[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]
IMPROVING FINANCIAL OVERSIGHT:
A PRIVATE SECTOR VIEW OF ANTI-MONEY
LAUNDERING EFFORTS
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON
OVERSIGHT AND INVESTIGATIONS
OF THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTH CONGRESS
SECOND SESSION
__________
MAY 18, 2004
__________
Printed for the use of the Committee on Financial Services
U.S. GOVERNMENT PRINTING OFFICE
95-012 WASHINGTON : 2004
_____________________________________________________________________
For sale by the Superintendent of Documents, U.S. Government Printing
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800
Fax: (202) 512-2250 Mail: Stop SSOP, Washington, DC 20402-0001
Serial No. 108-87
HOUSE COMMITTEE ON FINANCIAL SERVICES
MICHAEL G. OXLEY, Ohio, Chairman
JAMES A. LEACH, Iowa BARNEY FRANK, Massachusetts
DOUG BEREUTER, Nebraska PAUL E. KANJORSKI, Pennsylvania
RICHARD H. BAKER, Louisiana MAXINE WATERS, California
SPENCER BACHUS, Alabama CAROLYN B. MALONEY, New York
MICHAEL N. CASTLE, Delaware LUIS V. GUTIERREZ, Illinois
PETER T. KING, New York NYDIA M. VELAZQUEZ, New York
EDWARD R. ROYCE, California MELVIN L. WATT, North Carolina
FRANK D. LUCAS, Oklahoma GARY L. ACKERMAN, New York
ROBERT W. NEY, Ohio DARLENE HOOLEY, Oregon
SUE W. KELLY, New York, Vice Chair JULIA CARSON, Indiana
RON PAUL, Texas BRAD SHERMAN, California
PAUL E. GILLMOR, Ohio GREGORY W. MEEKS, New York
JIM RYUN, Kansas BARBARA LEE, California
STEVEN C. LaTOURETTE, Ohio JAY INSLEE, Washington
DONALD A. MANZULLO, Illinois DENNIS MOORE, Kansas
WALTER B. JONES, Jr., North MICHAEL E. CAPUANO, Massachusetts
Carolina HAROLD E. FORD, Jr., Tennessee
DOUG OSE, California RUBEN HINOJOSA, Texas
JUDY BIGGERT, Illinois KEN LUCAS, Kentucky
MARK GREEN, Wisconsin JOSEPH CROWLEY, New York
PATRICK J. TOOMEY, Pennsylvania WM. LACY CLAY, Missouri
CHRISTOPHER SHAYS, Connecticut STEVE ISRAEL, New York
JOHN B. SHADEGG, Arizona MIKE ROSS, Arkansas
VITO FOSSELLA, New York CAROLYN McCARTHY, New York
GARY G. MILLER, California JOE BACA, California
MELISSA A. HART, Pennsylvania JIM MATHESON, Utah
SHELLEY MOORE CAPITO, West Virginia STEPHEN F. LYNCH, Massachusetts
PATRICK J. TIBERI, Ohio BRAD MILLER, North Carolina
MARK R. KENNEDY, Minnesota RAHM EMANUEL, Illinois
TOM FEENEY, Florida DAVID SCOTT, Georgia
JEB HENSARLING, Texas ARTUR DAVIS, Alabama
SCOTT GARRETT, New Jersey CHRIS BELL, Texas
TIM MURPHY, Pennsylvania
GINNY BROWN-WAITE, Florida BERNARD SANDERS, Vermont
J. GRESHAM BARRETT, South Carolina
KATHERINE HARRIS, Florida
RICK RENZI, Arizona
Robert U. Foster, III, Staff Director
Subcommittee on Oversight and Investigations
SUE W. KELLY, New York, Chair
RON PAUL, Texas, Vice Chairman LUIS V. GUTIERREZ, Illinois
STEVEN C. LaTOURETTE, Ohio JAY INSLEE, Washington
MARK GREEN, Wisconsin DENNIS MOORE, Kansas
JOHN B. SHADEGG, Arizona JOSEPH CROWLEY, New York
VITO FOSSELLA, New York CAROLYN B. MALONEY, New York
JEB HENSARLING, Texas JIM MATHESON, Utah
SCOTT GARRETT, New Jersey STEPHEN F. LYNCH, Massachusetts
TIM MURPHY, Pennsylvania ARTUR DAVIS, Alabama
GINNY BROWN-WAITE, Florida CHRIS BELL, Texas
J. GRESHAM BARRETT, South Carolina
C O N T E N T S
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Page
Hearing held on:
May 18, 2004................................................. 1
Appendix:
May 18, 2004................................................. 31
WITNESSES
Tuesday, May 18, 2004
Aufhauser, David D., Senior Counsel, Center for Strategic and
International Studies and Counsel, Williams & Connolly LLP..... 6
Byrne, John J., Director of Center for Regulatory Compliance,
American Bankers Association................................... 8
Cachey, Joseph III, Vice President, Global Compliance and Chief
Compliance Officer and Counsel, Western Union Financial
Services, Inc.................................................. 10
Emerson, Steven, Executive Director, The Investigative Project... 14
Richards, James, Operations Executive for Global Anti-Money
Laundering, Bank of America.................................... 12
APPENDIX
Prepared statements:
Kelly, Hon. Sue W............................................ 32
Aufhauser, David D........................................... 34
Byrne, John J................................................ 40
Cachey, Joseph III........................................... 50
Emerson, Steven.............................................. 61
Richards, James.............................................. 72
IMPROVING FINANCIAL OVERSIGHT:
A PRIVATE SECTOR VIEW OF ANTI-MONEY
LAUNDERING EFFORTS
----------
Tuesday, May 18, 2004
U.S. House of Representatives,
Subcommittee on Oversight and Investigations,
Committee on Financial Services,
Washington, D.C.
The subcommittee met, pursuant to call, at 10:07 a.m., in
Room 2128, Rayburn House Office Building, Hon. Sue Kelly
[chairwoman of the subcommittee] presiding.
Present: Representatives Kelly, Hensarling, Garrett,
Gutierrez, Inslee, Moore, Maloney, and Matheson. Also present
was Representative Royce.
Chairwoman Kelly. [Presiding.] This hearing of the
Subcommittee on Oversight and Investigations will come to
order.
An effective money laundering system relies on a
collaborative effort from the public and private sectors. This
effort has received additional scrutiny recently due to
problems at Riggs Bank, an instance where the public-private
collaboration stumbled badly in protecting the public's best
interest. It is evident that the public and private sectors
must continue to improve the way that suspicious activity is
detected, reported and analyzed.
Today we examine ways to improve the oversight and
utilization of transaction information by regulatory and law
enforcement agencies so the failures at Riggs are the last of
their kind in our country.
The current enforcement structure we have put in place to
enforce our anti-money laundering laws disperses various levels
of responsibility through a convoluted group of Treasury
bureaus and independent agencies. It resembles somewhat a bowl
of spaghetti. While these agencies have been focused on efforts
to oversee the safety and soundness of our financial
institutions for decades, they must embrace new
responsibilities which acknowledge that money laundering is no
longer a second-tier issue for financial regulators.
