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





 IDENTIFY, DISRUPT AND DISMANTLE: COORDINATING THE GOVERNMENT'S ATTACK 
                         ON TERRORIST FINANCING

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

                             JOINT HEARING

                               before the

                SUBCOMMITTEE ON TECHNOLOGY, INFORMATION
                POLICY, INTERGOVERNMENTAL RELATIONS AND
                               THE CENSUS

                                and the

                 SUBCOMMITTEE ON GOVERNMENT EFFICIENCY
                        AND FINANCIAL MANAGEMENT

                                 of the

                     COMMITTEE ON GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                           DECEMEBER 15, 2003

                               __________

                           Serial No. 108-140

                               __________

       Printed for the use of the Committee on Government Reform


  Available via the World Wide Web: http://www.gpo.gov/congress/house
                      http://www.house.gov/reform


                                 ______

93-428              U.S. GOVERNMENT PRINTING OFFICE
                            WASHINGTON : 2003
____________________________________________________________________________
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                     COMMITTEE ON GOVERNMENT REFORM

                     TOM DAVIS, Virginia, Chairman
DAN BURTON, Indiana                  HENRY A. WAXMAN, California
CHRISTOPHER SHAYS, Connecticut       TOM LANTOS, California
ILEANA ROS-LEHTINEN, Florida         MAJOR R. OWENS, New York
JOHN M. McHUGH, New York             EDOLPHUS TOWNS, New York
JOHN L. MICA, Florida                PAUL E. KANJORSKI, Pennsylvania
MARK E. SOUDER, Indiana              CAROLYN B. MALONEY, New York
STEVEN C. LaTOURETTE, Ohio           ELIJAH E. CUMMINGS, Maryland
DOUG OSE, California                 DENNIS J. KUCINICH, Ohio
RON LEWIS, Kentucky                  DANNY K. DAVIS, Illinois
JO ANN DAVIS, Virginia               JOHN F. TIERNEY, Massachusetts
TODD RUSSELL PLATTS, Pennsylvania    WM. LACY CLAY, Missouri
CHRIS CANNON, Utah                   DIANE E. WATSON, California
ADAM H. PUTNAM, Florida              STEPHEN F. LYNCH, Massachusetts
EDWARD L. SCHROCK, Virginia          CHRIS VAN HOLLEN, Maryland
JOHN J. DUNCAN, Jr., Tennessee       LINDA T. SANCHEZ, California
JOHN SULLIVAN, Oklahoma              C.A. ``DUTCH'' RUPPERSBERGER, 
NATHAN DEAL, Georgia                     Maryland
CANDICE S. MILLER, Michigan          ELEANOR HOLMES NORTON, District of 
TIM MURPHY, Pennsylvania                 Columbia
MICHAEL R. TURNER, Ohio              JIM COOPER, Tennessee
JOHN R. CARTER, Texas                CHRIS BELL, Texas
WILLIAM J. JANKLOW, South Dakota                 ------
MARSHA BLACKBURN, Tennessee          BERNARD SANDERS, Vermont 
                                         (Independent)

                       Peter Sirh, Staff Director
                 Melissa Wojciak, Deputy Staff Director
                      Rob Borden, Parliamentarian
                       Teresa Austin, Chief Clerk
              Philip M. Schiliro, Minority Staff Director

   Subcommittee on Technology, Information Policy, Intergovernmental 
                        Relations and the Census

                   ADAM H. PUTNAM, Florida, Chairman
CANDICE S. MILLER, Michigan          WM. LACY CLAY, Missouri
DOUG OSE, California                 DIANE E. WATSON, California
TIM MURPHY, Pennsylvania             STEPHEN F. LYNCH, Massachusetts
MICHAEL R. TURNER, Ohio

                               Ex Officio

TOM DAVIS, Virginia                  HENRY A. WAXMAN, California
                        Bob Dix, Staff Director
                 Lori Martin, Professional Staff Member
                      Ursula Wojciechowski, Clerk
     Subcommittee on Government Efficiency and Financial Management

              TODD RUSSELL PLATTS, Pennsylvania, Chairman
MARSHA BLACKBURN, Tennessee          EDOLPHUS TOWNS, New York
STEVEN C. LaTOURETTE, Ohio           PAUL E. KANJORSKI, Pennsylvania
JOHN SULLIVAN, Oklahoma              MAJOR R. OWENS, New York
CANDICE S. MILLER, Michigan          CAROLYN B. MALONEY, New York
MICHAEL R. TURNER, Ohio

                               Ex Officio

TOM DAVIS, Virginia                  HENRY A. WAXMAN, California
                     Mike Hettinger, Staff Director
               Tabetha Mueller, Professional Staff Member


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on December 15, 2003................................     1
Statement of:
    Forman, Marcy M., Deputy Assistant Director, Financial 
      Investigations Division, U.S. Immigration and Customs 
      Enforcement, U.S. Department of Homeland Security..........    51
    Glass, George A., Director, Office of Terrorism Finance and 
      Sanctions Policy, Bureau of Economic and Business Affairs, 
      U.S. Department of State...................................    26
    Ross, Jeff, Senior Advisor, Executive Office for the 
      Terrorist Financing/Financial Crimes, U.S. Department of 
      the Treasury...............................................     7
    Townsend, Bruce, Deputy Assistant Director, Office of 
      Investigations, U.S. Secret Service, U.S. Department of 
      Homeland Security..........................................    62
    Whitehead, Carl, Special Agent in Charge, Tampa Office, 
      Federal Bureau of Investigation, U.S. Department of 
      Justice, accompanied by Frank J. Fabian, Unit Chief, 
      Terrorist Financing Operations Section, Washington, DC.....    37
Letters, statements, etc., submitted for the record by:
    Forman, Marcy M., Deputy Assistant Director, Financial 
      Investigations Division, U.S. Immigration and Customs 
      Enforcement, U.S. Department of Homeland Security, prepared 
      statement of...............................................    55
    Glass, George A., Director, Office of Terrorism Finance and 
      Sanctions Policy, Bureau of Economic and Business Affairs, 
      U.S. Department of State, prepared statement of............    29
    Putnam, Hon. Adam H., a Representative in Congress from the 
      State of Florida, prepared statement of....................     4
    Ross, Jeff, Senior Advisor, Executive Office for the 
      Terrorist Financing/Financial Crimes, U.S. Department of 
      the Treasury, prepared statement of........................    11
    Townsend, Bruce, Deputy Assistant Director, Office of 
      Investigations, U.S. Secret Service, U.S. Department of 
      Homeland Security, prepared statement of...................    64
    Whitehead, Carl, Special Agent in Charge, Tampa Office, 
      Federal Bureau of Investigation, U.S. Department of 
      Justice, prepared statement of.............................    40

 
 IDENTIFY, DISRUPT AND DISMANTLE: COORDINATING THE GOVERNMENT'S ATTACK 
                         ON TERRORIST FINANCING

                              ----------                              


                       MONDAY, DECEMBER 15, 2003

        House of Representatives, Subcommittee on 
            Technology, Information Policy, 
            Intergovernmental Relations and the Census 
            joint with the Subcommittee on Government 
            Efficiency and Financial Management, Committee 
            on Government Reform,
                                                         Tampa, FL.
    The subcommittees met, pursuant to notice, at 11:05 a.m., 
at the Tampa Port Authority Headquarters, 1st Floor Board Room, 
1101 Channelside Drive, Tampa, FL, Hon. Adam Putnam (chairman 
of the Subcommittee on Technology, Information Policy, 
Intergovernmental Relations and the Census) presiding.
    Present from the Subcommittee on Technology, Information 
Policy, Intergovernmental Relations and the Census: 
Representative Putnam.
    Present from the Subcommittee on Government Efficiency and 
Financial Management: Representative Platts.
    Staff present from the Subcommittee on Technology, 
Information Policy, Intergovernmental Relations and the Census: 
Robert Dix, staff director; John Hambel, senior counsel; Lori 
Martin, professional staff member; and Ursula Wojciechowski, 
clerk.
    Staff present from the Subcommittee on Government 
Efficiency and Financial Management: Michael Hettinger, staff 
director; and Tabetha Mueller, professional staff member.
    Mr. Putnam. A quorum being present, one from each 
subcommittee, a quorum in Congress, I guess, the joint hearing 
of the Subcommittee on Technology, Information Policy and 
Intergovernmental Relations and the Census, and the 
Subcommittee on Government Efficiency and Financial Management 
will come to order.
    Good morning and welcome, everyone, to today's oversight 
hearing examining the Federal Government's efforts to combat 
money laundering and terrorist financing. Specifically we will 
be looking at how Federal agencies are coordinating their 
efforts to identify terrorist financing and the role of 
information technology in that endeavor.
    On behalf of the Subcommittee on Technology, let me extend 
my appreciation to Mr. Platts and his able staff. It has been a 
model of congressional cooperation in setting aside turf and 
moving forward to get to the bottom of a very important issue.
    And in a few moments I will be yielding to Mr. Platts for 
his opening remarks. He has been a leader in the money 
laundering issues, and his work on financial management has 
been outstanding.
    I want to take a few minutes, though, to share a few 
thoughts from the perspective of the Technology Subcommittee 
that I have chaired this past year. One of the most effective 
ways to prevent future terrorist attacks on Americans and our 
allies is to disrupt the flow of the funds that finance the 
organizations. This is a complex challenge for several reasons. 
Federal agencies and State and local law enforcement must 
coordinate efforts with the private sector to identify 
transactions that raise suspicion. Considering the amount of 
information collected every day by banks and other financial 
institutions, this is a daunting task. In addition, the way 
terrorists move money through our financial institutions makes 
it even more difficult to identify and dismantle their funding 
schemes. We can't let the expense and difficulty of the task, 
though, keep us from pursuing and accomplishing this critical 
national security goal.
    Federal and local law enforcement have worked together for 
years to uncover money laundering activity. Through the Bank 
Secrecy Act, the Money Laundering Control Act, and the National 
Money Laundering Strategy, Congress has given agencies the 
legislative tools to implement policies that help local law 
enforcement identify illicit financial activity. The focus of 
these efforts shifted after the attacks of September 11th.
    While there are some similarities in the way money is moved 
in money laundering schemes, terrorist financing often finds 
its source in seemingly legitimate organizations. Illicit funds 
provided through money laundering can and do provide a ready 
source of money for terrorists. The full scope of terrorist 
financing, though, is much larger. One of the greatest 
challenges we face is how to improve the coordination and 
information sharing between Federal agencies such as Treasury, 
DHS, FBI and State Department with local authorities and 
private institutions.
    While the use of emerging information technology can 
greatly assist in coordinating efforts, as well as identifying 
and tracking suspicious financial data, the right policy and 
trained personnel are essential in accomplishing this goal. And 
as always, we have to be mindful of the need to protect civil 
liberties as well as the privacy and physical security of the 
financial data that is being gathered and analyzed.
    Congress and the administration have done extensive work 
already in setting sound policy to assist in the task of 
shutting down terrorist financing. Enactment of the U.S. 
Patriot Act and creation of the Department of Homeland Security 
in response to September 11th has required Federal agencies to 
alter the way financial crimes are defined and targeted with an 
emphasis on much-needed coordination.
    Congress will also be reassessing the National Money 
Laundering Strategy in the coming year to determine whether and 
how it should be renewed, since it is currently authorized only 
through 2003.
    And, finally, it is critical that Congress continue to 
exercise its oversight responsibilities as agencies learn to 
leverage resources and utilize information technology 
effectively and efficiently. This is an issue that is near and 
dear to the Tampa Bay area, with the Sami al-Arian case at the 
University of South Florida as well as other incidents in our 
area.
    And it is important and appropriate that we hold this field 
hearing here in Tampa where we have a number of local and 
Federal law enforcement agencies who have firsthand experience 
in dealing with this terribly complex task. And we appreciate 
certainly Chairman Platts' willingness to fly to Florida from 
Pennsylvania in the dead of winter to be with us and join us.
    And we would certainly be remiss if we did not acknowledge 
the tremendous holiday gift to all mankind that occurred 
yesterday courtesy of the American soldiers and sailors and 
marines and airmen who delivered Saddam Hussein to the world to 
stand trial and find justice for the crimes that he has 
committed against the Iraqi people.
    With that, Mr. Platts, thank you so much for your 
assistance, and welcome to Florida.
    [The prepared statement of Hon. Adam H. Putnam follows:]

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    [GRAPHIC] [TIFF OMITTED] T3428.002
    
