
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON
OVERSIGHT AND INVESTIGATIONS
OF THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTH CONGRESS
FIRST SESSION
__________
SEPTEMBER 24, 2003
__________
Printed for the use of the Committee on Financial Services
Serial No. 108-53
92-334 U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON : 2003
____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; (202) 512�091800
Fax: (202) 512�092250 Mail: Stop SSOP, Washington, DC 20402�090001
HOUSE COMMITTEE ON FINANCIAL SERVICES
MICHAEL G. OXLEY, Ohio, Chairman
JAMES A. LEACH, Iowa BARNEY FRANK, Massachusetts
DOUG BEREUTER, Nebraska PAUL E. KANJORSKI, Pennsylvania
RICHARD H. BAKER, Louisiana MAXINE WATERS, California
SPENCER BACHUS, Alabama CAROLYN B. MALONEY, New York
MICHAEL N. CASTLE, Delaware LUIS V. GUTIERREZ, Illinois
PETER T. KING, New York NYDIA M. VELAZQUEZ, New York
EDWARD R. ROYCE, California MELVIN L. WATT, North Carolina
FRANK D. LUCAS, Oklahoma GARY L. ACKERMAN, New York
ROBERT W. NEY, Ohio DARLENE HOOLEY, Oregon
SUE W. KELLY, New York, Vice 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
[GRAPHIC] [TIFF OMITTED] T2334.001
[GRAPHIC] [TIFF OMITTED] T2334.002
[GRAPHIC] [TIFF OMITTED] T2334.003
[GRAPHIC] [TIFF OMITTED] T2334.004
[GRAPHIC] [TIFF OMITTED] T2334.005
[GRAPHIC] [TIFF OMITTED] T2334.006
[GRAPHIC] [TIFF OMITTED] T2334.007
[GRAPHIC] [TIFF OMITTED] T2334.008
[GRAPHIC] [TIFF OMITTED] T2334.009
[GRAPHIC] [TIFF OMITTED] T2334.010
[GRAPHIC] [TIFF OMITTED] T2334.011
[GRAPHIC] [TIFF OMITTED] T2334.012
[GRAPHIC] [TIFF OMITTED] T2334.013
[GRAPHIC] [TIFF OMITTED] T2334.014
[GRAPHIC] [TIFF OMITTED] T2334.015
[GRAPHIC] [TIFF OMITTED] T2334.016
[GRAPHIC] [TIFF OMITTED] T2334.017
[GRAPHIC] [TIFF OMITTED] T2334.018
[GRAPHIC] [TIFF OMITTED] T2334.019
[GRAPHIC] [TIFF OMITTED] T2334.020
[GRAPHIC] [TIFF OMITTED] T2334.021
[GRAPHIC] [TIFF OMITTED] T2334.022
[GRAPHIC] [TIFF OMITTED] T2334.023
[GRAPHIC] [TIFF OMITTED] T2334.024
[GRAPHIC] [TIFF OMITTED] T2334.025
[GRAPHIC] [TIFF OMITTED] T2334.026
[GRAPHIC] [TIFF OMITTED] T2334.027
[GRAPHIC] [TIFF OMITTED] T2334.028
[GRAPHIC] [TIFF OMITTED] T2334.029
[GRAPHIC] [TIFF OMITTED] T2334.030
[GRAPHIC] [TIFF OMITTED] T2334.031
[GRAPHIC] [TIFF OMITTED] T2334.032
[GRAPHIC] [TIFF OMITTED] T2334.033
[GRAPHIC] [TIFF OMITTED] T2334.034