Of particular interest to this subcommittee are proposals
to simplify the governmental structure so that regulation and
compliance for these laws are better unified, perhaps even
under the auspices of a single entity.
Given the vulnerabilities exposed by the Riggs case, I am
inclined to believe that the current structure is a relic of a
foregone era and that substantive organizational reforms are
necessary. At a bare minimum, Congress should begin now an
active and thorough assessment of proposals aimed at
strengthening our enforcement regime. This subcommittee intends
to do just that in the coming weeks and months, and therefore I
look forward to testimony from some of our witnesses as to how
we might significantly improve the effectiveness of our system
without creating yet another layer of bureaucracy.
Our financial regulators must place a strong emphasis on
compliance through rigorous oversight, taking swift and
forceful action for non-compliance when necessary. This
oversight includes working with the private sector to develop
accurate risk assessments that enable examiners to focus on
specific institutions, because resources need to be
concentrated appropriately.
The continued leadership of the administration and the
Treasury Department is essential to improving financial
oversight. Earlier this year, President Bush signaled his
commitment to the war against terror by proposing a 14 percent
increase in funding for the Financial Crimes Enforcement
Network. FinCEN plays a key role in efforts to stop financial
crimes by working with the financial community and supporting
local, State and Federal law enforcement and intelligence
agencies.
The administration has also announced the creation of the
Office of Terrorism and Financial Intelligence--the acronym for
that they are using is TFI, Terrorism and Financial
Intelligence--within the Department of the Treasury to unify,
under one structure, the functions of several offices. I
applaud the administration for its efforts to streamline and
centralize our anti-money laundering efforts. There must be
greater communication between FinCEN, law enforcement, banking
regulators and financial institutions, and I believe this
office was an important step toward improving this
coordination.
Now we must work to bring the next steps into focus. As
evidenced by the failures of Riggs Bank and its regulator, the
OCC, it is time to explore further reforms that improve the
overall structure of our anti-money laundering efforts. It is
unacceptable that a Washington, D.C.-based bank with the
largest embassy banking clientele allowed tens of millions of
dollars to pass unnoticed and unreported through accounts
belonging to Saudi Arabian government officials. This activity
continued even after a consent order was put in place last
year. The mechanisms we put in place to detect and report
suspicious activity failed, and they failed repeatedly. We no
longer live in a world where such failures can be tolerated.
I thank the witnesses for appearing here today. You are on
the front line of these efforts, and I look forward to hearing
your views on how we can continue improving financial
oversight.
I turn now to our ranking member, Mr. Gutierrez.
[The prepared statement of Hon. Sue W. Kelly can be found
on page 32 in the appendix.]
Mr. Gutierrez. Good morning, Madam Chairman, and thank you
very much for calling this hearing today. It is important,
especially given recent events, that we closely examine our
anti-money laundering efforts and whether they are sufficient.
I welcome the witnesses here today and look forward to their
testimony.
I understand that many financial institutions are truly
committed to this effort, and I welcome their suggestions for
improving compliance. However, I am concerned about the
commitment of the relevant regulators to this effort, because
criminals will always seek out the weakest link in the chain
and will exploit any lapses in supervision.
After September 11, the passage of the PATRIOT Act, bank
regulators were given more tools to combat terrorist financing,
building on the foundation of existing anti-money laundering
efforts. I am truly troubled by the Riggs situation. It
represents not merely a failure of one institution's internal
controls but a fundamental flaw in its regulation. It is my
understanding that the flaws in Riggs' systems were long-
standing and systematic, dating back well before the PATRIOT
Act.
The consent order of last week is something that should
have happened 2 years ago, if not earlier. I don't understand
why the OCC was not more vigilant on this front and why it took
them so long to take these actions. September 11 was a wake-up
call for the industry and should have been for regulators as
well. Our safety depends on banks and bank regulators to be on
the forefront, on the front lines and prevent terrorists from
using international financial systems to fund their activities.
I understand that the regulators take the risk-based
approach to examining books under their purview, and I can't
imagine why Riggs' book of embassy business would not have
placed them in a category demanding extra scrutiny.
I am very concerned that the regulator has not made this
responsibility a higher priority or that their resources may be
spread too thin to fulfill their obligations. I have previously
expressed concern about the OCC's attempt to broaden their
portfolio into areas that Congress has not authorized without
commensurately increasing their operational budget. In fact,
the Financial Services Committee is on record in agreement with
me on this point.
This recent incident with Riggs makes me even more
concerned about the OCC's operations, and I really believe they
should be testifying here today. Chairwoman Kelly, I know you
share my concerns here, and I hope we can work together to get
the OCC to testify before our subcommittee regarding this
issue. I want to know if they have actively looked at every
major bank that could have potential terrorist financing issues
and what steps they have taken to aggressively control these
issues.
One final point: The OCC issued its findings late last
Thursday, and Friday a Maryland woman called her congressman
and she was very concerned about her account at Riggs Bank. She
was referred to the Banking Committee staff, and she said she
wanted to talk to the regulators. My staff supplied the phone
number for the OCC's Customer Assistance Group, but,
unfortunately, they don't operate on Fridays. They only work 4
days a week. They only talk to consumers 4 days a week and then
only from 9 o'clock to 4 o'clock.
So that woman had to wait from Thursday until Monday before
she could possibly reach someone at the OCC. I think this
agency is not concerned about consumers, and I have doubts
about their commitment to anti-money laundering efforts.
Thank you, again, Chairman Kelly, for calling this hearing
and for your leadership on this vital issue.
Chairwoman Kelly. Thank you, Mr. Gutierrez, and it is my
intention, as you know, to continue discussing with the various
agencies who have this responsibility what we can do to make
sure there are no more failures of this type.
Mr. Royce?
Mr. Royce. Let me begin by thanking the Chair for calling
this hearing today, and I am very grateful for your interest
and leadership on this topic.
I think we are very fortunate to have with us this morning
two of the countries foremost experts on terrorism, and I think
it is unfortunate that both Mr. Aufhauser and Mr. Emerson have
for so long been right on their predictions about our long
fight against terrorism.
In both cases, they have warned us that what we are in for
is a long struggle against a movement, not an organization but
a movement, and it is a movement of a very extreme arm of the
Wahabi Sect that is determined to ruin our way of life.
From the perspective of a member of this committee and of
the International Relations Committee, I could not agree more
with the assessments that they have made. We cannot win the war
on terror unless the global community works to cut off the flow
of funds that terrorists use and that terrorists receive.
Certain terrorist acts do not require vast amounts of funding;
however, the costs of indoctrination, the costs of recruitment
and sustainability for their operations are quite high. If
these rogue terror groups have no financial support, it is very
difficult for them to continue to operate effectively.