    Mr. Platts. Thank you, Mr. Chairman. It is great to be here 
with you. And I echo your sentiments about the appropriateness 
of our subcommittees working together as we are going to be 
talking about cooperation within our law enforcement 
communities on terrorist financing. It is certainly appropriate 
as a body that Congress try to show cooperation and 
coordination as well.
    And I also echo your sentiments on the great news that we 
got yesterday. And yesterday was about capturing Saddam 
Hussein, the person. Today it is about how we cutoff the money 
that flows to the people like Saddam and help funnel the 
terrorist attacks, whether it be against Iraqis, Americans or 
other peace-loving citizens around the world.
    So I appreciate your hosting today's hearing. It is always 
important, I think, for us when we have field hearings, a 
chance to get out into our communities and meet with follow 
public servants as well as for citizens to maybe see government 
in action a little closer to home. And this hearing certainly 
is an important one, and maybe, with the timing of yesterday's 
capture of Saddam, all the more important that we are here 
today.
    We certainly know that financial crime is the functional 
equivalent of a war industry for terrorists. Money provides the 
life blood for acts of terror. Criminal activity we typically 
associate with money laundering, smuggling, drug sales, 
counterfeiting offer terrorists a ready source of funds. The 
scope of terrorist financing, however, is unfortunately much 
larger than that.
    Legitimate charities, as was experienced here in south 
Florida, nonprofit corporations, think tanks have all funneled 
millions of dollars through the U.S. banking system to fund 
terrorist activities. Many of the organizations have earned 
tax-exempt status from the IRS. This new reality driven home by 
the tragic attacks on September 11th require a new focus in the 
war on financial crime. While the source and destination of 
funding may differ, the mechanism used to disguise funds for 
terrorist organizations are similar to those used by drug 
traffickers and criminal organizations.
    With tools provided by the USA Patriot Act and the 
strategic efforts that have been in play to fight drug cartels, 
the Federal Government has sharpened its focus and promoted 
unprecedented coordination among law enforcement entities and 
foreign governments. And I know we are going to hear much about 
that coordination here today.
    It is difficult to quantify the success of the Federal 
Government's attack on terrorist financing. While we know that 
millions of dollars in assets have been frozen around the 
world, the ultimate goal of terrorist financing investigations 
is the disruption of the flow of money, a result much more 
difficult to quantify.
    The United States has sought and received unprecedented 
support from other countries in overhauling the laws governing 
the international financial system and in designating entities 
as supporters of terror. And we have increased transparency and 
vigilance in the private sector. Our best weapon to attack 
money laundering and terrorist financing threats is a 
comprehensive and coordinated response. In this case, 
efficiency and effectiveness are not just good government 
rhetoric, they have the potential to save lives by preventing 
terrorist attacks.
    Recognizing the need for coordination efforts, as you 
referenced, in 1998 Congress mandated the development of an 
annual National Money Laundering Strategy. Much has changed 
since that time. Five years later, the National Money 
Laundering Strategy is up for reauthorization. We in Congress 
have a responsibility to take a hard look at whether this type 
of approach is the most effective.
    We need to be sure that our dedicated law enforcement and 
other government officials continue to have the tools they need 
to be responsive to changes in technology and methodology, and 
the flexibility to keep up with emerging challenges. We must 
continue to enhance our ability to identify and eliminate 
various avenues used to launder money, whether it be for drug 
traffickers, criminal organizations or terrorists.
    And we certainly today have a great panel of witnesses who 
are on the front lines of the war on terrorism and on terrorist 
financing. I want to thank each of you for your participation 
here today, but especially for your service to our Nation and 
our fellow citizens. We are blessed because of your service of 
you and your colleagues, and I certainly look forward to your 
testimony and appreciated the weekend reading you provided in 
providing that testimony to us ahead of time and allowing us to 
have an even more informed dialog here today. So thank you, Mr. 
Chairman.
    Mr. Putnam. Thank you, Mr. Chairman.
    At this time, as is the custom with the Government Reform 
Committee, we will swear in our witnesses. I would ask the 
panel and anyone accompanying the panel who will be providing 
supplementary information to please rise and raise your right 
hands.
    [Witnesses sworn.]
    Mr. Putnam. Note for the record that all of the witnesses 
responded in the affirmative.
    We have notified the public that we will be here about 2 
hours. We typically allow 5 minutes for opening statements. I 
think, considering the size of the subcommittee and the 
importance of the topic, if you go a little bit over, we are 
certainly not going to hit the eject button on you. But we 
would ask you to summarize your statements in 5 minutes or as 
close to that as possible so we can get into the question and 
answers and dialog.
    Our first witness for this hearing is Jeff Ross. Mr. Ross 
is the senior advisor for the Executive Office for Terrorist 
Financing and Financial Crimes with the Department of the 
Treasury. Mr. Ross serves as senior advisor in the area of 
money laundering and terrorist financing in this newly created 
office. That office, reporting to the Deputy Secretary of the 
Treasury, has been charged with coordinating and leading 
Treasury's multifaceted efforts to identify and attack 
systematically terrorist financing, money laundering and 
financial crimes, as well as spearhead the effort to identify 
and freeze Iraqi assets looted by the former regime.
    Mr. Ross, you have $750,000 in additional assets thanks to 
the capture of Saddam Hussein. Welcome to the subcommittee.

 STATEMENT OF JEFF ROSS, SENIOR ADVISOR, EXECUTIVE OFFICE FOR 
 THE TERRORIST FINANCING/FINANCIAL CRIMES, U.S. DEPARTMENT OF 
                          THE TREASURY

    Mr. Ross. Thank you, Mr. Chairman. Thank you both.
    Preliminarily, this hearing is not about his capture, but I 
will note for the record that Mr. Hussein felt that there were 
four essentials for his survival: a ventilator fan, an air 
pipe, a pistol, and, as you correctly noted, $750,000 in crisp 
U.S. $100 bills. So ``follow the money where the money goes'' 
even as of yesterday was pointed out again.
    Good morning, and thank you again for the invitation. I 
have prepared a formal written testimony, which I would 
appreciate if the subcommittee would accept into the record.
    Mr. Putnam. Mr. Ross, before you begin, could you pull the 
mic a little bit closer, or clip it to your tie or something? 
We want to make sure that the reporter picks it up.
    Mr. Ross. OK. Preliminarily I would like to thank these 
committees and the Congress for the new and enhanced tools 
which the Congress has given the executive branch to identify 
and attack terrorist financing, money laundering, and other 
financial crimes. I assure you we will use those powers 
aggressively, but judiciously.
    Money serves both as the fuel for terror, narcotrafficking 
and organized crime, as well as a significant vulnerability. 
Money flows leave a signature and audit trail; provide a road 
map, which, once discovered, might well prove the best single 
means for identification and capture of terrorists and their 
facilitators and other criminals. If we and our international 
partners can identify, follow and stop the money, we will have 
gone a long way to destroy this infrastructure.
    The Treasury strongly believes that resources devoted to 
fighting money laundering and financial crimes reap benefits 
far beyond merely addressing the underlying financial crimes 
that they are targeting. The terrorist financiers, money 
launderers and other financial criminals leave footprints in 
the global system, and these footprints lead in two directions, 
both forward to identify future perpetrators and facilitators 
and backward to identify supporting entities and individuals. 
Additionally, it leads to information which would allow for 
asset recovery.
    To pursue this following-the-money approach, last March 
Treasury established the Executive Office, which the chairman 
was kind enough to describe. It is a small office with a lot of 
responsibilities, the last of which is the search for and 
attempt to repatriate as much of the Iraqi assets as Hussein 
looted as is possible.
    A quick mention about Tampa. I agree, this is a fitting 
venue for this hearing. Tampa law enforcement has been and is 
on the cutting edge of investigating and prosecuting both, Mr. 
Whitehead. More than a decade ago the BCCI case filed here in 
Tampa revealed the global implications of money laundering, and 
that case has become a byword for the complexity and global 
reach of international money launderers.
    On the terrorist financing front, as we have already heard, 
the Sami al-Arian case, which is a principal case here, and 
terrorist financing was a principal component of the charges in 
that case.
    Just as money laundering involves the placement, movement 
and integration of criminal proceeds in the legitimate 
financial system, the horrific end results of terrorist 
activities require the raising, movement and use of large 
volumes of funds. The terrorist act itself cannot be 
accomplished without a sophisticated financial and operational 
infrastructure that costs millions, if not tens of millions, of 
dollars. This infrastructure--including purchasing safe houses, 
martyrs' family support, recruitment costs, indoctrination 
costs, logistical and personnel training and support, and 
finally the purchase of weapons--must be exploited.
    The committees have asked for some examples of successes in 
this war. Perhaps the most visible weapon on the financial 
front of the war against terrorism has been the public 
designation of terrorists and their support network coupled 
with freezing their assets under Executive Order 13-224, put 
out by the President September 24, 2001. To date, 344 
individuals and entities, including 23 charities, have been 
designated, or over $136 million frozen worldwide.
    However, numbers designated and funds frozen must never be 
construed as the ultimate barometer of the effectiveness of our 
financial war on terrorism. Only a small measure of success is 
counted in the dollars frozen. The larger balance is found in 
the changes that the global attacks have cost in the 
methodologies of raising, moving and using the financing of 
terror. All engaged in terror financing systems are at 
increased risk and scrutiny, domestically by the Patriot Act, 
in Saudi Arabia by increased scrutiny on charities, in the 
Middle East and Pakistan on remittances, and the alternate 
remittance system. Compelled changes in financing methodologies 
disrupt systems, increase the risk of detection and may 
ultimately dry up the pipelines themselves.
    Other noteworthy achievements: Almost 700 terror-related 
accounts blocked worldwide, 100 in the United States; 172 
countries' blocking orders in force against assets of 
terrorists; 80 countries have introduced new terror-related 
legislation; 84 countries now have FinCEN-equivalent financial 
intelligence units.
    Treasury, with Department of State, established a $5 
million Treasury counterterrorism fund. As we sit here, there 
has been created and there is in place an FBI-IRS CI training 
capability in Saudi Arabia working on the financial side. IRS 
CI has 41 interagency SAR review teams, including one operating 
right here in Tampa as we speak, download and review 140,000 
SARs annually for possible leads to terrorist financing. The 
Financial Action Task Force has issued special recommendations. 
There have been--40 countries accepted an Abu Dhabi Declaration 
on Hawalas, which is an important alternative remittance 
system, international attack.
    Since passage of the Patriot Act, 14,000 money service 
businesses have registered with FinCEN, very important, now 
subject to SAR reporting. There have been a number of 
Department of Justice-initiated cases, which are described in 
the formal testimony, and I will leave the FBI and Justice to 
wax on those.
    Second component, the 2003 National Money Laundering 
Strategy. The strategy was released last month, has three 
overarching goals: Safeguarding the national financial system 
for money laundering and terrorist financing; enhance the U.S. 
Government's ability to identify, investigate and prosecute 
money laundering organizations; and ensure effective 
regulation.
    The core principle of this strategy is enhancing our 
ongoing efforts to combat money laundering by using interagency 
approaches such as HIFCAs, OCDETFs, SAR review team and HIDTAs. 
We also are using our asset forfeiture laws. The Treasury 
Executive Office for Asset Forfeiture reports that fiscal year 
2003 receipts into the Treasury fund exceeded $250 million, 
which is a 45 percent increase over the fiscal year 2002 
receipts.
    Through OFAC we are implementing the specially designated 
Narcotics Trafficker Program. We are working on the Foreign 
Narcotics Drug Kingpin Act program to attack drug money 
launderers. We have identified, through cases, clear links 
between Colombia and terrorism and narcotrafficking.
    Regulatory effectiveness. Patriot Act mandates the greatest 
numbers of substantial changes to the U.S. anti-money-
laundering regulatory regime in recent memory. Among things we 
have done is we have closed off our financial borders to 
foreign shell banks, required additional due diligence for 
correspondent accounts, required foreign banks with 
correspondent accounts to identify a person for service of 
process. We have required U.S. financial institutions to 
establish customer identification and verification.
    Two points in the Patriot Act I would like to mention very 
briefly. Patriot Act section 311 enables the Secretary to 
protect the U.S. financial system against specific terrorist 
financing and money laundering threats posed by foreign 
financial institutions, accounts or even jurisdictions. The 
mere possibility of these designations has caused the nations 
to make changes to their legal and regulatory regimes and 
enhance the global anti-money-laundering and terrorist 
financing infrastructure.
    Another provision is 314(a), which permits FinCEN to make 
contact with over 29,000 U.S. financial institutions in one 
fell swoop. It permits law enforcement agencies quickly to 
locate the accounts and transactions of those suspected of 
significant money laundering or the financing of terror. Since 
it was inaugurated last February, it has supported 64 
terrorism/terrorist financing cases and 124 money laundering 
cases. Three indictments have resulted, in part, from searches 
made under this system, 407 grand jury subpoenas, 11 search 
warrants.
    Very quickly on technology, criminals benefit from 
enhancements in technology, as both these subcommittees are 
well aware. So does U.S. law enforcement. Technology holds one 
of the keys to our success in the financial war on terrorism. 
Appendix H of the National Money Laundering Strategy has a long 
report on terrorist financing on-line. It identifies how we are 
trying to identify and attack it.
    IRS CI has a pilot counterterrorism project that is 
utilizing all Treasury data bases as well as tax-related--
protected tax information, to support FBI Joint Terrorism Task 
Forces.
    Finally, FinCEN since September 11 has supported 2,692 
terrorist investigations. The terror hotline has resulted in 
789 tips. FinCEN has received over 2,842 SARs possibly related 
to terrorist financing.
    Technology works in two directions. We at the Treasury are 
trying to work from our side. Thank you very much.
    Mr. Putnam. Thank you, Mr. Ross.
    [The prepared statement of Mr. Ross follows:]

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    Mr. Putnam. Our next witness is George Glass. Mr. Glass has 
been Director of the Office of Terrorist Finance and Economic 
Sanctions Policy in the State Department since just after the 
September 11, 2001, World Trade Center and Pentagon attacks. He 
presently also serves as Acting Deputy for Energy, Commodities 
and Sanctions. Prior to September 2001, he was Deputy Chief of 
Mission at the U.S. Embassy in Bern, Switzerland. He served as 
U.S. Consul General in Bavaria, Germany, from 1997 to 2002.
    Welcome to the subcommittee.

  STATEMENT OF GEORGE A. GLASS, DIRECTOR, OFFICE OF TERRORISM 
 FINANCE AND SANCTIONS POLICY, BUREAU OF ECONOMIC AND BUSINESS 
               AFFAIRS, U.S. DEPARTMENT OF STATE

    Mr. Glass. Thank you, Chairman Putnam, Chairman Platts, 
distinguished members of the committee. I want to thank you for 
the opportunity to testify today on U.S. efforts to combat 
terrorist financing.
    The United States is engaged in a long-term war against 
terrorism. I thank you for your support and for providing the 
necessary tools for waging this war. This fight requires 
actions on multiple fronts.
    We have made substantial progress, but an awful lot remains 
to be done. Since September 11, 2001, the United States, as 
noted, has ordered the freezing in the United States of the 
assets of 344 individuals and entities linked to terrorism.
    We have supported the submission by dozens of countries 
around the world of some 244 al-Qaeda-linked names for 
inclusion in the U.N. asset freeze list requiring all countries 
around the world to take action against these names. We have 
frozen approximately $136.8 million in almost 50 countries, 
including the United States. We have instructed our embassies 
formally to approach every country, every government around the 
world some 75 times to freeze each name that we designate.
    We have developed a broad international coalition against 
terrorist finance. We have stopped a major hawala network based 
out of Somalia, which had been operating in some 40 countries. 
We acted against supporters of the Asian terrorist group linked 
to the Bali disco bombing. We designated charities funding 
Hamas, and we disrupted Saudi terrorist financiers.
    We assisted the strengthening of national laws, regulations 
and regulatory institutions around the world to better combat 
terrorist finance and money laundering, and through all of this 
we made it harder for terrorists and for their supporters to 
use financial systems.
    Particularly important in making this happen is the fact 
that we have come a very long way over the past 2 years in 
terms of U.S. Government interagency coordination. We improved 
the degree to which all agencies with equities related to the 
pursuit of terrorist financing cooperate and coordinate their 
efforts. This strong interagency teamwork involves the 
intelligence and law enforcement communities as well as State, 
Treasury, Homeland Security, Justice, and the financial 
regulatory agencies all collectively pursuing understanding of 
the system of financial backers, facilitators and 
intermediaries that play a role in this shadowy financial 
world.
    A key weapon against terrorist finance has been the 
President's Executive Order 13224, signed on September 23, 
2001, just 12 days after the terrorist attacks of September 
11th. The order provided the basic structure and authorities 
for an effort unprecedented in history to identify and freeze 
the assets of individuals and entities associated with 
terrorism across the board. Under the Executive Order the 
administration has frozen the assets of 344 individuals and 
entities on 47 separate occasions. The agencies cooperating in 
this effort are in daily contact, looking at and evaluating new 
names and targets for possible asset freeze.
    However, our scope is not just limited to freezing assets. 
We have very successfully used other actions as well, including 
developing diplomatic initiatives with other governments to 
conduct audits and investigations, exchanging information on 
records, cooperating in law enforcement and intelligence 
efforts, and in shaping new regulatory initiatives.
    We also have a very substantial interagency commitment that 
provides counterterrorist finance training to help our 
coalition partners develop and enhance their capabilities to 
detect, disrupt and dismantle terrorist financing networks by 
strengthening the legal frameworks, providing financial 
investigative training, training banking regulatory communities 
on suspicious transactions, developing financial intelligence 
units that cooperate internationally, and strengthening the 
ability of prosecutors to bring terrorist financiers to 
justice. We have already assessed and are providing assistance 
to a number of high priority countries in this area.
    Internationally, the U.N.'s role in response to the 
challenge of terrorist financing has been significant. This is 
extremely important because most of the assets making their way 
to terrorists are not under U.S. control; and, when it comes to 
al-Qaeda in particular, it means that when an individual or 
entity is included in the U.N. sanctions list, all 191 U.N. 
member states are obligated to implement the sanctions, 
including asset freezes against these individuals and entities. 
The U.N. has added a total of some 244 al-Qaeda-linked names to 
its consolidated list since September 11th.
    U.S. efforts against terrorist finance are active in all 
regions of the world. Saudi Arabia has been one important 
focus. On October 12, 2001, we froze the assets of Saudi 
millionaire Yasin al Kadi because of his links to al-Qaeda. He 
was designated and listed by the U.N. for worldwide sanctions. 
Subsequently we and the Saudi Government submitted, on March 
11, 2002, the names of the Somali and Bosnian branches of the 
charity al Haramain to the United Nations, also for worldwide 
asset freezing. We and the Saudis also submitted the name of 
Wael Julaidan, a prominent Saudi al-Qaeda financier, to the 
U.N. for sanctions, including asset freeze, on September 6, 
2002.
    Saudi Arabia has made changes to its banking and charity 
systems to help strangle the funds that keep al-Qaeda in 
business.
    Another key focus of terrorist finance has been Hamas, 
which was first formally designated by the U.S. Government as a 
foreign terrorist organization in October 1997. On August 22nd 
of this year, just a few months ago, the President announced 
the designation for asset freezing of five key Hamas 
fundraisers. On that day he also announced the designation of 
six top Hamas leaders. Hamas's suicide bombings demonstrate the 
organization's commitment to undermining any real efforts to 
move toward permanent peace between Israel and the 
Palestinians. Shutting off the flow of funds to Hamas is 
crucial to reducing Hamas's ability to carry out its activities 
and to thwart progress toward peace.
    In Asia we have also been active. We have been working 
closely with the governments in Asia to stop funding for Jemaah 
Islamiyah, an organization linked to the September 2002 Bali 
disco bombing.
    Another key focus has been hawalas, or informal money 
remittance systems, which have posed special challenges in the 
Middle East and South Asia. We have made a special effort to 
engage countries on hawalas and other informal networks, 
encouraging innovative solutions, including via technical 
assistance and regulatory oversight.
    Mr. Chairman, asset freezes and arrests get the headlines, 
but diplomatic action also makes a difference. When we talk 
about diplomatic approaches for dealing with targets, we are 
talking about getting other governments to cooperate in the war 
against terrorist financing by taking concrete actions of their 
own, including law enforcement and intelligence actions, as 
well as getting them to speak out publicly against terrorist 
groups.
    It has involved encouraging foreign governments to 
prosecute key terrorists and terrorist financiers, to extradite 
a terrorist financier, to pass strong antiterrorist financing 
legislation, to prohibit funds from being sent to a charity, 
and to make sure companies funneling funds to terrorists are 
shut down.
    We have made it more difficult for terrorists to move and 
collect funds, but we still have a long way to go given the 
dimensions of this challenge.
    Mr. Chairman, I would like to thank you both for the 
opportunity to address this important issue.
    Mr. Putnam. Thank you, Mr. Glass.
    [The prepared statement of Mr. Glass follows:]

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    Mr. Putnam. Our next witness is Mr. Carl Whitehead, Special 
Agent in Charge here in Tampa, Mr. Whitehead with the FBI. Mr. 
Whitehead entered duty with the FBI in 1982 and has served in 
the Detroit, Los Angeles, New Orleans and San Antonio field 
offices.
    During his career Mr. Whitehead has directed several 
significant drug, public corruption, and violent crimes 
investigations, most recently as an inspector in the Inspection 
Division with FBI headquarters in Washington. Mr. Whitehead has 
significantly contributed to ensuring the operational and 
administrative efficiencies of the FBI.
    Welcome, Mr. Whitehead. You are recognized.

  STATEMENT OF CARL WHITEHEAD, SPECIAL AGENT IN CHARGE, TAMPA 
  OFFICE, FEDERAL BUREAU OF INVESTIGATION, U.S. DEPARTMENT OF 
JUSTICE, ACCOMPANIED BY FRANK J. FABIAN, UNIT CHIEF, TERRORIST 
          FINANCING OPERATIONS SECTION, WASHINGTON, DC

    Mr. Whitehead. Thank you. Good morning, Mr. Chairmen and 
members of both subcommittees. I would like to, on behalf of 
the FBI, to thank you for giving us the opportunity to 
participate in this forum and to provide comments on the FBI 
achievements, together with our partners, in the ongoing effort 
to identify, dismantle, and disrupt sources of terrorist 
financing. I also appreciate the opportunity to highlight the 
FBI's use of information technology to better identify and 
isolate suspicious transactions related to terrorist financing.
    As you are aware, since September 11, 2001, the FBI has 
relocated or reallocated substantial resources to protect the 
American people from another terrorist attack. At FBI 
headquarters, the Counterterrorism Division has been 
reorganized to provide a more centralized, comprehensive, and 
proactive approach to investigating terrorist-related matters. 
In the field we have increased the number of agents devoted to 
terrorism cases and expanded the ranks of our Joint Terrorism 
Task Forces [JTTFs], which involve agents and officers from a 
host of State, local and Federal partners.
    Given the focus of this hearing, you clearly appreciate 
that the fight against terrorist financing is a major front in 
our war on terror. Simply put, terrorists and their networks 
require funding in some form to exist and operate. Whether the 
funding and financial support is minimal or substantial, it 
leaves a financial trail that can be traced, tracked and 
exploited for proactive and reactive purposes.
    Being able to identify and track financial transactions and 
links after a terrorist act has occurred is only a small part 
of the mission for us. The key is honing our ability to exploit 
financial information to identify previously unknown terrorist 
cells, recognize potential terrorist activity, and predict and 
prevent potential terrorist acts.
    To this end the FBI has bolstered its ability to 
effectively combat terrorism through the formation of the 
Terrorist Financing Operations Section [TFOS]. TFOS was created 
to combine the FBI's traditional expertise in conducting 
complex criminal financial investigations with advanced 
technologies and the powerful legislative tools provided by the 
U.S. Patriot Act. To achieve its goals TFOS has developed a 
strong support network within the private financial sector and 
encouraged the cooperation and coordination among law 
enforcement and intelligence agencies both here and abroad.
    In the past several months, TFOS has demonstrated its 
capabilities by conducting near real-time financial tracking of 
a terrorist cell and providing specific and identifiable 
information to a foreign intelligence agency, which resulted in 
the prevention of six potentially deadly terrorist attacks.
    This recent success is not an isolated one. The FBI has 
engaged in extensive coordination with the authorities of 
numerous foreign governments in terrorist financing matters, 
leading to joint investigative efforts throughout the world. 
These joint investigations have successfully targeted the 
financing of several overseas al-Qaeda cells. Additionally, 
with the assistance of relations established with the central 
banks of several strategic countries, successful disruptions of 
al-Qaeda financing have been accomplished in countries such as 
UAE, Pakistan, Afghanistan, and Indonesia.
    Those of us in the field have also benefited from the 
increased coordination and liaison being spearheaded at the 
national-international level. TFOS has provided operational 
support to FBI field divisions across the United States. This 
assistance is providing a form of financial analytical support, 
major case management, financial link analysis, and the 
deployment of teams of experts to develop investigative plans 
to analyze large volumes of documents and data. TFOS has 
provided this type of operational support in the al-Qaeda 
sleeper cell cases in Buffalo and Portland and many others.
    Here in Tampa, we have seen the results of increased 
coordination and cooperation in investigations like the 
criminal case against Sami al-Arian, the alleged U.S. leader of 
the Palestinian Islamic Jihad, and the World Islamic Study 
Enterprise. As has been widely reported, that case resulted in 
the closure of several front companies suspected of funneling 
money to support PIJ operations against Israel.
    In August 2002, an investigation led to the deportation of 
Mazen Al-Najjar, the brother-in-law of Sami al-Arian and a 
known PIJ member.
    In February, following a 50-count indictment for RICO and 
material support of terrorism violations, the FBI arrested al-
Arian and three other U.S.-based members of the PIJ. The FBI 
also executed over 11 search warrants associated with this 
case.
    Despite the success and other achievements outlined in my 
written testimony, we cannot rest in our efforts to combat 
terrorist financing. The FBI has an ability to not only react, 
but proactively and strategically think about potential threats 
and future case developments. Technology is an important tool 
in this effort.
    The Proactive Exploits Group within TFOS has conducted an 
extensive review of data-mining software and link analysis 
tools currently utilized by other government entities and 
private industries to assess their potential use by the FBI. 
The Proactive Exploits Group has already created an interactive 
computer playbook generator that can assist investigators in 
determining data sources to be queried in their cases, 
depending on the quantity and quality of their investigative 
data.
    Working with outside experts, the FBI has also developed a 
process by where the Financial Intelligence Analysis Unit 
within TFOS can batch query multiple data bases for potential, 
after matches by names, telephone numbers, e-mails, etc. This 
batch process has the potential to save the FBI hundreds if not 
thousands of hours of data input and query time on each 
occasion it is used. It also facilitates rapid acquisition and 
the sharing of information with other agencies.
    In my submitted remarks, several ongoing data analysis 
projects are outlined in more detail. It is important to 
understand, however, that these projects and similar 
initiatives by TFOS seek only to more fully exploit information 
already obtained by the FBI in the course of its 
investigations, or through appropriate legal process, and where 
there is an articulated law enforcement need. The FBI does not 
seek to access personal or financial information outside of 
these constraints.
    I would like to use my final moments with the committee to 
underscore the FBI's commitment to greater coordination and 
cooperation with other agencies in this fight against 
terrorism. At a national level, TFOS routinely participates in 
joint endeavors with the agencies presented here today. We are 
an active participant on the Policy Coordinating Committee on 
Terrorist Financing, which is chaired by the Treasury 
Department, and focuses on ensuring that all relevant 
components of the Federal Government are acting in a 
coordinated and effective manner to combat terrorism financing.
    We have also benefited from agreements between the 
Department of Homeland Security and DOJ that clarify our 
complementary missions in the terrorist financing and money 
laundering arenas. At a local level, we have long appreciated 
the fact that the most difficult cases must be tackled in 
concert with our sister agencies. That reality has become all 
the more clear as we face the challenges of a terrorist threat. 
Terrorism is a global problem that reaches into every 
community. A solution is a willingness to engage in 
unprecedented national and international cooperation and an 
openness to new tools and new ways of thinking. The FBI is 
committed to both.
    Again I offer my gratitude and appreciation to you, 
Chairman Putnam and Chairman Platts, as well as the 
distinguished members of both committees for dedicating your 
time and effort to this important issue.
    Mr. Putnam. Thank you, Mr. Whitehead.
    [The prepared statement of Mr. Whitehead follows:]

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    Mr. Putnam. Our next witness is Ms. Marcy Forman, Deputy 
Assistant Director for Financial Investigations Division, U.S. 
Immigration and Customs Enforcement at the Department of 
Homeland Security.
    In this position, Ms. Forman has oversight on three 
specific initiatives under the Financial Investigations 
Division, the centerpiece of which is Cornerstone. Cornerstone 
focuses on identifying means and methods used by criminal 
organizations to exploit financial systems through the 
transfer, laundering, and/or concealment of the true source of 
criminal proceeds.
    Welcome to the subcommittee. You are recognized.

   STATEMENT OF MARCY M. FORMAN, DEPUTY ASSISTANT DIRECTOR, 
FINANCIAL INVESTIGATIONS DIVISION, U.S. IMMIGRATION AND CUSTOMS 
       ENFORCEMENT, U.S. DEPARTMENT OF HOMELAND SECURITY