In my view, the question we need to ask as members of the
committee is how can the Financial Services Committee play a
lead role in the fight on terror? We have the world's best
safety and soundness financial regulators. As a part of their
job, these regulators are also tasked to enforce the Bank
Secrecy Act and certain provisions of the PATRIOT Act. This
committee needs to emphasize the importance of that role to
these regulatory agencies.
I think we may need to create a new structure and we may
need statutory changes whereby each safety and soundness
regulator would have a designated group that works hand in hand
with the newly created Office of Terrorism and Financial
Intelligence in the Treasury Department.
The Bank Secrecy Act and the PATRIOT Act give our examiners
a number of tools to fight terror finance. This committee
should lead Congress down the path of creating an environment
where financial intelligence is gathered and then is shared and
analyzed and used appropriately and effectively.
As Mr. Aufhauser argued in his testimony that he is going
to present to us, ``Much of the information that is submitted
to the government under the Bank Secrecy Act is merely lodged
like a book like a library shelf without a card catalog,'' in
his words.
In the absence of an express and pointed request from law
enforcement, he says, ``the information remains unexploited.
Surely we ought to have an artificial intelligence program that
red flags patterns and concerns for investigation without
specific targeted inquiry.'' He is absolutely correct. Not only
do we need to utilize the PATRIOT Act, but we need to use it to
data mine and to uncover terrorist activity.
And, again, I thank Chairwoman Kelly for her leadership on
this subject, and I very much look forward to hearing the
testimony of our witnesses this morning.
Chairwoman Kelly. Thank you very much, Mr. Royce.
Ms. Maloney?
Mrs. Maloney. In the interest of time, I am just going to
place my comments in the record and wait for the testimony.
Thank you.
Chairwoman Kelly. Thank you.
Mr. Hensarling, you have no statement?
Mr. Matheson?
Mr. Moore?
Mr. Garrett? Oh, all right.
We now turn to our panel of witnesses. Thank you. It is a
pleasure to welcome back to the committee Mr. David Aufhauser,
the former general counsel of the Treasury Department who is
currently with the law firm, Williams & Connolly. While at the
Treasury Department, Mr. Aufhauser was the Chair of the U.S.
Government Coordinating Committee on Terrorism Financing and a
leader in implementing the USA PATRIOT Act. Through his work,
he has helped shape our war against terror.
I am also very pleased to introduce Mr. John J. Byrne, the
director of the Center for Regulatory Compliance for the
American Bankers Association. Mr. Byrne has over 20 years of
experience in regulatory and educational efforts on money
laundering, asset forfeiture, computer security, privacy and
other general electronic banking and compliance issues. He was
the first private sector recipient of FinCEN's Director's Medal
for Exceptional Service.
In addition, the subcommittee welcomes Mr. Joseph--let me
make sure I am pronouncing it, Cachey? Cachey--representing
Western Union. Mr. Cachey is responsible for administering
compliance with the requirements of the Bank Secrecy Act.
Regulations of the Office of Foreign Assets Control and related
anti-money laundering and anti-terrorist financing laws in 196
countries in which the Western Union conducts its business.
Our next witness is James Richards, a senior anti-money
laundering executive at Bank of America. Mr. Richards was
formerly a supervisor of the Narcotics Forfeiture Group as the
Massachusetts district attorney. He is also a Canadian
barrister and later served as the BSA compliance and financial
intelligence director with Fleet Financial.
Finally, the subcommittee will hear from Steven Emerson,
the executive director of the Investigative Project, a well-
known expert on international terrorism and terrorist
financing. Mr. Emerson has shared his very important insights
with this subcommittee on a number of occasions in recent
years. His expertise is based on daily contact with sources in
government and key financial institutions as well as his
participation in major terrorist financing cases.
I thank all of our witnesses for your appearance here today
and for your testimony. Without objection, your written
statements will be made part of the record. You will each be
recognized for a 5-minute summary of your testimony. I don't
know if anyone needs this, but I am going to remind you that
there is a box on the end of each table. The green light means
you have 5 minutes for your testimony, the yellow light means
there is one minute remaining, and the red light means that we
would like you to summarize your testimony. If you haven't
gotten to the end, please summarize and let us move on to the
next witness. Thank you very much.
And let us begin with you, Mr. Aufhauser. Thank you very
much for being here.
STATEMENT OF DAVID D. AUFHAUSER, COUNSEL, WILLIAMS AND CONNOLLY
LLP
Mr. Aufhauser. Thank you. It is an honor to be here. When I
was at a Treasury I had a big staff and so I would get my
testimony in early. I apologize that I got it into you about 7
minutes ago.
Chairwoman Kelly. Don't worry about that Mr. Aufhauser. It
is valuable one way or another, so we accept it.
Mr. Aufhauser. For that reason, I am actually going to
refer to much of it, but I think I can do it in 5 minutes. It
was written knowing how this committee operates.
Probably one of the most vexing issues that this committee
faces is the unprecedented nature of the threat of terrorism.
The DNA of war has changed and changed inalterably. Confirming
the asymmetry power of our military, no force is going to
confront the United States on a conventional battlefield, at
least currently, with a uniformed army under a recognized flag
of state. Nor is there, importantly, a finite list of strategic
targets to bunker with concrete and steel. Rather, the highest
of profile targets are said to be soft, open to the most
outrage and the most unspeakable scenes of mayhem. It is a
school bus, it is a marketplace, it is a monument, it is a
place of worship, indeed, it is this hall of Congress.
The greatest infamy, of course, in this uncommon war is the
premium placed on the death of innocent people. Bullets and
boots on the ground will not alone protect us. This is shadow
warfare and it requires a rethink of how do you defend a
nation. Every element of national power must be brought to
bear, even the finance ministry of the United States, as
anomalous as that may sound to folks.
With so many targets that defy military purpose and,
therefore, escape common measures of detection, the three most
critical factors that emerge as you talk about forging a new
national power defense are, one, the need for enhanced
intelligence, two, the leveraging effect of disrupting the
logistical lines that constitute the purchase for stealth, and
the need for a genuine partnership between business and
government.
The funding of terror, the financing of terror, the money
of terror is the one common denominator in all three theorems.
First, as Congressman Royce pointed out, it is virtually the
only intelligence that has true integrity in this war. The rest
is a product of deceit or treachery or bribery or betrayal and
sometimes torture. But the record, the financial records that
you discover don't lie. They are diaries, they are confessions
of which can save a populace, as was the case from a mass
poisoning of ricin in the London subway system.
Indeed, when we read about the capture of Hambali several
months ago, what was trumpeted was of course what we can learn
from his interrogation. What was not trumpeted, and probably
was more important than anything we are learning from his
interrogation, is what was in his PC and what the PC contained
in terms of his financial dealings.
Second, the ambition of a terrorist cell is defined by its
resources, much like the ambitions of a business or a
government. Moreover, the only link in the chain of terror that
is subject to deterrence is the would-be banker who otherwise
enjoys his anonymity and his affluence and his family's
prominence. If he can be deterred--that is to be distinguished
from the man who puts a bomb, straps a bomb on himself and
walks into a marketplace, he is implacable, he is beyond
redemption--but the banker who enjoys his anonymity, he can be
stopped if he fears discovery and the loss of his freedom. If
we can cut him short, we can cut the designs of terrorism
short.
Third, no one is better suited to help police our financial
borders than the financial services community and most of the
folks on this panel. Indeed, the infinite number of ways that
money can be spirited around the globe with the intention of
killing people drives the need for more gatekeepers than this
government has. That is in part the genius and in part the
burden of Title III of the PATRIOT Act. To be sure, it is was
and is at best a proxy for getting at a lethal challenge that
we have never encountered before. I think, as I say later, it
is very hard to judge the character of money. And in fact, when
you talk to professionals to my left, it is characterized as a
cliquesodic adventuresome idea.
And maybe it oughtn't be tried in a time of peace but we
are at war, and if we don't try it, we abdicating the single
most promising way to stop violence attributed to terror.
Changing people's hearts and minds is a generational challenge.
Stopping the logistical lines that fuels the terror, which is
to say the money, is what we can do and what we should do and
what our resources should be devoted to doing.
Now, there were great successes, as my testimony suggests,
from the existence of the scrutiny at our financial borders,
and my time is running fast. There are six specific suggestions
I set forth in my testimony for continuing oversight by this
committee. The most promising, I think, is the 314 safe harbor
that has been established for discussions between one financial
institution and another to do their own kind of scrutiny.
For whatever reasons, and perhaps the professionals to my
left will tell us, I don't think that has borne the fruit it
can bear. There are a host of other recommendations that I
make--do I have--well, I had more time than I thought.
Chairwoman Kelly. Mr. Aufhauser, just go ahead and
summarize. We are here to hear your testimony.
Mr. Aufhauser. Well, let me refer to this because it is
constructive. I mentioned 314 and the dialogue that we ought to
encourage between financial institutions to talk about
suspicious activity. Similarly, the government has an
obligation to share reciprocal information with the financial
institutions. That has been devilishly difficult because to do
so has a procedural hurdle, which is the secure transmission of
very sensitive data, and a substantive hurdle, which is you
don't want to jeopardize ongoing investigations.
A lot of people are thinking about that. No one has found
the panacea. Perhaps this committee can help, help examine
that, so that the dialogue from government to financial
institutions is complete and seamless and that we can be allied
in guarding our financial borders.
We have yet to develop a topology for terrorist financing.
I think it is because it is very difficult, but with all the
intellectual caliber of the Silicon Valley and the financial
community, I am convinced we can do it and that we have to have
a war-like cabinet to make it happen.
Finally, very significantly, a lot of foreign countries
have followed our lead in the adoption of anti-money laundering
legislation, but it is at the wholesale level, as the finance
minister of Pakistan said to me, ``David, we need to take it
retail, and we don't have the capability of taking it retail.''
So this committee should explore and urge a significant uptick
in capacity-building, particularly in transitional economies
about how to enforce and how to train people to enforce
effectively anti-money laundering legislation and to combat
terrorist financing.
I have more but I don't want to intrude on other people's
time.
[The prepared statement of David D. Aufhauser can be found
on page 34 in the appendix.]
Chairwoman Kelly. Mr. Aufhauser, thank you. I know you have
more. All of your testimony will be in the record, and if we
have time, I hope that the questions will bring out any
testimony that you may be unable to give at this moment. But if
not, I will probably go back and ask everyone to summarize
again because this is a very important topic.
We move to you, Mr. Byrne.
STATEMENT OF JOHN BYRNE, DIRECTOR OF CENTER FOR REGULATORY
COMPLIANCE, AMERICAN BANKERS' ASSOCIATION
Mr. Byrne. Madam Chairman and members of the subcommittee,
the ABA appreciates this opportunity to represent the committed
men and women in the banking industry that work daily wit the
USA PATRIOT Act on all of the laws covering the anti-money
laundering obligations. When we last appeared before your
subcommittee in March of 2003, ABA outlined a series of
recommendations regarding needed areas of improvement to USA
PATRIOT Act oversight.
We are pleased to report that a number of areas of concern
have been addressed, and our partners in the government
continue to work closely with the industry on needed
improvements. We ask, however, that the regulatory agencies and
law enforcement address several of the remaining 2003
recommendations.
In addition, ABA has two more recommendations. First, there
needs to be a dramatic change in routine cash reporting under
the Bank Secrecy Act so that there can be intelligent and
efficient use of resources by both the government and the
private sector in the continuing challenge of preventing our
financial system from being used by criminals. Next, with the
increased attention being placed on risk-based compliance, the
industry needs clear and concise guidance on suspicious
activity reporting obligations.
Last year, we repeated our frustration that the Treasury
Department had never fulfilled the 1994 statutory mandate to
publish an annual staff commentary on Bank Secrecy Act
regulations. As we stated at the time, ``This indifference to
congressional direction has contributed to industry confusion,
examination conflicts and inconsistent interpretation of Bank
Secrecy Act obligations.''
We are pleased to report that FinCEN director, William Fox,
has expressed his commitment to improved guidance through the
use of advisories and commentary. We reiterate our promise to
work with FinCEN and the appropriate agencies to achieve this
overdue goal.
While we repeat our 2003 call that Congress ask the
regulatory agencies to report on efforts in coordinating Bank
Secrecy Act exams, we have seen a commitment to consistency in
the past several months. For example, not only has FinCEN
Director Fox expressed public support for uniform assessments,
but he has also directed the Bank Secrecy Act Advisory Group to
form a Subcommittee on Exam Issues. This subcommittee, co-
Chaired by the ABA and the Federal Reserve Board, will review
existing guidance and offer appropriate recommendations. We
would be happy to report to this committee on our findings.
With the increased entities required to file suspicious
activity reports, as well as the heightened scrutiny by
regulators on SAR policies and programs, it is essential for
the regulatory agencies, law enforcement and FinCEN to assist
SAR filers with issues as they arise. This need is particularly
obvious in the area of terrorist financing. As you heard from
Mr. Aufhauser, this crime is difficult, if not impossible, to
discern as it often appears as a normal transaction.
We have learned from many government experts that the
financing of terrorist activities often can occur in fairly low
dollar amounts and with basic financial products. Guidance in
this area is essential if there is to be effective and accurate
industry reporting. The bottom line is that terrorist financing
can only be deterred with government intelligence shared with
the financial services industry.
Recently, several financial institutions have contacted ABA
about examiner criticisms received in reviews of their
Suspicious Activity Report programs due, in large part, to the
number of SARs that the institution has filed. These financial
institutions expressed the concern, which we share, that the
number of SARs filed meets a minimum threshold or that
institutions are not filing the same number of SARs as peer
institutions. The concern expressed is that there be new
requirements in the form of a quota for determining the
adequacy of SAR programs consisting, in large measure, of
counting the number of SARs filed and, in some instances,
comparing the number of SARs filed between peer institutions.
Obviously, this would be a significant and alarming development
in the examination and review process.