    Ms. Forman. Thank you. Good morning, Chairman Putnam and 
Chairman Platts. It is a privilege to appear before you to 
discuss the ongoing law enforcement efforts and accomplishments 
of the Department of Homeland Security [DHS], Bureau of 
Immigration and Customs Enforcement [BICE]. BICE Financial 
Investigations is committed to protecting the integrity of 
America's financial systems against the exploitation by money 
launderers and those who finance terrorism.
    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 and terrorist finance activities in order to protect 
the financial systems of this Nation.
    DHS fully supports the mission of BICE. Secretary Ridge 
demonstrated this commitment by participating in the rollout of 
BICE's Cornerstone initiative in July 2003, which I will 
discuss further in my testimony.
    BICE is pleased to have the Department's full support in 
these investigations and in working cooperatively with the 
private sector to help reduce the vulnerabilities of the 
financial systems exploitation.
    Financial investigations continue to be a BICE priority. 
BICE brings a unique assembly of over 30 years of financial 
investigative expertise, powerful statutory authorities and 
cutting-edge investigative techniques in the conduct of money 
laundering and terrorist financing investigations. The 
enactment of the USA Patriot Act serves to further enhance 
these investigative techniques.
    The enactment of the Money Laundering and Financial Crimes 
Strategy Act in 1998, which mandated the National Money 
Laundering Strategy, serves as a blueprint for addressing 
investigative financial priorities.
    BICE and the former U.S. Customs Service has time and again 
demonstrated its expertise in the kinds of complex, large-
scale, and high-impact investigations that BICE continues 
today. For example, the BICE-led investigations in such cases 
as the BCCI in Tampa, Operation Greenback in South Florida, 
Operation Casablanca in Los Angeles, Operation Wirecutter in 
New York, Operation Green Mile in Phoenix, and the BICE-led 
initiatives in the New York El Dorado Task Force. In these 
cases and initiatives alone, BICE, in conjunction with other 
Federal, State and local law enforcement, has seized 
approximately $900 million in criminal proceeds.
    I would like to take a moment to highlight the ongoing 
successes of the El Dorado Task Force. The El Dorado Task Force 
was created in 1992 and is the largest and most prominent 
interagency money laundering task force in the country. One 
recent El Dorado investigation led to the guilty plea of 
Broadway National Bank for violations of the Bank Secrecy Act, 
and paid a $4 million fine, the most significant BSA-related 
prosecution in many years.
    This task force has since been the model for the 
establishment of other money-laundering task forces throughout 
the law enforcement community. It also served as a template for 
the creation of the High Intensity Financial and Related Crimes 
Areas, HIFCAs, that were created as part of the National Money 
Laundering Strategy.
    In response to the events of September 11, 2001, BICE, 
through the former Customs Service established Operation Green 
Quest. Operation Green Quest was an interagency task force 
designed to augment existing counterterrorism efforts by 
targeting financial networks through the application of a 
systems-based approach to following the money.
    Operation Green Quest was committed to the identification, 
disruption, and dismantling of organizations which served as 
sources of terrorist funding. In connection with the 
consolidation within DHS, in May 2003 a memorandum of agreement 
was reached between DHS and DOJ to clarify the roles and 
responsibilities for terrorist financing investigations.
    BICE adopted the successful methodology embodied in 
Operation Green Quest to the new financial initiative called 
Cornerstone, which was launched in July 2003. As part of this 
initiative, BICE has expanded the longstanding working 
partnership with the financial and trade sectors in an effort 
to identify and eliminate the vulnerabilities that can be 
exploited by criminal and terrorist organizations.
    Through Cornerstone and its predecessors, BICE has achieved 
great success in identifying systems that have been used by 
narcotics traffickers, arms traffickers, and terrorist networks 
to finance terrorist activities. These systems include trade-
based violations such as the black market peso exchange, the 
largest trade-based laundering system in the Western 
Hemisphere, the smuggling of bulk cash, misuse of money service 
businesses and the exploitation of charities and 
nongovernmental organizations. Since October 25, 2001, the 
combined efforts of Operation Green Quest and Cornerstone have 
resulted in the seizure of approximately $35 million, have led 
to the execution of 172 search warrants, 233 arrests, 163 
indictments and 94 convictions.
    With the integration of the statutory authorities and 
investigative tools from the former Customs Service and the 
former Immigration and Naturalization Service, BICE is able to 
more effectively target vulnerabilities that facilitate illegal 
activities.
    Cornerstone systematically and strategically examines 
financial systems that may be susceptible to abuse and seeks to 
prevent their exploitation. In addition, Cornerstone relies on 
the worldwide network of 37 BICE foreign attache officers, 
which have established and continued to maintain criminal 
relationships for corresponding law enforcement government 
enemies in their host country.
    I noted earlier a number of BICE investigative successes 
and would like to provide a brief outline of a few of our 
significant ongoing investigations. In northern Virginia, as a 
result of the BICE, IRS, and FBI ongoing investigations of 
charities and nongovernment organizations, Biheiri was 
convicted for various immigration violations. In addition, 
Alamoudi was arrested and indicted for violations of 
immigration law, money laundering, structuring transactions 
with the government of a state that supports terrorism, and the 
International Emergency Economic Powers Act [IEEPA].
    It is alleged that these individuals and their 
organizations were financing terrorist groups around the world. 
In Miami, BICE detained and seized approximately $5.6 million 
in assets belonging to a high-ranking Nicaraguan Government 
official who was alleged to have embezzled and laundered in 
excess of $100 million. This investigation was conducted by the 
BICE-led Foreign Political Corruption Unit, in coordination 
with the BICE Attache Office/Panama, and the Nicaraguan 
Government.
    In Seattle, 13 individuals were indicted for transferring 
$12 million to Iraq in violation of money laundering laws and 
IEEPA. To date, the primary subject of this suggestion has been 
convicted of money laundering and additional prosecutions are 
pending.
    In the New York-Newark metropolitan area, BICE, together 
with IRS and other law enforcement agencies, conducted joint 
investigations which targeted money service businesses 
operating without a license. These investigations identified 
the illegal transfer of about $100 million to countries of 
interest.
    To date, these investigations have resulted in 14 arrests, 
12 indictments, 6 convictions for failure to register as a 
money service business, and for other violations.
    With these investigations, BICE has demonstrated the 
benefits derived from the USA Patriot Act, specifically to the 
statutory changes related to unlicensed money service 
businesses, cash smuggling, and the expanded authority to 
identify accounts belonging to suspects. The BICE Financial 
Division has continuously evolved to match its investigative 
priorities with the critical concerns of this Nation.
    Since March 2003, BICE Financial and Strategic 
Investigative Division has deployed four teams of BICE special 
agents to the Iraqi theater of operations. BICE special agents 
are conducting investigations relative to violations of U.S. 
law, to include weapons of mass destruction, illegal 
procurement of U.S.-origin technology, and money laundering.
    BICE has established an Iraq task force in Washington, DC, 
to review and analyze documents and financial records that have 
been obtained through the world to identify violations of U.S. 
laws. To date, BICE special agents have been responsible for 
the recovery of over $32 million in cash hidden in Iraq by the 
former regime, and are attempting to determine the source of 
these funds.
    As part of the DHS initiative to promote a partnership with 
the private financial sector, BICE, in coordination with the 
U.S. Secret Service, will hold semiannual Systematic Homeland 
Approach to Reducing Exploitation [SHARE] meetings. SHARE 
meetings will promote an exchange of information between 
government and executive members of the financial and trade 
communities that are impacted by money laundering, identify 
theft, and various other financial crimes.
    In support of SHARE, Cornerstone publishes Tripwire, a 
quarterly newsletter that BICE provides to the financial sector 
to address law enforcement concerns, emerging trends, patterns 
and pathologies in the money laundering and terrorist finance 
arena.
    In conclusion, I would like to thank the chairmen for the 
opportunity to testify before you today. I would also like to 
thank the joint subcommittees for their continued interest and 
support. It would be my pleasure to answer any questions.
    Mr. Putnam. Thank you, Ms. Forman.
    [The prepared statement of Ms. Forman follows:]

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    Mr. Putnam. The financial witness is Mr. Bruce Townsend. 
Mr. Townsend is currently Deputy Assistant Director of the U.S. 
Secret Service Office of Investigations. A career member of the 
Senior Executive Service, he oversees Secret Service offices in 
the United States and in 20 countries abroad, he develops 
Secret Service investigative policy, and leads the 
investigative initiatives.
    We welcome your input to the subcommittee and thank you for 
being here. You are recognized.

STATEMENT OF BRUCE TOWNSEND, DEPUTY ASSISTANT DIRECTOR, OFFICE 
  OF INVESTIGATIONS, U.S. SECRET SERVICE, U.S. DEPARTMENT OF 
                       HOMELAND SECURITY

    Mr. Townsend. Good morning. Chairmen Platts and Putnam, 
thank you for the invitation to testify on the subject of 
terrorist financing and the role the Secret Service plays in 
combatting this problem.
    With me today is Special Agent in Charge John Joyce of the 
Secret Service Tampa Field Office. I am pleased to report that 
our Tampa Field Office is fully engaged and committed to the 
interagency coordination that is necessary to assist in the 
effort to keep America secure.
    In addition to providing the highest level of physical 
protection to our Nation's leaders, the Secret Service 
exercises broad investigative jurisdiction over a wide priority 
of financial crimes. As the original guardian of our Nation's 
financial payment systems, the Secret Service has a long 
history of pursuing those who would victimize our financial 
systems and the law-abiding citizens of the United States.
    In recent years, the combination of the information 
revolution, the effects of globalization, and the rise of 
international terrorism have caused the investigative mission 
of the Secret Service to evolve dramatically. Today, our dual 
missions of investigations and protection have become fully 
interdependent and inseparable.
    When the Secret Service moved from its home of 138 years in 
the Treasury Department to the Department of Homeland Security, 
we brought with us intact all of our personnel, resources, and 
investigative jurisdictions and responsibilities. Today those 
jurisdictions and responsibilities require us to be involved in 
the investigation of not only traditional financial crimes but 
also identity crimes, as well as a wide range of electronic and 
high-tech crimes.
    The events of September 11, 2001 have altered the 
priorities and actions of law enforcement throughout the world, 
and the Secret Service is no exception. Immediately following 
the attacks, the Secret Service was able to bring its 
experience in credit card and identity fraud as well as its 
electronic crimes expertise to bear on the investigation, 
working with the Department of Justice, and the FBI in the 
following ways: Assisting in developing complete financial 
profiles of all suspects, living and deceased, in the 
investigation. Identifying other suspects through current and 
historical financial investigations. Contributing to an 
intelligence assessment regarding possible future acts through 
analysis of money movement, expenditures, and other financial 
data. Developing an analysis of current credit card usage by 
the suspects in the investigation. Investigating more than 
17,000 leads in support of the Department of Justice-led 
investigation.
    As part of the Department of Homeland Security, the Secret 
Service continues to be involved in a collaborative effort 
targeted at analyzing the potential for financial, identity, 
and electronic crimes to be used in conjunction with terrorist 
activities.
    The Secret Service prides itself on an investigative and 
preventative philosophy, which fully involves our partners in 
the private sector and academia and our colleagues at all 
levels of law enforcement in combatting the different types of 
financial and electronic crime committed against the people of 
the United States.
    Central to our efforts in this arena are our liaison and 
information exchange relationships with the Treasury 
Department, the State Department, the FBI, and the Bureau of 
Immigrations and Customs Enforcement. As a key element in our 
strategy of sharing information and cooperating with other 
agencies involved in the effort to keep America safe, the 
Secret Service has assigned 58 special agents to the FBI's 
Joint Terrorism Task Forces, as well as headquarters personnel 
to the Bureau of Immigrations and Customs Enforcement [BICE], 
Operation Cornerstone, and the Treasury Department's Financial 
Crimes Enforcement Network [FinCEN].
    It is through our work in the areas of financial and 
electronic crime that we have developed particular expertise in 
the investigation of credit card fraud, identify theft, cyber 
crime, and bank fraud. Secret Service investigative focus is 
often on organized criminal enterprises, both domestic and 
transnational.
    As Secret Service investigations undercover activities of 
individuals or groups focusing on doing harm to the United 
States, appropriate contact is immediately made and information 
is passed to those agencies whose primary mission is 
counterterrorism. For more than a century, the Secret Service 
has maintained its dual missions of investigation and 
protection. Whether it is through the investigation of 
traditional financial and identity crime, the protection of our 
Nation's critical and financial infrastructure, or the 
safeguarding of our Nation's leaders, the Secret Service will 
continue to devote all its resources to assist in keeping the 
United States safe and secure from those wishing to do us harm.
    Chairmen Platts and Putnam, this concludes my prepared 
statement. I will be pleased to answer any questions.
    Mr. Putnam. Thank you very much, Mr. Townsend.
    [The prepared statement of Mr. Townsend follows:]