Moreover, regulatory scrutiny of SAR filings, and the
recent civil penalty assessed against Riggs Bank for SAR
deficiencies, has and will cause many institutions to file SARs
as a purely defensive tactic to stave off unwarranted criticism
or second guessing of an institution's suspicious activity
determinations. Obviously, if that continues, the legitimacy of
the information in the SAR database will be called into
question.
In terms of routine cash reporting, a February analysis by
FinCEN shows that over half the CTRs filed would be eliminated
if the current $10,000 threshold were raised $20,000 for
businesses. The current dollar amount was created 35 years ago.
While $10,000 is still a large amount of cash for individuals
and probably should not be raised, reports on routine
businesses simply clog the system.
Those who would argue that a change in CTR reports will
lessen the banks' focus on cash transactions need to be
reminded that the industry will still have reporting
infrastructures in place, be required to file SARs on
suspicious transactions and would retain the mandate to report
individual CTRs over $10,000. We believe now is the time to
adjust a process that is in sorely need of repair.
The ABA has been in the forefront of industry efforts to
develop a strong public-private partnership in the areas of
money laundering and now terrorist financing. This partnership
has achieved much success but we know more can be accomplished.
We commend the Treasury Department, the banking agencies and
FinCEN for their recent efforts to ensure a workable and
efficient process. We will continue our support for those
efforts.
Thank you for this opportunity, and we will be happy to
answer any questions.
[The prepared statement of John J. Byrne can be found on
page 40 in the appendix.]
Chairwoman Kelly. We thank you for your testimony, Mr.
Byrne.
Mr. Cachey?
STATEMENT OF JOSEPH CACHEY III, VICE PRESIDENT, CHIEF
COMPLIANCE OFFICER AND COUNSEL, GLOBAL COMPLIANCE
Mr. Cachey. Thank you, Madam Chairman and committee
members. Western Union is a global leader in money transfer,
and you are correct, we do business in 195 countries and
territories around the world through 185,000 global locations.
Internationally, over 70 percent of these locations are banks
or national post office systems. Domestically, in the United
States, we have over 45,000 locations which were made up of
grocery store chains, convenience stores and check cashers,
among other businesses. The important thing to note is that
these are local businesses serving local communities' needs.
I just want to highlight three or four areas of my
submitted testimony today in my opening comments. First, it is
important for the committee to realize that from an anti-money
laundering compliance standpoint, this is still a fairly new
game to money services businesses. SAR reporting became a
requirement for our industry at the beginning of 2002, and the
Section 352 PATRIOT Act compliance programs went into effect
the summer of 2002. So we are only 2 years in the process of
educating an industry and getting an industry up to speed as to
the responsibilities and how to do this right.
Our goal in working with our agents in the U.S. is twofold:
First, education, and, second, to make it cost effective. From
an educational standpoint, we have provided agents with turnkey
compliance guidelines to get them up to speed as to something
as simple as what does a compliance officer do? What do
policies and procedures for anti-money laundering compliance
program typically look like? What is employee education on
these issues, and how do you document that? And then of course
the internal reviews that need to occur.
We also provide our agents with ongoing regional training,
topic-specific workshops and one-on-one training if they
request it. And then we are currently and constantly enhancing
these tools so that our agents are getting new information,
information in a variety of languages, information that will
allow them to build their programs and monitor their activities
so they can fulfill the suspicious activity reporting
requirement. We continue these efforts today and believe that
the regulatory community should continue this effort in the
same way.
Education is key. As a compliance officer, I tell my
business clients, internal clients all the time that to start
at ground zero and work your way to a full-fledged, mature
compliance program takes 3 to 5 years. We have been scrambling
to get it done in two to three ways, and I think we are well on
our way, but we need to keep this in mind as we move forward.
Secondly, and a number of panel members have mentioned
this, the regulations call for a risk-based approach, and we
appreciate that. Industry and regulators should focus resources
where the highest risk is actually located. In Western Union,
for example, we treat different categories of our agents
differently. We break agents down to national accounts,
networks and independents, or what we commonly refer to in the
industry as mom-and-pops.
A national account is typically a publicly traded
corporation. They have internal legal departments, internal
audit departments, typically you can start at the top, express
what needs to be done for your particular service, and that
could get pushed through to an organization in a very efficient
manner. It takes less work to get a national account to do what
needs to be done than any other account because they want to do
it the right way.
Networks typically are regional. They also have internal
infrastructures, if you will, but they typically need more help
on the legal aspect: ``What is BSA compliance, what is AML
compliance, can you help us build our program?'' But, again,
once that program is built, they have good mechanisms and
infrastructures in place to roll those programs out.
And then probably the greatest challenge is the mom-and-
pops because they don't have access to lawyers readily, you
don't want to make them hire a lawyer or a consultant to have
to go figure out what the BSA is and how to build a program.
They don't have a need for intense infrastructure within their
business, and so you really need to walk them hand in hand
through the process.
Western Union views this as a risk-based approach because
each organization poses different levels of risk in getting
programs rolled out, and we believe that FinCEN and the IRS
should take the same approach in applying their resources, both
for education and then also the IRS' examination process.
Finally, I would just like to say a word on terrorist
financing. As we have all indicated, today's terrorist cells
strive to weave themselves into the fabric of our society to
camouflage a financial legitimacy. Typically, they enter
whatever jurisdiction they are entering into legally, they get
valid government IDs, they get bank accounts, they get credit
cards, they get debit cards, and, as we all know, we need a
surprisingly small amount of money to do what they are striving
to do. If a name gets put a public list, like the OFAC list, we
will make sure that that person doesn't receive or send any
transactions.
But the key is better non-public information, non-public
intelligence from the government to let us know what should we
be looking for? What are the government intelligence agencies
seeing, what patterns are they seeing, what activities they are
seeing so that we can look for that in our back room and
identify that type of activity which is most useful to law
enforcement.
Thank you very much for this opportunity, and I will be
happy to answer any of your questions.
[The prepared statement of Joseph Cachey III can be found
on page 50 in the appendix.]
Chairwoman Kelly. Thank you, Mr. Cachey. I was interested
that you pointed out in your testimony that the terrorists can
use rather discrete amounts of money in various ways, and I
think that is an important piece of your testimony. I thank you
for pointing that out.
Mr. Richards?
STATEMENT OF JAMES RICHARDS, OPERATIONS EXECUTIVE FOR GLOBAL
ANTI-MONEY LAUNDERING, BANK OF AMERICA
Mr. Richards. Thank you, Madam Chairman, Ranking Member
Gutierrez, members of the subcommittee. As pointed out, I am
the senior vice president and the global anti-money laundering
operations executive for Bank of America. I held a similar
position at FleetBoston Financial prior to the merger.
In both rolls, I have or had responsibility for the bank's
operational aspects of preventing, detecting and reporting
potential money laundering or terrorist financing. I stress,
Madam Chairman, the operational aspects or operational
perspective, as I bring to this subcommittee the perspective of
someone who sees the Bank Secrecy Act and USA PATRIOT Act, the
regulations and regulatory expectations and guidance firsthand
and in operation.
From a purely operational point of view, money laundering
and terrorist financing are two, very, very different problems.
Traditional money laundering prevention is a transaction-
focused internally sourced issue where transactions lead to
relational links. Terrorist financing prevention is very
different. It is a relationship-focused, externally sourced
issue where relational links lead to transactions.
Take a typical money laundering case. We are required to
detect and report potential structuring. Customers have come
into the bank and structure cash transactions so as to avoid
the large cash reporting requirements. Looking solely at those
large cash transactions is a pretty basic exercise and can lead
to potentially suspicious activity but building a tool and
having a program that enables you to take every customer who
opens up an account without a taxpayer identification number,
with an opening deposit of less than $100, who structures cash
deposits in the United States and withdraws money through ATM
machines in high-risk countries. Now, that is interesting and
frankly is not that difficult to do.
Compare that typical money laundering case with a typical
terrorist financing case. Almost every one of them starts with
some sort of request from the government, whether it is a grand
jury subpoena or a Section 314(a) information-sharing request.
Let's say the request is for Bin Laden Enterprises, 123 Main
Street. That would be a very typical 314(a) request. First, we
have to scrub our various customer and transactional systems to
determine if we have a match on that name.
Let us assume we don't have that customer at that address
but we have Khalid Sheikh Mohamed and KSM Enterprises at the
same address. We would have to then review our transactional
systems, and we would find that KSM Enterprises sent wires to
another entity called AQ Recruiting. We would use a surface web
search engine, such as Google, to find more information on
Khalid Sheikh Mohamed, KSM Enterprises and AQ Recruiting. Very
often, even more important than what we find is what we do not
find. Legitimate businesses generally cannot hide from the
Internet.
We would also use what we call the invisible web resources
such as Search Systems to find that Khalid Mohamed was an
officer of both KSM and AQ, and there were six others that were
officers of both. We may also find that those six were officers
of six other companies. We then go back into our systems and
perhaps find another 15 customers and 6 addresses that appear
linked to all the people either transactionally or
relationally. We would run those addresses and telephone
numbers, and we would add more entities.
If one of our targets had a web site, let's say one of them
is a charitable organization, we would then be able to go into
the historical web and look at all of their web sites back as
far as 1996. What we would have is something that was sourced
by the government: even though it was not a match under 314(a),
we would now have a case that involved at least 15 people, 10
companies transacting between themselves where the public
information doesn't match their activity. And if the totality
of the relationships and transactions led to a standard of
suspiciousness, we then have a very effective and very good
Suspicious Activity Report to file.
The success of the financial sector's anti-money laundering
and terrorist financing prevention efforts is entirely
dependent on two things: First, cooperation between and
coordination by all of the parties involved: the law
enforcement and intelligence communities, the regulatory
community, the private sector, our trade associations, such as
the ABA, and others; and, second, creative, committed
professionals dedicated to this task.
In my experience, Madam Chairman, the American financial
sector has both.
Thank you for this opportunity to testify on this very
important topic. Bank of America remains committed to meeting
its obligations of protecting, preventing, reporting and indeed
mitigating the effects of money laundering and terrorist
financing and recognizes and applauds the efforts of its
private sector colleagues and public sector partners in these
efforts. Thank you.
[The prepared statement of James Richards can be found on
page 72 in the appendix.]
Chairwoman Kelly. Thank you, Mr. Richards.
Mr. Emerson?
STATEMENT OF STEVEN EMERSON, EXECUTIVE DIRECTOR, THE
INVESTIGATIVE PROJECT
Mr. Emerson. Madam Chairman, members of the committee, I
want to thank you for inviting me, and I also want to commend
your for assembling a phenomenal panel this morning--the best
panel I have seen on money laundering and counterterrorism
issues. I also want to let you know, Madam Chairwoman, that I
am very appreciative of the incredible leadership you have
played the last 2.5 years since September 11 in terms of
bringing to the attention of the American public, Congress, the
media and other institutions the role that needs to be played
by the private sector and government in fighting the scourge of
terrorism.
I also want to express my appreciation to Congressman Royce
who I have had the privilege of working with very closely
following September 11 when Congressman Royce invited me to
join his squatter's movement in various members' offices until
they agreed to approve and support the PATRIOT Act. And I
understand and appreciate very much what it takes to pass
legislation in this great body.
I also want to let you know that I am very appreciative of
my staff, Jon Levin and Dana Lessman, of the Investigative
Project for their help in preparing this testimony.
One of the issues that we obviously would be looking at
today in much greater detail, and are looking at, is the Riggs
case. The question is does Riggs represent an exception or does
it represent a pattern? Its failure to obey the order and file
SARs, a suspicious activity report, in deference to the
client's desire, principally that of the government of Saudi
Arabia for secrecy, is the most single, serious breach every in
the first line in U.S. history of financial controls against
terrorism.
The bank officials who participated in these willful
violations should be held personally responsible, and there are
many questions that need to be answered. Whether clients are
assured of a quid pro quo? How long did it continue to operate?
To what activities have drawn funds from diplomatic accounts
from Saudi Arabia at the Riggs branches? And considering the
long-term problems with Riggs, why didn't the OCC consider it a
high-risk institution?
I urge this committee to conduct a thorough and
comprehensive review of the reports prepared by financial
regulators and to work closely with law enforcement and
financial oversight institutions to see exactly what went wrong
in the Riggs case.
And although the Riggs case represents the failure of the
financial sector in oversight, there are cases and examples
that represent the courageous successes of institutions in
helping to track and interdict possible terrorist operations.
In this category, although he is very humble, my co-panelist,
Jim Richards, I must tell you, has played a singular role in
helping and actually leading the government in identifying
terrorists in the United States and helping to stop operations
because of his recognition of actual activities in financial
reporting that led the government to identify and issue law
enforcement sanctions against possible terrorists.
Also, David Aufhauser has continued to play a leadership
role in the war of terrorism financing. His vision and
leadership is thoroughly needed as we move forward.
In one instance where I can discuss, and it has been
publicly cited in previous reports, a major financial
institution cut ties with a terrorist-linked bank after being
advised to do so. In the year 2000 and 2001, Citigroup was
participating in joint ventures with the al-Aqsa Bank, which
has ties to Hamas. When informed by the Israeli government of
those ties, Citicorp contacted the U.S. Treasury for guidance
and subsequently terminated its relationship with al-Aqsa Bank.
So what is the true relationship and paradigm here? Is it
Citigroup taking the initiative with the Treasury Department or
is it Riggs Bank's failure to comply with the government
mandates? Al Qaida and other terrorist groups have found huge
crevices and holes in the financial structures of Western
nations, exploiting not just their freedom of regulation but
also the freedom of religion and freedom of thought, the
freedom of expression to basically promote religious extremism
under the guise of financial transactions.
That is something that necessarily financial regulators
will not always be advised of or even be aware of, and in this
case the concept advanced by Congressman Royce for a much
needed financial intelligence ability, the creation of which is
equivalent of having a CIA at Treasury that could recognize
patterns, activities from those who established accounts to
those who are the recipient, is absolutely critically needed
for the first time in the war against terrorism.