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    Mr. Putnam. And thank you to all of our witnesses. And this 
lays the foundation for I think an important dialog. And we 
will let Mr. Platts begin with the questions. You are 
recognized.
    Mr. Platts. Thank you, Mr. Chairman. And, again, my thanks 
to each of you for your testimonies and participation.
    Maybe start with kind of a broader question regarding the 
National Money Laundering Strategy. And all are free to answer. 
But I think, Mr. Ross, and Ms. Forman, Mr. Whitehead, it kind 
of directly relates to your three entities.
    Currently, just the Department of Justice and Treasury sign 
off on that strategy. With the realignment of duties and with 
BICE being at DHS and Secret Service being at DHS, it seems 
logical if we are going to reauthorize the strategy, now that 
this initial 5-year period is up, that we would look at having 
DHS be one of the signatories to that strategy, given the 
important role that DHS plays in this issue.
    I would be interested in the perspective of each of your 
offices in adding DHS as one of the three signatories, instead 
of just two.
    Mr. Ross. Thank you, Mr. Chairman. I agree with you. I 
think, if it is reauthorized--and I understand Senator Grassley 
has a bill that would reauthorize the Money Laundering 
Strategy, I think through 2006. I agree with you.
    I think, given the competences and the capabilities that 
have been transferred from Treasury over to DHS, particularly 
the antimoney-laundering areas described by Ms. Forman on 
Cornerstone, I think DHS is an integral player to the money 
laundering strategies.
    In fact, they were consulted with respect to this one. I 
think the timing was just such that the signature wasn't there. 
But I concur. The Treasury Department concurs.
    Mr. Platts. Mr. Whitehead, for Justice. Any objections to 
DHS having to sign off as well?
    Mr. Whitehead. Well, clearly DHS is an important part of 
the equation. And I think, as Mr. Ross said, it was probably a 
timing issue there as for when the first agreement was signed. 
So there would be no objections, from my perspective. Of course 
I am looking at it from the local perspective, but, nationally, 
I wouldn't see where there would be an opposition to that.
    Mr. Platts. I assume, Ms. Forman, DHS would like to have a 
greater say in that strategy if it is to be reauthorized. And 
maybe if you want to speak also to the issue--and, if others 
want to add as well--should we be reauthorizing it in a similar 
form to what it is, or should we look at some significant 
changes, given the events of the last 5 years?
    Ms. Forman. To answer the first question, I agree DHS 
should be an integral part of the Money Laundering Strategy, 
and I believe we will be, based on the historical perspective 
as well as our current perspective in money laundering 
investigations.
    With regards to the reissuance of a National Money 
Laundering Strategy, I certainly would support it with some 
modifications in terms of probably greater accountability in 
terms of the participants, agents, as well as a proposal for 
some funding resources to go along with it.
    Mr. Platts. And accountability for developing better 
performance standards, kind of how to judge what everyone is 
bringing to the table? In what sense would you envision more 
accountability?
    Ms. Forman. Performance standards as well as compliance 
with the dictates and the agreements in the strategy, and based 
on the goals and objectives that are set forth, to make sure 
that we are in concert in reaching those goals and objectives.
    Mr. Platts. That kind of begs the question: Are there 
specific examples that you believe now we are not doing that, 
that we are not--all entities that are part of the strategy are 
not complying with all of the aspects of the strategy?
    Ms. Forman. No. I think all of the agencies are in--going 
in the direction to achieve those. But I think we need to 
prioritize in terms of which ones we can achieve realistically 
during the timeframes that are set out.
    Mr. Platts. Any other comments on maybe the 
reauthorization? Any changes from what we currently have, if we 
are going to reauthorize?
    Mr. Ross. One point I would like to make since the fact 
that since September 11, it has been a greater emphasis, 
obviously, on terrorist financing. As everyone has testified, 
the systems that are utilized by terrorist financiers and the 
systems that are utilized by money launders are virtually the 
same. There are different players involved. For instance, you 
don't usually find narcotraffickers using charities to move 
narcoproceeds.
    But the systems themselves, the bulk couriers, the money 
remitters, the money order sales, the international movements 
of funds, the systems are the same. So I think that to the 
extent that it is reauthorized, it would not be untoward to 
maintain a terrorist financing component within the strategy 
itself, as we have done.
    With respect to changes, I think a yearly report in a lot 
of cases causes some of the tensions that Ms. Forman was 
talking about, and that possibly something along the line of a 
different yearly report, a yearly report in a little different 
timeframe than February, might be something to consider with 
respect to the strategy. And also additional resources and 
funding, I think are important, particularly, if we are--if 
Congress is looking to reauthorize a continuation of the HIFCA-
type program.
    As you know, setting up a program with no funding and no 
resources and kind of on a voluntary basis is very difficult at 
best, and in some circumstances could suggest, you know, taking 
from Peter to pay Paul, and that sort of thing. So I think 
funding and resources would be an area in which we would like 
to work closely with Congress if it is determined to 
reauthorize.
    Mr. Platts. And, Mr. Ross, you kind of touched on a 
followup I had, was with the funding issue, with the HIFCAs. 
And if we are reauthorizing and continue that mandate, should, 
one, there be a dedicated funding stream for that requirement, 
and should HIFCAs be part of that reauthorization, given how 
they have been used thus far?
    Mr. Ross. I think in the HIFCA context, a lot of it has 
been determined by what existed before, as opposed to what you 
are trying to recreate. As Ms. Forman testified, the El Dorado 
Task Force was kind of the paradigm example of an interagency 
financial task force that preexisted. It became kind of the 
centerpiece with respect to the HIFCA.
    The program, it was a fairly easy transition. In other 
areas where you did not have a specific interagency approach to 
financial crime, it is more difficult to try to pull the pieces 
together. And I think there, if you have a greater system 
accountability, as Ms. Forman said, and also funding, I think 
it will greater enable the districts and geographic areas of a 
sense of how they want to function, how do they want to pull 
together, what do they want to concentrate on? Do they want to 
specialize in narcotics money laundering? Do they want to 
specialize across the board?
    I think that we do need to add some form and structure. 
Treasury will work--delighted to work very closely with all 
committees of the Congress as this goes forward.
    Mr. Platts. I have one more kind of broad issue, and then 
yield back to the chairman. We are going to have several 
rounds. I appreciate your allowing us that, and your patience, 
as we do have a lot of questions.
    When we look at--and we have had I believe tremendous 
success, knowing that we have a deadly enemy out there that, if 
given the opportunity to have another September 11th, would 
have it tomorrow if they could pull it off. And we need to be 
grateful for the work of our Intelligence Community, our law 
enforcement community, our military, that have taken the fight 
to Osama bin Laden and al-Qaeda instead of waiting for them to 
bring the fight to us again.
    But, as we are always looking to improve in how to 
strengthen our abilities, and while we are grateful for the 
successes over the last plus 2 years, one of the things that 
when I look at the reorganization, when we created the 
Department of Homeland Security, was to really try to bring 
together under that one roof the various entities involved in 
this battle and this war on terror. And with, you know, the 
historic move of Secret Service from Treasury to DHS, 
Immigration and Customs, the various aspects that were 
consolidated--and then we have the memorandum of agreement this 
summer that kind of undoes what I thought that we were doing 
with the creation of the Department and the shift of the 
criminal investigation responsibility out of the Department to 
the FBI and the Department of Justice, which seems to negate 
the advantages of DHS, especially with Treasury and BICE being 
in DHS.
    I welcome all of your comments on have we consolidated and 
then, in the end, decentralized through that memorandum of 
agreement. And maybe it ties into State as well, by the fact 
that we now have the FBI with the lead on criminal 
investigations, we have DHS and BICE kind of on the--guarding 
the framework, protecting the framework of the financial 
community, and then we have State chairing the Terrorist 
Financing Working Group that kind of brought everyone together, 
then through that kind of agreement have gone the opposite way.
    Am I missing something in that belief?
    Mr. Townsend. Mr. Chairman, I will kick that one off. With 
regard to the Secret Service specifically, when the agreement 
that you are referring to was first contemplated, there was 
some initial confusion, and part of that is it was on the part 
of our own organization.
    But that MOA--and again speaking from the Secret Service 
perspective--has not affected us. We are carrying on with the 
historic and traditional missions that I mentioned in my 
opening statement.
    I had an opportunity to speak to Mr. Ross prior to 
beginning today, from the Treasury Department. We have a 
special agent that continues to work in the Treasury Department 
on issues, and he brings information back and forth as is 
needed. And we intend to enhance that relationship both in 
staffing and the quality of the relationship.
    So we are while, we hope, contributing to the new mission 
of the Department, we believe that we can make a contribution 
there, we are certainly endeavoring to do whatever we can to 
bring whatever expertise and resources we have to the 
Department and thereby keeping America safe, we still are 
continuing with our historic mission.
    One, probably the most illustrative, is that of the 
integrity of our U.S. Federal Reserve notes, our bank notes. 
The Secret Service continues to work very closely with Treasury 
in tracking counterfeiting, both domestically and around the 
world. We are happy to report that while it is always a 
concern, the U.S. bank note and the U.S. currency is safe, 
sound, and secure. People want the dollar around the world. And 
they use it, and they should continue to do so.
    So from the Secret Service perspective, clearly September 
11 has changed everything, but at the same time, we continue to 
do the things we do best, but with a new focus on keeping the 
country safe.
    Mr. Platts. OK.
    Ms. Forman. If I may address that question, the May 2003 
memorandum of understanding created an environment of efficient 
and timely exchange of information. The document itself has a 
subset of protocols which establish the mechanisms of which 
information is exchanged and who will work what investigation 
based on various factors, to include what is in the best 
interests of the U.S. Government, the equities of the 
investigative agency, the resources expended, and the corporate 
knowledge.
    And there are protocols in place where we have a deputy at 
TFOS is a BICE senior manager from the Financial Investigations 
Division. So we have unfettered access to information, and so 
does the FBI in the exchange of information regarding terrorist 
financing investigations.
    We are still in the game of investigating terrorist 
financing as well as other vulnerabilities in a coordinated 
effort with the FBI. In addition, our methodology is the same. 
For the last 30 years, the former Customs Service, now BICE, 
has applied a methodology of attacking systems and identifying 
vulnerabilities in systems to include a corrupt system such as 
the black market peso exchange, to legitimate financial 
systems, such as the money service businesses, where in 
Phoenix, AZ we have a major initiative called BICE Storm, where 
we have identified money orders that are being utilized for 
alien smuggling as well as narcotics traffickers, based on an 
assessment of the system as well as a census that was 
conducted. So the methodology has always been the same.
    We will go after the corrupt system if the entire system is 
corrupt, or we will surgically go in and remove the bad apple, 
that individual and entities that are corrupt.
    Mr. Whitehead. First off, the memorandum of agreement has 
clearly improved the coordination and development of the TFOS. 
And, as Ms. Forman stated, the exchange of personnel from BICE 
has really served to help to move that forward. I have a member 
of our TFOS, the unit chief, Frank Fabian, here. I would like 
to yield to him to make a couple of comments about that.
    Mr. Putnam. We need to swear you in.
    [Witness sworn.]
    Mr. Putnam. Note for the record that he responded in the 
affirmative. If you will speak into the mic, please.
    Mr. Fabian. Certainly. In listening to the comments of Ms. 
Forman, I certainly echo those comments. And I would add that 
since the adoption of the MOA, we have put in place senior 
people over with BICE, as they have with us. We have 
established a joint vetting unit to ensure that cases that come 
in from the field are reviewed at the senior level in 
Washington.
    Those cases that on the surface do not appear to have a 
terrorism financing nexus to them, are certainly then 
investigated through Homeland Security and BICE. Those that do, 
they continue to participate on through the JTTFs and 
respective field offices where they occur.
    What this has done, in our opinion, is what it was set out 
to accomplish. And that is, to make sure that efforts were not 
duplicated by different agencies working the same cases perhaps 
from a different perspective, and maybe even not knowing that 
they were investigating them. So I think it has done a great 
deal to aid in the efficiency of the investigative efforts 
between the very talented agents that have for years been 
working these sorts of investigations through operation Green 
Quest, and now Cornerstone, with agents from the Bureau and the 
other participating agencies on the JTTF.
    Mr. Platts. Well, I appreciate your addressing that. I 
think that is an important message to get out, that we have 
done our best to kind of break down those stovepipes and have 
all entities working hand in hand, and have the--in the end, 
all of us on the same page as we look out for the best 
interests of our fellow citizens.
    Now I will reserve the rest of my questions for the next 
round. Thank you, Mr. Chairman.
    Mr. Putnam. Thank you. The purpose of this hearing is to 
discuss the various schemes that terrorists and others have 
used to circumvent the existing regulatory framework to fund 
their illegal activities. And Mr. Ross, I think, has pointed 
out the similarities and the differences between traditional 
money laundering of moneys, profits generated by illegal 
activities, and terrorist financing, which also has that 
component but also may utilize profits that were very 
legitimately earned and funneled through charitable 
organizations or front groups.
    The GAO report that was just released this weekend 
discussed another key component of the circumvention, and that 
involves methods other than using U.S. currency. The conversion 
of that currency into cigarettes, diamonds, gold, other 
species, if you will, that is easy to conceal, easy to transfer 
across borders. And it identified that as a weakness, that we 
may not have the current regulatory framework in place, which I 
would view as being an indication of success that our currency 
laws, whether it is bank secrecy or Graham-Leach-Bliley, or the 
Patriot, or the whole laundry list of things that have 
developed since the early 1970's, have pushed the bad guys into 
an alternative form of financing.
    But I would ask--I suppose we will begin with Treasury and 
Customs or whomever is appropriate to address this issue of how 
effectively does the law allow us to track the transfer of 
commodities, which has become the alternative to using currency 
in some cases?
    Mr. Ross. Thank you, Mr. Chairman. I echo your views that 
to the extent that we have driven terrorist financiers and 
narcotraffickers and other organized criminals out of the 
direct banking and formal financial system, and even to a 
lesser extent out of the informal system and into a trade-based 
system, it is an accomplishment.
    At the same time, it is not an end in and of itself. As Ms. 
Forman testified earlier, we at Treasury and now DHS and 
Justice are well aware of the use of trading commodities. We 
are well aware that, for instance, narcotraffickers move 
billions of dollars' worth of U.S. dollars back into Colombia 
in the form of trade goods. We are aware of that. We are 
working on it in an interagency basis.
    I will defer to Ms. Forman to describe a particular 
mechanism that they have in place at DHS, I think it is the 
paradigm data base, to try to identify trade-based anomalies. 
But I will go specifically to the diamonds and commodities 
mentioned in the GAO report.
    I think it is unfortunate that at the time the GAO report 
was finalized, the Money Laundering Strategy had not been 
released or not been released sufficient so that GAO could take 
a look at the report. In the strategy in appendix D we do have 
the report on trade-based money laundering and terrorist 
financing.
    What we identify in that is that, of course, the use of 
commodities is to be expected. A, they are mediums of exchange 
in areas which are particularly susceptible to terrorist 
financing; that is, the Middle East, Africa, and the Far East. 
So the mechanisms are in place. The dealers are in place, 
people who have historically dealt in trade goods, diamonds, 
emeralds, gold, in particular are in place. And we do discuss 
this in the Money Laundering Strategy.
    I think from a law and regulatory perspective that we do 
have the tools. I believe what we need to do more of is work 
more closely with our international counterparts because, as a 
member of the panel earlier mentioned, I guess Mr. Glass, as 
much money as is generated in the United States goes into 
terrorist financing, much, much more is generated abroad. What 
we need is for our international partners to identify and 
target the possible use of trade-based money laundering and 
terrorist financing through their countries as well.
    But appendix D does address this topic.
    Mr. Putnam. Ms. Forman.
    Ms. Forman. If I could add. I concur with Mr. Ross's 
assessment in terms of having the tools necessary to identify 
trade-based money laundering. Customs, former Customs Service, 
now BICE, has a system called the numerically integrated 
intelligence system. It is a software package that was 
developed by former Customs Service, which is able to identify 
anomalies in trade. The software, it is a software package that 
contains Bank Secrecy Act data, import-export data, I-94 
Immigration data, and various other type of data that can be 
utilized to identify anomalies in trade.
    The benefit of having this software is when you are working 
with your international counterparts--and specifically I can 
site examples of us working with Colombia--in which we also 
have their trade data. So we are able to identify exports out 
of the United States, and the foreign country is able to 
identify what they actually received. Colombia, in particular, 
is indicative that when a certain amount of exports leave the 
United States, some commodities such as appliances, computers, 