Al Qaida itself has established its own banking system
outside of European and U.S. law. Al-Taqwa Bank, for example,
was created by the Muslim brotherhood in 1988 to move and
safeguard large quantities of cash for terrorist causes. It was
designated a terrorist entity by U.S. authorities in 2001. In
January 2002, the Treasury deputy general counsel wrote to a
Swiss prosecutor notifying that as of October 2000 Al-Taqwa
seemed to be providing a clandestine line of credit for a close
associate of Bin Laden. Reportedly, the Justice Department
might now be close to bringing indictments.
The questions that you face in the future, and as you have
faced in the last 2.5 years, is to what extent we can enlist
and ensure that the private sector participates aggressively in
the interdiction and recognitions of the dangers.
One very good statistic that I will tragically leave you
with is the ratio of what the costs were to the damage of
September 11. The costs of carrying out September 11 to the
terrorists was about $500,000, largely in transfers of less
than $5,000. The cost to the U.S. economy was $500,000 billion.
That is a ratio, I don't need to do the match of a million to
one. If we had spent a little bit more money ahead of time and
invested it paying the price that we should have paid, we might
have been able to prevent this incredible tragedy.
Thank you, Madam Chairwoman.
[The prepared statement of Steven Emerson can be found on
page 61 in the appendix.]
Chairwoman Kelly. Thank you, Mr. Emerson.
Mr. Aufhauser, there was a discussion in the April 20
Summit Banking Committee hearing about your suggestion of a
separate examination and compliance force within the Treasury.
In that hearing, there was some resistance from one of the
witnesses, a head of one of the regulatory agencies. His
resistance was based, first, on the idea that regulators should
be given more time to prove that they can perform at the level
that we expect in a post-September 11 environment. He went on
to suggest that implementing new structural reforms would take
time that we do not have.
I am very interested in your thoughts on these concerns. I
think most of us would agree that we are in a new security
environment for the long haul, but we should probably make sure
that we have in place now a regulatory and compliance structure
that will be capable of serving us all at a high level of
effectiveness over a long period of time.
If we don't act now, aren't we just deferring legal reforms
to a later date? And if, as suggested, I think we give the
current regulators some time and we still don't reach the
performance levels that we expect, then do we face the
possibility of being in similar circumstances a couple of years
down the road, having gained nothing during the way?
The Riggs Bank failed to report, the OCC failed to detect,
this was something that I am wondering if it wouldn't happen
again if we don't act now to do something. And I would be
interested in what you have to say about that.
Mr. Aufhauser. Well, I can't divine whether if we had
changed the structure, Riggs would have been discovered
earlier, but what informed my testimony earlier, and I still
endorse it, is two concerns. One is for uniformity. Two is
without discounting in any way the professionalism of the folks
at the OCC and the Federal Reserve, their larger mandate is
safety and soundness when they take look at financial
institutions.
AML issues and terrorist financial issues, which is a
subset of AML in my judgment, are at risk. I am not saying it
happens necessarily but are at risk of becoming stepchildren to
the examinations. And in the best of all possible worlds, to
quote, Penglas, I do believe it would be better to have one
uniform compliance office that was enforcing the BSA
regulations.
The second thing that informs that judgment is that the
Treasury Department has relied on OCC and the Federal Reserve
and indeed the SEC on delegating the authority and
responsibility for examining compliance, because they are
already heavily involved in the regulation of their industry
actors. But the PATRIOT Act extended AML requirements to a
whole host of industry sectors that do not have any coverage by
any Federal regulator, whether it is casinos or whether it is
insurers or whether it is car dealers and jewelry stores, and
hedge funds, by way of example, also.
So there is a complete community of interest out there,
which under 352 of the PATRIOT Act is responsible for complying
and establishing AML programs, yet no one is policing them--no
one, no one.
Chairwoman Kelly. That is really serious, and I think that
it is something that we have got to--that is one of the reasons
why we are having this hearing. I think it is very important
that we move on with it.
I would like to ask both you and Mr. Emerson, should the
new Undersecretary at the Office of the Treasury--that office
is designated to coordinate anti-terrorist financial efforts.
Should that office have the enforcement authority or should
they just have intelligence capability and let the enforcement
authority go to another agency?
And I would like to start with you, Mr. Aufhauser and move
to you, Mr. Emerson.
Mr. Aufhauser. That is a hard question. That is a hard
question because I haven't thought about it. I have always
married the two interests, and I think it wildly inefficient
not to have both. I do agree with what Steve said, and I am
sure he will say more, we need a professional first-class,
best-in-class financial intelligence unit in the U.S.
government.
We have extraordinarily people populating various agencies
of the government that pursue that interest. There is no one
FIU right now, and there is no one woman or man charged with
not only directing the resource application, directing the
analysis but also holding people accountable. So that is a very
important part of your question which is that there ought to be
a very strong intelligence FIU unit.
What you do with that next in terms of enforcement, you
used the word, ``enforcement.'' It may not be enforcement. It
may be other endeavors that you undertake, diplomatic or
otherwise, to make sure that you are frustrating somebody's
attempt to penetrate our financial borders to kill people.
I do think the person who possesses the best knowledge of
the intelligence and who is charged with responsibility for
establishing a strategy ought to be charged also with the
responsibility for executing.
In the past, during my tenure, a lot of that was done by
committee at the NSC, and although I think we did a really
credible job, I do think the NSC is the wrong place to have an
operational organization. It sets policy; it doesn't execute.
Chairwoman Kelly. Mr. Emerson?
Mr. Emerson. I think you rightfully point out that the
problem exists today. I remember reading the hearings, I think,
last week or the week before, various officials in the Treasury
as well as ICS where the number of three-and four-letter
acronyms, I was dizzy by the time I read the third testimony. I
think there were 19 I read and it was sort of like a Reuben
Goldberg machine, and obviously there really wasn't some type
of coordinating mechanism but there was a stovepipe
relationship.
And I think your question goes to the heart of what is now
being faced at the FBI, which is to the extent to which there
needs to be a separate intelligence branch broken out of the
FBI for enforcement; that is let the enforcement people do the
enforcement and let the intelligence people specialize the
intelligence.
As much as I theoretically would like to endorse the notion
of a combined enforcement and intelligence position, my feeling
is that the intelligence people need to be thoroughly
instructed, mandated and only focused on intelligence
gathering. They have to live and breath it all the time. They
have to work on an equal playing field, perhaps even in a
higher playing field in terms of being able to mandate
sanctions or enforcement, but there has to be a cadre.
As Congressman Royce has pointed out, the financial
intelligence that needs to be created is only going to come
from people. You can have the best software in the world, the
best link analysis--I know that in our office we use Analyst
Notebook, it is wonderful but in the end it is garbage in,
garbage out--and it is only on the ability of people like Jim
Richards to look at transactions in the actual account to say,
``You know, there is something suspicious.''