and so forth may be smuggled in to avoid taxes and duties in 
Colombia, when, in fact, may be part of the black market peso 
exchange, or drug dollars, unwittingly used most of the time, 
are utilized to purchase these commodities.
    Mr. Putnam. Anyone else? Mr. Glass.
    Mr. Glass. We at the State Department, we have been in 
touch with a number of organizations and governments around the 
world on the issue of alternative remittance systems and their 
reported use. There have been a variety of press reports about 
this over the past year or so. And it is an issue that we have, 
with other agencies, tried to gather and collect more 
information on.
    It is an issue that is very, very difficult to get what I 
would call actionable intelligence on. It is an issue that--
where there are a lot of stories, there is a lot of 
unsubstantiated information out there. And we are working and 
trying to get that more precise.
    When we take action overseas in the realm of terrorist 
finance of any kind, whether it be against an entity or an 
individual or whatever, one of the things that is most 
important in that effort is providing information, a 
justification as to what you are doing and why you are doing 
it.
    We often provide to overseas governments a statement of 
case as to why you suspect this activity is taking place by 
this organization or by this individual. And the point of this 
is we need hard information, not only of an intelligence 
nature, but information that is sharable with other 
governments, with organizations, to get them to act. It is one 
of the things that we are constantly pressing for in our 
interagency collaboration. We work with all of the agencies at 
this table on a routine basis in order to develop just that 
kind of information. But particularly when we get into the 
realm of alternative remittance systems, it becomes more and 
more of a challenge.
    We do have in place, which I am sure that you are aware of, 
the Kimberly process to deal with conflict diamonds, where 
there is a certification regime on rough diamonds, in order to 
try to make it more difficult to use diamonds and gems to avoid 
the formal financial systems.
    There is perhaps, however, more that can be done in the 
alternative remittance systems field. It is something where we 
do have ongoing discussions not only with our posts overseas, 
but also with a number of other governments around the world in 
order to come to terms with this important issue.
    Mr. Putnam. Well, GAO devotes a considerable amount of 
space to this issue. It is clear that it is a main avenue of 
diversion. And its center of activity is in parts of the world 
where we, frankly, don't have a very large or active role: West 
Africa, essentially no government, no borders, no control, and 
a fair amount of the world's diamonds. And all indications are 
that they are funding al-Qaeda, Hamas, Hezbollah, among others. 
So it appears to be a gaping hole in our preparedness.
    Speaking of international cooperation, how has 
international cooperation changed since September 11th, and the 
Patriot legislation? Who is cooperating the best? And who is 
cooperating the least?
    Mr. Glass. I presume that would be to the State Department?
    Mr. Putnam. Give us your best diplomatic answer on who is.
    Mr. Glass. Well, I will tell you quite frankly, to my 
knowledge, before the Executive order of September 23, 2001, I 
am not aware that the State Department went out worldwide to 
every government in the world and asked them to freeze assets 
of a given entity or individual. This was something that really 
was a new undertaking in the aftermath of September 11th.
    When the President signed the Executive order and included 
the 27 names in the annex to that Executive order, we 
immediately approached every country in the world and asked 
them to search these names, and said, if you find any assets 
from these individuals, they should be frozen.
    And since that time, as I mentioned in my testimony, we 
have gone out over 75 times to every country with whom we have 
diplomatic relations around the world and asked them to freeze 
assets. We have provided them supporting information, we have 
provided them identifying information on each of those names 
and asked them to take action.
    So we really do have, in many ways, much more of an 
international effort, if you will, a very precise and targeted 
effort against specific targets to freeze assets than was there 
at any time previously. This has worked I think in a promising 
way. Some two-thirds of assets frozen around the world have 
been frozen outside of the United States, one-third inside the 
United States, roughly speaking.
    Assets are frozen at the current time in approximately 50 
countries around the world, and about 170 countries report that 
they are taking action to freeze assets every time the names 
are released. Now, when names are added to the United Nations 
in New York, they are automatically--all member states are 
obliged under Chapter 7 to freeze those assets immediately, and 
the key phrase is here, ``without delay.'' Very, very quickly.
    Mr. Putnam. They are obliged to. Has there been full 
cooperation with that obligation?
    Mr. Glass. It is very hard to say precisely whether there 
has been complete and full cooperation. We know that, as Mr. 
Ross mentioned in his testimony, that 170 countries report that 
they have issued blocking orders, that they have instructed 
their financial institutions to freeze assets on given names 
and specific individuals. We do know, as I mentioned, that 
assets have been frozen overseas. We make an effort through our 
embassies to monitor and to find out whether countries are 
being effective in their efforts.
    But there are challenges out there that continue to exist, 
particularly when you get into less developed areas of the 
world. It is one thing in the United States for officials here 
to issue notices to financial institutions to freeze assets, to 
do that electronically on a real-time basis. It is another to 
try and imagine this being done in certain parts of Africa or 
in countries such as Afghanistan.
    Mr. Putnam. Or Syria or Libya or some of the other helpful 
countries who are members of the United Nations.
    Mr. Glass. Those present their own unique challenges in 
their own way. But we do make demarches on a routine basis to 
the Syrian Government on these issues when a name comes up and 
is added to the U.N. list.
    We do send our diplomats in to request that they also 
freeze those names, as we do in all other countries with whom 
we have diplomatic relations. This is new. Our embassies are 
more engaged in these activities than ever. The instructions 
that we send out to our posts on this are cleared by all of the 
agencies in Washington, by the Treasury Department, by the 
Justice Department, and are coordinated very closely at post. 
So it is a work in progress. But it is one that we spend an 
awful lot of effort on. And we have raised, I am completely 
convinced, the level of international attention to terrorist 
finance to a level that was never there before.
    Mr. Putnam. Let me ask just one financial and brief 
question before I yield back to Mr. Platts. The events of 
September 11th, I think everybody universally refers to them as 
this turning point in the way that we have viewed the world or 
the way that we have approached certain crimes. It has been 
referred that money laundering is one of them, that it was this 
watershed event that shifted the way that we viewed the 
process, the investigation, the procedure.
    The Congress reacted, passing the Patriot Act. There were 
Executive orders, creation of the Department of Homeland 
Security. So we took this jarring event in the Federal 
Government's bureaucratic culture that the folks, all of you 
who have to go out there and have your specific missions--that 
was a jarring event, followed by several jarring legislative 
activities, not the least of which was severing your 170-some-
odd year relationship with Treasury and putting you into the 
newly created Department, and moving Customs and things like 
that. So we have done all of that.
    How much better are you able to communicate with all of the 
other agencies sitting at this table than you were prior to 
that? Do you have access? For example, Secret Service is here, 
Customs is here. Do you have complete, unfettered access to 
each other's data bases when you are involved in an 
investigation, or are there still barriers to that? And how 
does that work across the other departments? I would be 
interested in hearing your thoughts on that.
    Mr. Townsend. I will kick off that, Mr. Chairman. With 
regard to the data bases, on a technical level I believe the 
answer to that is no. And to some degree that shouldn't come as 
a surprise to us, because we have spent the last 20 or 30 or 40 
years designing things that way. If you look at a very 
grassroots level, look at the voice radio systems just in 
emergency first responders.
    Some 20 or 30 years ago when I was a uniformed policeman, 
it was thought to be a bad thing that you could hear everyone's 
radio traffic in a county area. So we worked for the last 30 
years designing stovepiped radio systems where you couldn't 
hear everything that was going on in a region or a county. That 
was thought to be a good thing.
    Well, we think differently now. So while we recognize that 
our thinking has to change, unfortunately it is not going to 
happen overnight.
    When you asked the question on the access to everyone's 
data bases, speaking with the Secret Service and--the U.S. 
Secret Service relationship is when I need something, we are 
going to give it to them. There was a boom in technology in 
terms of the realization that communication has to exist, and 
that information we have is available to other law enforcement 
partners. The answer is yes.
    I think the answer was yes post-September 11, but it is an 
emphasis now. Excuse me, pre-September 11. The answer was, yes, 
pre-September 11. It is an emphatic yes now.
    Mr. Putnam. Mr. Ross, do you have better coordination with 
the different agencies today than you did prior?
    Mr. Ross. Well, I would like to give a quick anecdote if I 
could. Immediately after September 11, at that point I was a 
DOJ employee. I went over to work with the FBI when they 
established the precursor to the TFOS, which is called the 
TFRG, Terrorist Financial Review Group. It was the FBI 
initiative to create a financing--interagency financing 
strategy for terrorism. Never been done before.
    What happened was, we sat around the table and said, ``Who 
are the best people at agencies to have sitting here with their 
data bases so that we can immediately plug into them?'' The 
first order of business was, well, who do we need? We need IRS 
CI. We need FinCEN. We absolutely need Customs. We need DEA. 
Federal Reserve would be helpful.
    And what happened, people came, worked together, shared 
literally a huge room, everyone with their own data bases. And 
I have never seen an entity function better. But, at the same 
time, everyone still maintained separate data bases. Everyone 
still was patched into their own individual data bases.
    Most importantly, everyone brought to the table their own 
unique abilities with what you do with the data that was being 
fed to them.
    So in answer to your question, I am not sure if it is 
better. I know better agency coordination on terrorist 
financing is better--it virtually didn't exist prior to 
September 11, if it did at all. So it is tremendously better.
    Are people more aware? Are they more aware of what data 
bases can be applied and can be applied on the interagency 
basis and proactively to identify terror? Yes, an emphatic yes 
to that. So I think that there are times when an 
interoperability capability is useful--and at times, even if it 
is useful, will be made more useful--to have the right people 
with the right data bases work in an interagency composition, 
which is what I think is the most effective use of these data 
bases that exist.
    Mr. Putnam. Thank you. We will return to this. But I want 
to yield back to Mr. Platts.
    Mr. Platts. Thank you, Mr. Chairman. I am going to kind of 
pick up where Chairman Putnam was with the international 
community, and probably, Mr. Ross and Mr. Glass, really focus 
on your testimonies.
    As I was preparing for today's hearing, and again having 
the chance to review your testimonies ahead of time--appreciate 
you sharing that--there was an article in my Sunday paper 
yesterday that I read, and you may have seen a variation of it 
in the Washington paper or elsewhere. I am going to just read a 
short part of it.
    I am quoting from the article, ``Governments around the 
world aren't enforcing global sanctions designed to stem the 
flow of money to al-Qaeda and impede the business activity of 
the organization's financiers, allowing the terrorist network 
to retain formidable financial resources, according to the 
United States, European and U.N. investigators.
    ``Several businessmen designated by the United Nations as 
terrorist financiers, whose assets were supposed to have been 
frozen more than 2 years ago, continue to run vast business 
empires and travel freely, because most nations are unaware of 
the sanctions and others don't enforce them,'' the 
investigators said.
    ``Several charities based in Saudi Arabia and Pakistan that 
were reportedly shut down by the governments, because of the 
groups' alleged financial ties to Osama bin Laden, also 
continue to operate freely,'' they said.
    Then I jump to basically the end of the article that says, 
``So far the world body has publicly named 272 people as 
sponsors of terrorism. But U.N./U.S. officials say they don't 
know where more than half of those people are, and only 83 of 
191 countries have submitted the required U.N. reports on 
attacking terrorist financing and implementing the travel ban. 
Only a third of those have given a list to their border 
guards.''
    That doesn't present the best picture for the world 
community stepping up to the plate and delivering, as we 
understand they are obligated to do. And that is kind of 
following up Chairman Putnam's question of who isn't, in 
assessing the job they are doing?
    And I think, Mr. Glass starting with you, according to 
this--and I did not have the chance between yesterday morning 
reading this and this morning to try to verify some of those 
numbers--but according to this, only 83 of 191 countries have 
submitted the required U.N. reports. That is something that we 
should be able to verify. And I would appreciate for the record 
if the Department of State could provide both of our 
subcommittees this report that goes to compliance with the 
obligations that these 191 countries have.
    Is that 83 number correct? And who are the other 90 or so 
that are not submitting the required U.N. reports regarding 
terrorist financing? From a specific request, I would 
appreciate that information. That should be readily 
determinable by the Department.
    But I welcome, maybe in a more broad response, of--we never 
heard any specific nations mentioned. Who has done a great job 
and who hasn't? And I would like to revisit that, especially in 
light of, you know, my citizens back home are reading this 
article. And I appreciate you can't make other countries do 
what they are obligated to do under their U.N. Charter 
agreement. But we need to know who those countries are and what 
can we do as a government to try to get them to do what they 
are obligated to do as members of the U.N.
    Mr. Glass. Well, thank you. I counted about 10 or 12 
questions in there.
    Mr. Platts. I imagine, at least.
    Mr. Glass. And I am somewhat familiar with this U.N. report 
that came out about 3 weeks ago. First of all, on the question 
that governments are not enforcing sanctions around the world 
it is, at the end of the day, up to each individual country to 
implement sanctions in accordance with the U.N. resolutions--in 
accordance with their U.N. obligations.
    We, however, in Washington do routinely, through our 
embassies overseas, remind governments of those obligations. 
And we do engage them. If we have bilateral discussions with 
specific governments in Washington, we will make that part of 
the agenda for discussions, and ask them to tell us how things 
are going on the terrorist finance front on asset freezing, on 
travel bans. I would tell you, as part of our talking points 
when we do discuss terrorist finance, those issues are always 
prominent, including the travel ban issue, which we have been 
highlighting more and more as time goes along.
    The specific--some of the specific cases mentioned in the 
U.N. report were referring to the NADA-NASREDDIN network in 
Europe, which has been one that we and the Treasury and Justice 
Department have been looking at for quite some time, and we 
have frozen those names domestically and at the U.N. some time 
ago now.
    We were also intrigued to learn recently, slightly before 
the press reporting here, of the issue of how some European 
countries are dealing with the freezing of assets.
    And the issue for the Europeans, for some European 
countries, not all of them, but for some of them is, how you 
define assets. When you freeze assets are you just talking 
about bank accounts, or are you taking about material assets, 
things, an automobile, a building of some kind or another?
    And apparently in different European countries they deal 
with this definition in a legal sense in different ways. And 
this has become a bigger issue that apparently was featured at 
a workshop that the European Union held on November 7th, last 
month. And the Europeans are paying more and more attention to 
this to try to come to terms with just this issue in response 
to this question.
    You asked about certain charities being frozen around the 
world. These came up also in that report. And we have been in 
discussions with both Pakistan and Saudi Arabia both of which 
you mentioned regarding these charities, regarding the freezing 
of assets of these charities. But in some cases it is not just 
a question of freezing the assets of charities inside any one 
of these countries, since these organizations frequently 
operate in other countries as well.
    And in some cases, freezing assets is not the only action 
that is to be taken. There are other activities that are taken, 
such as investigative activities which we are working, as was 
mentioned, with other countries, investigating charities. There 
are other methods that are taken such as regulatory oversight. 
And on other occasions it is not always clear how much 
wittingness or affiliation has been involved with a charity 
toward the support of terrorism. But we are very much engaged 
in that activity and trying to make sure that a charity that is 
designated is actually frozen, in fact.
    You mentioned that--you read that approximately half of the 
countries around the world were not aware of their obligation 
to freeze assets, if I understood your question.
    Mr. Platts. That is what the story states.
    Mr. Glass. I can only confirm to you that we discuss, we 
raise the U.N. obligation with every country with whom we have 
diplomatic relations on a regular basis around the world. So if 
these countries claim they are not aware of their U.N. 
obligations, the United States has reminded them of those U.N. 
obligations on a regular and repeated basis.
    Some of the countries around the world give the lists to 
their border guards. This is also something that we remind them 
too, that there is a travel ban. We remind countries of this, 
that there is a travel sanction that comes with the U.N. 
obligations here. We have confirmed, for example, that in 
rather out-of-the-way places, in Asia, countries have told us, 
for example, that, they don't have the capability always to 
freeze assets in all of their banks, because their banks often 
conduct business on the basis of hand receipts, for example.
    But they do pass out the lists to their border guards and 
do use them in terms of travel bans, which some countries do, 
some don't.
    We would like to know more about those countries that 
don't, because we think it is important that they do, that they 
be reminded of that. And we will make efforts to do so in the 
future.
    In terms of completing reports to the United Nations, the 
actual U.N. report which is in, I believe it is on the U.N. Web 
site--I am told it is at this point in time--does list by name 
those countries that have not submitted reports to the U.N. in 
compliance with the 1267 Committee at this point in time. So 
you can get that list off of the U.N. If you don't have it, I 
am sure we can also get it and provide it to you.
    My brief scanning of that list of names earlier, I don't 
have this report with me here, indicated to me that many of 
those countries are in lesser developed areas that are not 
perhaps part of the mainstream financial system that we 
always--that we think of when we think of banks and bank 
regulations. But, nonetheless, we think it is important that 
all countries report to the U.N. on this very important issue.
    Which countries so far have done a good job and which have 
not? I think there is a lot to be done for all of us. I do know 
that, for example, that the European Union has put together its 
own mechanisms for listing names, for adding names very, very 
quickly, that are designated by the United Nations, so that all 
European Union member states are required to freeze assets when 
names are added to the U.N. list.
    Other countries around the world have what we call self-
executing mechanisms, where as soon as a name is added to the 
U.N. list, in those countries, it automatically becomes 
regulation or law to freeze those assets in financial 
institutions, and those countries are required to freeze 
immediately as well.
    Other countries are less responsive and may not have such 
quick responsiveness on those names. We would encourage them, 
however, to improve that. And as part of that, we have a team, 
we have several teams actually that travel around the world 
trying to provide countries with the technical capabilities to 
freeze assets in order to carry out these obligations, to get 
them capabilities to buildup not only a suspicious activity 
reporting mechanism, but also a mechanism to notify their banks 
of names that should be frozen, to provide identifying 
information, to search for bank accounts.
    But I will tell you that in my own work on this issue over 
the past 2\1/2\ years, it has struck me how challenging this 
can be in some countries. If I take, for example, just the 
country of Afghanistan and try to think about how to implement 
sanctions in that country, it became very clear, for example, 
that Afghan citizens almost routinely do not know their own 
dates of birth. They may know the year in which they were born, 
but there is no central registry for the day and month when 
Afghan citizens were born.
    So you have to ask yourself, if you are going to identify 
accounts, if you are going to ask banking or financial 
institutions to freeze assets and you don't have a date of 
birth of an individual, it becomes very, very difficult to do 
so, because there are a lot of people with names that are very, 
very similar.
    Frequently also we only have one part, a fragment of a name 
that we are dealing with when we are trying to freeze assets. 
And that leads to the comment that you also find in the U.N. 
report, which is an accurate comment, that identifying 
information is not adequate. And it is not. It is a constant 
quest that we, that OFAC, that the Treasury Department, that 
the intelligence and law enforcement community are constantly 
challenged with, to come up with specific identifying 
information in order that we can be effective and freeze assets 
and not, for example, inform financial institutions to freeze 
the assets of someone named Smith, which is a worthless 
exercise, because you get so many positive hits that you really 
can't be effective.
    These are the challenges that we are facing. We are getting 
better. And we are getting better with countries around the 
world. But we have a long way to go. And part of that, an 
important part of that, which I think is supported nicely by 
the Congress, is providing technical assistance, helping other 
countries to come to terms in their financial networks with 
building systems to actually freeze assets and identify people.
    Mr. Platts. Well, I appreciate the substantive answer, and 
trying to touch on the various points. And I would agree, one, 
that we are seeing headway and we are making headway and seeing 
progress. And I would agree there are differences and 
challenges from a Third World country trying to fulfill these 
requirements versus the United States or the European Union or 
other more developed, wealthier countries.
    But I guess what I would hope, and we certainly can pull up 
the list from the U.N. site that is specifically referenced in 
the report, but I would still appreciate the Department of 
State providing these subcommittees a list of those nations 
that the Department identifies--and the best way I can say, is 
where there is an identified charity, where there isn't a 
question of misidentification, but this is the charity in 
question, and there is a sizable amount that is to be frozen, 
and for whatever reason that host nation is not freezing, that 
we have a best picture possible of who is fulfilling the U.N. 
requirements and who is not.
    And it really goes to one of the frustrations that I think 
a lot of people feel about the U.N. And one of the reasons I am 
grateful for the leader that we have in the White House is we 
have a President that said the U.N. needs to--what it says 
needs to mean something. If there is no action, the words are 
meaningless. And with Iraq for, what, 16 or 17 times we said, 
do this or else, and we never acted. And thanks to our 
President, the Prime Minister of Great Britain, and others who 
joined us, there was action to followup those words and enforce 
those words.
    And my worry is that we are seeing something similar here. 
We have all of these countries agreeing in word to do this. But 
the question: Are they really doing it? Are there actions that 
are coming about because of those words? And I would be 
interested in seeing which nations aren't. If it is a Saudi 
Arabia or a Germany, that is different than if it is an 
Afghanistan, given Afghanistan is, as we speak, trying to craft 
a new constitution. But I think that would help our perspective 
at the Congress.
    A couple of specific questions. And, Mr. Ross, I do want to 
allow you to comment as well. But on the U.N. definition of 
assets and the debate out there, I take it that there is no 
definition in the U.N. regarding the freezing of assets? And 
that is the reason for the disparity--or is it--there is a 
definition in the U.N. requirements, and countries are choosing 
then to actually enforce it differently?
    Mr. Glass. The Security Council resolution that uses the 
word ``assets'' does not provide a more specific definition.
    Mr. Platts. OK.
    Mr. Glass. To the best of my knowledge.
    Mr. Platts. OK. Thank you. I guess the information that 
would be helpful is the Department has identified who you go 
back to. If you could share that with us, I would appreciate 
that. That you know are not doing it; that you are having your 
representatives at the embassies go out and remind them of 
their obligation.
    Mr. Glass. Could I just add that the Department does not 
maintain a list of countries, for example, that are more 
cooperative or less cooperative or anything like that. We do 
try to encourage, with every country with whom we work around 
the world, that they take their various obligations in the 
realm of terrorist finance seriously and implement the Security 
Council resolutions. But also--and this is something that is 
much broader than just the State Department, but it affects all 
of us here at the table--is how they are cooperating with us, 
for example, at an investigative level on a certain name or a 
target or issue, or how they cooperate with us in auditing 
books or quietly providing records, for example, bank records 
in one case or another.
    So it is a very broad effort. And I just wanted to----
    Mr. Platts. Right. And probably a give-and-take as you look 
at all of those aspects. I appreciate that. I guess to best 
possibly refine my request is, to go back to that, where there 
is an absolutely known charity with these assets in this 
country that is party to that U.N. Charter, and the Department 
is aware that they are not freezing those assets, that be 
shared with the subcommittees.
    And, Mr. Ross, I don't know if you want to add. Mr. Glass 
covered it probably pretty extensively.
    Mr. Ross. Mr. Glass has covered it very well. I do note for 
the record, I believe, in that article my superior did also 
point out the issues with respect to the legal and regulatory 
and structural problem about what is an asset in some of the 
countries.
    Mr. Platts. Maybe if you could followup--or jointly--
another specific, that apparently is going to be an identified 
listing of countries. We talked about the 191 having the 
obligation. And, Mr. Ross, you referenced 172 that have 
blocking orders in force.
    So there is 19 that, you know, are identifiable as not 
having blocking orders, of those 191. If we could have that 
shared with us, that would be great.
    If I can touch on one other issue quickly, and then send it 
back to you, Mr. Chairman.
    One is just the testimony. I appreciate a number of you 
talking about the Patriot Act. And I think, Mr. Whitehead, your 
statement sums it up, I think very importantly, for the public 
to understand the importance of that legislation and this 
battle against terrorism, and your quote, past terrorist 
financing methods--I am sorry, I am reading the wrong sentence. 
``The success in preventing another catastrophic attack on the 
United States homeland would have been much more difficult if 
not impossible without the act.'' And I appreciate your 
highlighting in some detail, as a number of you did in your 
written testimony, that the Patriot Act has gone a long way to 
giving you the tools of the 21st century to protect Americans 
here at home.
    And, you know, through this hearing, help the public to 
understand that there is a lot of misinformation, you know, or 
misunderstanding out there about the Patriot Act and how it 
impacts Americans versus allowing you to go after the bad guys. 
And I appreciate your specifically talking about it, as well as 
others, in your testimony; that has benefited this law 
enforcement effort.
    Thank you, Mr. Chairman.
    Mr. Putnam. Thank you, Mr. Platts.
    I want to return to Mr. Glass, if I may. You have 
represented your Department exceptionally well and been a very 
good diplomat. But you are the Director of the Office of 
Economic Sanctions Policy, and you have survived two different 
waves of questioning with only a passing reference to one 
continent.
    Surely you can give us some sense of those nations. You 
have already quantified it by saying that a third of the frozen 
assets are in the United States and two-thirds are abroad. Of 
those two-thirds of the assets that are abroad, where are they 
concentrated? What are the top two, three, five places where 
these other frozen foreign assets are located, as some way of 
giving us a better understanding of which nations are the 
source of the greatest volume of funds for terrorists?
    Mr. Glass. Mr. Chairman, I would have to defer to my--or 
perhaps invite my Treasury colleague to comment on this, 
because the data on which those conclusions are based is data 
that is compiled by the Department of the Treasury.
    They do have, as best they can put together, an indication 
as to which countries compile a certain amount of information 
on what assets are frozen. Some of that information is subject 
to various bank secrecy issues in those countries. And it is 
not State Department data. But nonetheless it does, I think, 
reflect some of the efforts.
    The one comment I would make is that my own viewing of that 
information seems to indicate that a lot of those assets are in 
places where money would normally pass through; that is, large 
banking centers, large financial centers around the world. But 
I don't know if, Jeff, you are in a position to----
    Mr. Ross. Bob, appreciate the hand-off. Of course, what I 
will do, Mr. Chairman, is I did not come prepared to identify 
countries. I will go back, and the Treasury Department will 
address this as a followup question, with respect to countries 
and freezing.
    One thing I cannot recall is if there are any restrictions 
on disclosure of the specific amounts by country. But if there 
are, obviously we will work very closely with the subcommittee 
to get you the information.
    Mr. Putnam. How about Customs? Who has been the most 
cooperative, and who has been the least cooperative in dealing 
with the post-September 11 changes that have occurred as we 
attempt to crack down on the terrorism financing and other 
money laundering and smuggling and things of that nature?
    Ms. Forman. Well, I can just address the countries we are 
dealing with in terms of the money laundering arena and some of 
the terrorist financing arena. In terms of the money 
laundering, drug money laundering in particular, we have an 
excellent relationship with the Colombian Government.
    Under Plan Colombia, we have several initiatives that have 
been put in place to address the black market peso exchange and 
narcotics money laundering. In regards to money laundering and 
terrorist financing, we work very closely with our Canadian 
counterparts, British counterparts, and various other European 
countries around the world. And we have had great success in 
that area.
    Mr. Putnam. For any of you, how cooperative have countries 
outside of Western Europe been, particularly those nations in 
Southern Asia and the Middle East and Africa? Understandably we 
are dealing with countries that do have less developed 
financial institutions, less developed regulatory frameworks.
    But I think what the two of us are struggling to grasp is, 
is the conventional wisdom correct that a substantial portion 
of the funding is coming from Saudi Arabia or is it not? Are 
our allies in Western Europe cooperating with us as strongly in 
the boardrooms and the banking houses of Antwerp and London and 
Paris as they are in other parts of the world militarily and 
diplomatically, or is there a gap there?
    Are the European financial centers--you are the former 
Consul General to Bern, Switzerland--are the Swiss banking 
houses cooperative, relatively speaking, or are they not? And I 
can't think of any other ways to ask the same question. But 
perhaps you all might help illuminate this a bit for the 
benefit of the public forum, rather than a memo to us in 2 
weeks that we read and glean the information that we need from, 
but essentially the purpose of a congressional field hearing, 
getting out of Washington and into the Tampa, FLs or the York, 
PAs of the world would be lost.
    So if you would, please help us understand better just how 
cooperative these other nations have been. For example, you 
mentioned the U.N. Web site that lists those countries 
participating. But in response to a number of Mr. Platts's 
questions, you correctly included the caveat that we remind, we 
work with, we encourage. We coerce. We incent those nations 
with whom we have diplomatic relations.
    Now, how many countries do we have diplomatic relations 
with that are members of the United Nations, and how many are 
members of the U.N. but do not enjoy official diplomatic 
relations with the United States. That may be a back channel 
for all of those funds, because we don't have relations, we 
don't have embassies, we don't have official ties that would 
allow us to encourage, incent, and coerce?
    Mr. Glass. Generally speaking, Mr. Chairman, those 
countries with whom we don't have diplomatic relations are for 
the most part those countries that are state sponsors of 
terrorism with whom we have no financial or banking 
relationships either, and we should not have any kind of 
financial interaction. And these are closely regulated and 
enforced by the U.S. Government.
    To address your question, if I might just try to take a 
stab at it, as to how cooperation is going around the world on 
terrorist finance, I think you rightfully noted that we have 
good cooperation with European Union member states. We talk to 
the Europeans on a regular basis. They have--not only do they 
have a mechanism for designating names from the United Nations, 
an automatic self-executing mechanism, but they also maintain a 
clearinghouse list for non-al-Qaeda-linked names that do not go 
to the U.N.
    These are also terrorist names, but they are not linked to 
al-Qaeda or the Taliban. That list has, and I don't have it 
with me today, but it has about 110, 120 names on it that have 
come from various corners of the world. There is an 
International Sikh group that is listed there. There are ETA 
names that are listed on that list. And the Europeans, when 
they add names to that list, they come to us and ask us to 
freeze those names as well on our list in the United States, 
which we do. These are names, as I mentioned, which do not 
qualify for asset freeze at the United Nations because of the 
way that the Security Council resolutions are written to focus 
primarily on al-Qaeda.
    Cooperation with the Europeans is good. I am happy to 
discuss that more if you want more detail there. But let me 
move on to some of the other regions.
    In the Middle East, cooperation varies from country to 
country. Around the Persian Gulf, we have had a number of very 
promising joint efforts with a number of countries there that 
have, for example, provided a large number of banking records 
in some cases. In other cases, they have conducted raids and 
shut down Hawala organizations. They have held conferences on 
Hawalas in order encourage countries throughout the region to 
implement regulatory measures to control Hawalas that have been 
very successful, that have resonated widely.
    They have frozen assets of individuals and entities in 
their countries. The situation with Saudi Arabia, which I 
provided more detail of in my testimony, is one that is a very 
important focus for the United States. We are in regular high-
level contact with the Saudi Government. Just several months 
ago, there was created an--under the leadership of the FBI, a 
joint task force with Saudi officials. I don't know if my 
colleague wishes to discuss more about that, but that has been 
mentioned in previous testimony. That is a very promising and 
very effective operation where we, U.S. investigators and Saudi 
Arabia investigators on the ground, are working full time to 
followup terrorist leads, including in the fields of terrorist 
finance.
    The Saudis have joined us in designating key Saudi 
financiers. They have joined us in designating some branches of 
al Haramain. There have been discussions with the Saudis about 
broader efforts against al Haramain, as well as other charities 
that are promising. But I don't--in this forum I am not in a 
position to get into the specifics of what we plan to do in the 
future with specific targets.
    Cooperation is improving. There is more to do. But it is 
improving and we are, we believe, seeing results. The Saudis 
have frozen assets of terrorists and terrorist supporters 
inside Saudi Arabia. Again, I don't know if I am in a position 
to share that information in this forum or not.
    In the case of Pakistan, a very important country as well, 
we have had ongoing discussions with the Pakistanis. The 
Secretary of the Treasury visited Pakistan in August or 
September of this year where there was discussion of terrorism 
finance. There are very important charities and organizations 
in Pakistan whose assets have been frozen, but there is a lot 
more in that country that needs to be done. We do have, 
however, a good working relationship with that country.
    In Asia, there has been a lot of terrorist activity in 
Asia, particularly by Jemaah Islamiyah. When we and 49 other 
countries submitted Jemaah Islamiyah to the U.N. for asset 
freezing I believe back in October 2002, it was the largest 
such effort against any organization by an international 
coalition, 50 countries asking the U.N. to designate and freeze 
this organization. That has taken place.
    And since that time, some additional 22 individuals have 
been added to the U.N. list. These are key financial people, 
financial and other leaders of Jemaah Islamiyah in Asia, and 
Asian countries are obliged to freeze assets of these 
individuals. Whether they have, and to what extent, depends in 
this case particularly to the degree as to whether they have 
the technical expertise to actually implement financial 
freezes. This is something where we are providing technical 
assistance and advice to several of these countries in Asia at 
this time in order to help build that capacity, to help them in 
this regard.
    And so there is an effort, there are cooperative efforts 
with countries going on.
    We have ongoing dialogs as well with Russia, with China, 
where they freeze assets. At least they tell us they do. We are 
not exactly sure how they go about this or how they implement 
freeze orders domestically in their individual systems. But we 
are told by their officials, by various parts of their 
governments, that they implement freeze orders.
    In other countries around the world, they will either tell 
us that they are implementing freeze orders, or they will 
request additional expertise and technical assistance to do so. 
But as I said, this is--this is something we are continuing to 
work at, where we do approach these governments on a routine 
basis. We do encourage them. And when they ask for technical 
assistance, we try to assist in that regard, and provide that 
expertise.
    Mr. Putnam. Thank you, Mr. Glass.
    Mr. Whitehead, my financial question is for you. You have 
dodged most of the bullets today. As someone who has been in 
the Washington office and in field offices all around the 
country, we would certainly presume, or at least hope that the 
benefits of the successive waves of legislation benefit the 
field offices the most.
    We hear a great deal from local law enforcement that there 
is insufficient information sharing. And at the Federal 
Government alone, we have a small slice of the different 
agencies and departments that also must share information 
critical to your successful outcome in an investigation.
    So my question to you would be, have you seen an 
improvement in information sharing, or are there still barriers 
because of security clearances, data base incapabilities, lack 
of interoperability? Are there still barriers, or has your 
ability to get your hands on all of the evidence, all of the 
information that the entire Federal Government has collected 
that may be of interest to you in your specific circumstance, 
is it where it ought to be?
    Mr. Whitehead. Well, thank you for giving me the 
opportunity to answer your last question here. There has been 
tremendous improvement since September 11 in that arena. Our 
JTTFs, with having representatives of all of the Federal 
agencies as well as local and State representatives working 
hand in hand every day, has tremendously improved the flow of 
intelligence.
    We have had tremendous successes in the integration. As Mr. 
Ross stated yesterday, or earlier, it is very effective to have 
those data bases available. Although they don't talk to each 
other, we have them colocated under one roof so that we can 
have access to all of those data bases, and that has been 
tremendously helpful to us.
    So the legislation that has been passed, that the Patriot 
Act has given us, is a tremendous tool in order to combat this 
problem. Probably one of the biggest examples of that here in 
Tampa, of course, is the al-Arian case, where we now, because 
of the wall going down between the classified and criminal 
side, we were able to use 9 years of gathered intelligence to 
support that criminal prosecution. So that is just a tremendous 
advantage for us.
    Mr. Putnam. That was as a result of the Patriot Act? 
Correct?
    Mr. Whitehead. Exactly. Because of the removal of the wall 
between the intelligence and criminal side which previously 
prohibited using that type of intelligence to support a 
criminal investigation, we were unable to do that. But now we 
are able to successfully support these cases. And this is an 
excellent example of how we have been able to use that as a 
result of the act. So this allowed the use of national security 
letters, which enabled us to obtain records, to gather 
intelligence in these cases has been tremendously helpful; 
prior to the act, we would have to obviously go to a court to 
get some type of court order in order to obtain their financial 
records or telephone records in these classified cases.
    And now we are able to do that on a national security 
letter, on my signature. So it has just been a tremendously 
helpful process to help us gather the intelligence we need to 
prevent acts of terrorism from occurring.
    Mr. Putnam. Thank you, Mr. Whitehead.
    Mr. Platts, do you have any final thoughts or last 
questions?
    Mr. Platts. If I could try to run through some real quick. 
And if it is OK, I would like to reserve the ability to submit 
some for the record.
    Mr. Putnam. Certainly. We will be making that motion at the 
end.
    Mr. Platts. OK. A final comment on Chairman Putnam and I 
both kind of pursuing the country issue and, I think, trying to 
summarize for why we see it as so important, for two primary 
reasons. One is the importance of this effort being 
comprehensive. You know, if 150 countries are doing a great job 
and 41 are not, we know where the terrorists are going to put 
all of their money. They are going to put it in the 41 that are 
not.
    And so, you know, the importance of us encouraging every 
nation to do what they have agreed to do, and again for the 
U.N. to mean something, if they are part of that agreement they 
need to comply with what they agreed to. And if they don't, it 
just--we know where the terrorists are going to go with those 
resources.
    The second is, you know, our Nation is a very generous 
Nation, and we have always been a beacon of hope for people 
coming here. But we have also been the beacon of hope for our 
willingness to go to other countries and provide assistance. 
And I think it is appropriate for taxpayers to know if a 
country is in need of assistance, humanitarian, health care, 
education, whatever it may be, and American taxpayers step up 
to the plate and say we are going to help, that we don't want 
to be doing that for a nation that is not helping us.
    And if there is a nation that is on their list saying, no 
we won't freeze those assets, well, that is fine. But don't 
look for America to, you know, come helping you and your 
citizens. And that is something that as policymakers in 
Congress we need to know. And that is something that would 
reflect--be reflected in the actions Congress takes when we 
pass appropriations bills. And those countries need to 
understand that our generosity maybe won't continue if they are 
not helping us to track down criminals, which is what we are 
after.
    So I think it is important to kind of phrase those two 
priorities as to why we kind of have to continue to seek some 
specifics. I will try to run through two or three items real 
quickly here and not get into as in depth as we have these 
other issues.
    One. Mr. Ross, just for the volume of information, and as 
we have changed the statute and regs regarding suspicious 
activity reports the volume that you are now handling has grown 
dramatically. Can you quickly summarize, one, from the 
technology standpoint, which relates to out of the 
subcommittee, your ability to use technology. From a funding 
standpoint, do you have the resources from Congress to 
assimilate this information you get; are you just doing the 
best you can, but there is no way you can handle all you are 
getting?
    Mr. Ross. Thank you, Mr. Chairman. I think, particularly 
from a financing perspective, that they are doing a much better 
job of using technology, particularly in the area of link 
analysis, which is data mining, which is a crucial area where 
what you do is you take disparate pieces of information; for 
instance in the SAR data base, in the narrative text, it could 
mention this phone number here, in another field on another SAR 
filed in a whole another place, that could mention the same 
phone number there. There are no linkages whatsoever between 
those two.
    However, if you purchase the right software and you apply 
the right package, through a link analysis you will find a 
commonalty between those phone numbers, telephone records, 
common addresses, common bank accounts. That type of approach 
is what is being utilized by FinCEN now. That approach is being 
used in the proactive reports that they are sending out to law 
enforcement. And I think I gave the statistics on the numbers, 
and the hundreds of those that have been sent out to law 
enforcement, quite a few implicating possible terrorist 
financing activities.
    So what we are doing is using existing and new technologies 
better to link financial data to get to the investigators who 
can then use that data to try to make their investigations. So 
I think we are comfortable.
    Mr. Platts. Are you strained from a human resource 
standpoint or financial resources in applying that technology?
    Mr. Ross. No, I don't believe we are. I would defer to a 
FinCEN specialist. I would have to get back with FinCEN. But 
from what I have seen, the numbers and quality of the reports 
going out are holding steady. What is more remarkable to me is 
the FinCEN ability to communicate with 29,000 financial 
institutions on these 314a requests that are coming in from law 
enforcement. Now, they are very refined. Those requests only 
can be made with respect to terrorist financing, and in the 
most significant money laundering cases.
    But as a result of those, as I believe I testified, there 
have been indictments, at least in part based on the responses 
from the financial institutions. There have been hundreds, I 
think, of grand jury subpoenas for the bank accounts. There 
have been thousands of tips and leads.
    So the technology now that is being applied--5 years ago I 
would have told you this is impossible, it can't be done--and 
today it is being done on a biweekly basis.
    Mr. Platts. Great. I am going to touch real quickly on two 
others. One that concerns me is the decision by Treasury on the 
Mexican Matricular Consular card being used for opening bank 
accounts as an acceptable means of identification.
    My understanding is Department of Justice, FBI, and perhaps 
the Secret Service don't support that decision to allow that as 
a form of identification because of the ease of which they can 
be acquired. If you would want to comment in defense of the 
Treasury, and if FBI and Secret Service, or if any of our 
panelists want to comment on your position.
    Mr. Ross. Thank you, Mr. Chairman. Yes, I will comment on 
this. We at Treasury decided that the financial institutions--
and I think an important thing to remember is that we are not 
talking exclusively about banks here, we are speaking of 
security brokers, mutual funds, brokerage houses, future 
commission markets. We are talking about a wide range of 
financial institutions that do business in a wide variety of 
capacities. This is not just a simple banking community.
    For risk-based analysis, what we have mandated, and we put 
out final regs in May 2003, are that these financial 
institutions must have written policies and procedures, a 
basis--which provides a reasonable basis for them to conclude 
that they are aware of the identity of the person with whom 
they are doing the business.
    We are aware of the concern with respect to Matriculars. We 
are aware of concerns probably with respect to driver's 
licenses, for instance.
    Mr. Platts. That is my last question. I was going to touch 
on that.
    Mr. Ross. I think any and all identification instruments 
can be abused. There is no question about that. The question--
our view at Treasury is that the financial institution itself, 
the one that has created the environment in which it operates 
and the one that is providing the service, has to be the one 
that is in--from a reasonable perspective, the best position to 
identify what is reasonable for them to have to identify the 
person with whom they are transacting business.
    Mr. Platts. But if our Federal Government is saying that 
this other Federal Government's official identification is 
acceptable--I mean, that we recognize it--who is the bank then 
to say, no, we are not going to recognize the Mexican 
Consulate's identification they have provided? I mean, it 
really to me falls to us to say is that acceptable or not, that 
specific form; as opposed to having, how many institutions did 
you--the tens of thousands, you know, to have all of them 
individually saying, this is acceptable. It worries me, because 
when we are trying to have that comprehensive effort, we have a 
gaping, you know, hole here that a terrorist can get through, 
because of how easily these identifications can be acquired.
    Mr. Ross. Well, as I said, we are aware of the concerns. We 
do not believe that we have sufficient discrete information to 
suggest that a particular item of identity is more likely not 
to be accurately either attained or to have accurate 
information on it than other items of information.
    The problem with trying to identify--trying to use a 
regulation such as 326 where you are going after a wide variety 
of financial institutions offering a wide variety of services 
is if you try go down the path and say this is good, this is 
bad, you are going to end up with a regulation that is 
constantly going to tend to morph and to be changed.
    We are trying to work a regulation that allows--reasonably 
allows us to be able to identify who the account holders were. 
And we understand that there are differences of opinion on this 
point.
    Mr. Platts. If I can wrap up with the FBI and Secret 
Service on that specifically. Do you believe that we should 
continue to allow this form of identification to be accepted? 
And related to it, regarding driver's licenses, should we at 
the Federal level prohibit individuals who are not legally 
present in the United States to have driver's licenses, given 
how they are accepted as an official form of identification? So 
that--two different issues, but very much related to who is 
this person and are they who they say they are, and are they 
here lawfully?
    Mr. Whitehead. Well, clearly the use of fraudulent 
identifications is a major problem for us in these 
investigations and has unfortunately been one that is difficult 
to get our arms around as far as constantly trying to identify 
individuals and developing intelligence on it.
    As far as the position on whether we agree with the use of 
these cards or not, we are going to have to defer to my 
national office TFOS, to give you any current positions from 
headquarters.
    Mr. Fabian. Actually, I don't know if I can speak to that 
issue. I don't know if I can address that issue specifically. I 
would say that all of us here at the table, I am sure all of us 
on the panel recognize that the purpose of having 
identification when opening accounts, conducting financial 
transactions, that there is a reasonable expectation that 
information is correct and legitimate.
    In fact, the Patriot Act strengthened the ability of the 
banks to determine those that were opening accounts and 
requires specific information. So I think any----
    Mr. Platts. I guess if we could whether--which of you would 
maybe followup is what is the FBI's official position 
specifically on Matriculars; you know, should they be allowed 
as an acceptable form of identification for opening up a bank 
account in that--by the Federal Government?
    Mr. Fabian. I am sorry.
    Mr. Platts. If we can have that followup to the 
subcommittee, that would get to the exact point. With the 
Secret Service?
    Mr. Townsend. With your permission, we would submit for the 
record on that issue. With regard to the driver's license 
issue, if I can parcel your question with regard to the 
possession, we will also submit for the record on that.
    But I would like to let the subcommittee, the chairmen 
know, that the Secret Service has an ongoing initiative with 
the American Association for Motor Vehicle Administrators, the 
Document Security Alliance, to continue to address this issue 
of our 50 different driver's licenses and the attendant 
problems.
    It is something that we think we can bring some expertise 
to with regard to our document analysis capabilities. And it is 
something that is ongoing. We meet with those associates 
regularly. It is something that we recognize as a real concern. 
We are endeavoring to bring the technology that is available 
into driver's licenses.
    And, of course, as you are aware, you are dealing with 50 
separate State legislatures. It is not something that is going 
to be an overnight fix. But these two organizations, AMVA and 
the Document Security Alliance, I think it is a good 
partnership. And the issue that you bring up is one that is at 
the forefront.
    Mr. Platts. I appreciate it. That gets to that second part, 
coming out of the State house myself, and Adam as well, in 
having that uniformity. And if there is guidance from your work 
with the national association, of the State administrators, the 
highway administrators, that we need legislation, legislation 
that would through Federal funding help provide that, you know, 
coordination and that uniform driver's license so we have the 
ability for one State to better talk to another, that this guy 
has already got a license here and not let him get five other 
ones in different States.
    We would welcome that feedback if you believe that, as you 
are working with the association, there is a need for a 
legislative approach. Because I support that effort. And having 
that uniformity would be very helpful. I appreciate your both 
following up with specifics on the driver's license and the 
Matriculars.
    And, Mr. Chairman, I just want to thank you for your 
patience with me, as I do have more questions, but I will 
submit those for the record to followup.
    And again I appreciate our witnesses and your allowing me 
to join you at this hearing today.
    Mr. Putnam. Thank you, Mr. Platts. I also have a number of 
questions. And that being the case, since there are questions 
that we did not have time for today, the record will remain 
open for 2 weeks for submitted questions and answers. And we 
appreciate the panelists' full cooperation in responding.
    I want to thank you, Mr. Platts and your staff, as well as 
the staff of the Subcommittee on Technology for putting 
together this hearing. It is always a challenge to organize a 
field hearing outside of Washington with the logistics.
    And I appreciate the witnesses cooperating as well as with 
their travel schedules. We want to thank you for all of your 
participation. Agencies and law enforcement have a tremendous 
task before them. I think that we clearly have made progress, 
but there is also still room for improvement.
    As we have discovered in other areas of the Federal 
Government, grappling with the coordinating efforts and 
communicating vital information between agencies is an 
important component to our eventual success.
    Without that cooperation on all levels, our goal of choking 
off terrorist financial networks will be difficult to realize.
    With that, we appreciate the participation of the audience. 
And we certainly want to thank the Port Authority for their 
cooperation in allowing us to use their particular venue, 
particularly George Williamson and John Thorington with the 
Port Authority.
    With that, the subcommittees stand adjourned.
    [Whereupon, at 2:35 p.m., the joint subcommittee hearing 
was adjourned.]

                                 
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