Last night I was reading over the actual transactions in
the Sami Al-Hussayen case, that is the IANA prosecution that is
being carried out in Idaho right now. And what was interesting
to me I was looking over an 80-page matrix of financial
transactions from his bank account over the last 2 years, and I
was trying to figure out if I was a bank officer or a teller,
could I have detected a pattern here of suspicious activity
merely by looking at it.
If I look at the numbers, no, even though there are large
numbers sometimes of $10,000, $15,000, $20,000 transfers within
days of one another. But in terms of who was making the
deposits and withdrawals in terms of either the Saudi cultural
offices or Saudi government, this would have triggered
something automatically, and it would have taken somebody who
was read on to this and sensitized to this issue.
So I think to be comprehensive about it, a new
undersecretary should be vested with everybody who reports to
him on intelligence matters and I think actually have a
position that oversees issues of enforcement.
Chairwoman Kelly. That is very interesting.
Mr. Richards and Mr. Cachey, I will start with you, Mr.
Richards, but, Mr. Cachey, I want to go to you too. Can you
identify any particular case in which your companies worked
with law enforcement to stop the flow of funds to a terrorist
group or an activity of some sort?
Mr. Richards. Madam Chairman, off the top of my head, I can
think at least two particular cases: One prior to September 11
and one after September 11. In both cases, we identified what
we thought was suspicious activity. Again, we are not required
to detect money laundering or terrorist financing, we are
required to detect and report suspicious activity. We did that.
In both cases, we felt it was significant enough that we
immediately contacted law enforcement, which we are entitled
and indeed perhaps required to do if it is an ongoing, serious
matter. And in this case, it was the Boston U.S. Attorney's
Office, and they immediately contacted us and sought the
underlying records that were the basis of our suspicious
activity reports. Subsequent news events confirmed that what we
had reported was indeed tied to potential terrorist financing.
Chairwoman Kelly. Mr. Cachey?
Mr. Cachey. I think the important thing that I took away
from Mr. Richards' comments was he discovered that they had
done something wonderful through a news report, and I think
that is the challenge we have. When we see suspected activity
that we think is terrorist related, we report it directly to
certain agencies within the government along with FinCEN,
particularly Operation Green Quest when that was in effect and
now Homeland Security.
But we don't get the type of feedback from law enforcement
that we would like to get to say that SAR you filed or that
phone call you made led to this activity. Because if you don't
read about it in the newspaper, you really don't get any
feedback, so we do have processes in place, both through our
Compliance Department and our Security Department with several
fellow agencies that we report suspected activity to, but
feedback is hard to get, particularly if there is an ongoing
investigation, which you can understand.
Chairwoman Kelly. Thank you both very much.
Mr. Gutierrez?
Mr. Gutierrez. Than you very much. I would like to thank
all of the witnesses. It seems to me from listening to all the
panelists that there are a couple of things that maybe we can
improve on.
I kept hearing the phrase, ``educating people,'' starting
with you, Mr. Aufhauser, and others about who do we need to
educate on our financial industries and how could we go about
doing it better in terms of watching for suspicious activity
and getting to it. Do we call them all in for--I mean they call
us all in for meetings and I get educated on ethics rules and
my staff does, and we get constantly--I know the doctors--good
doctors will continuously get reeducated after. What do we need
to do so that we can better do this?
Mr. Aufhauser. If I said the financial community needs to
be educated, I only said half of what I intended to say. So
does the government. I mean it really is a two-way street, and
without the reciprocity, the exchange of the knowledge universe
that each has, it is a fruitless endeavor.
I think what we have to educate each other on is getting
smarter, ironically. My brief experience in my private life for
the last 3 months has been there is actually overreporting of
SARs, in part, simply out of a cautionary note by financial
institutions and, in part, because with the exception of
perhaps Jim Richards who seems to be very long on the tooth on
what to look for, a lot of the new actors who are subject to
SAR reporting don't exactly know what to be looking for.
Jim is exactly right, they don't file a SAR because they
know it is terrorism and you don't file a SAR because you know
it is a crime. You file a SAR because there is a suspicion,
something to the character.
Mr. Gutierrez. I gathered that from your comments and from
what Mr. Richards said. So is there a way of taking Bank of
America and the kinds of things that we have heard here today
and ensuring that other institutions do more?
Mr. Aufhauser. I don't know if it is that institutions need
to do more. I just think we need to be smarter about what we
are looking for, and that requires what used to my office
talking more to private industry.
Mr. Gutierrez. How do we----
Mr. Aufhauser. What we didn't have the genius, Congressman,
and I didn't have the genius for is how do you do that without
jeopardizing something incredibly sensitive? And I mean it in
terms of broadcasting the information, sort of these 314
requests that go out and say, ``Hey, this guy, Aufhauser, is
suspicious. Do you have anything on him?'' The most important
dialogue I ever had with people like Jim or Joseph--and, by the
way, there are stories one could tell about Western Union being
terrific ally of the U.S. government in the war on terror which
has nothing to do with capture but has everything to do with
helping us abroad.
I think what we--you know, I have actually lost my train of
thought there. What we need to be--the most productive thing I
ever did was a specific targeted request for information
because of a very sensitive piece of information. And I went to
somebody I trusted in that institution. There was an element, a
bond of personal trust. If we can figure out how to multiply
that so that we can do more broadcasting of sensitive
information, we will be more effective.
One last very soft observation: This is not about just
capturing bad guys, it is about them fearing capture. And I
have read plenty of intelligence, actually overheard intercepts
where bad guys abroad said, ``We can't use the U.S. financial
banking system; they will catch us.''
Mr. Gutierrez. And I guess what I have heard is maybe we
are going to need to look into this a little further. And
anybody who has any other comments on what we can do to better
educate our folks and who we need to educate within that system
that certainly, I think, would be helpful from your
perspective. And, as you say, obviously we both need to educate
each other. We need to do a better job on our side.
I have limited of time so I just want to--can we ask the
other--thank you.
Mr. Byrne and Mr. Cachey, please.
Mr. Byrne. Congressman Gutierrez, I want to make a couple
of points about education. I don't want the committee leaving
today thinking that there hasn't been for a good number of
years a whole host of programs on big picture education,
certainly, not just the laws and regulations but examples of
money laundering cases once they are closed and the typologies
that we share with bankers on what to look for going forward in
the areas of money laundering and fraud and those sorts of
crimes. So that goes on on a regular basis, and many of us
participate in those sorts of programs.
I was at a program a couple of weeks ago on the west coast
in which law enforcement, bank regulators and bankers met for 3
days and worked on terrorist financing and PATRIOT Act issues
in which, for example, the IRS Criminal Division or the FBI
would do a presentation on how a particular line of SAR
reporting turned into a conviction, what to look for--while we
don't have enough of these, what to look for in terms of
terrorist financing going forward or money laundering.
Law enforcement does a very good job of doing training and
programs. We in the industry need to be part of those as much
as we can. We are not talking about investigations as they are
pending, we are talking about once they are closed and we get
some information going forward. So a lot of that has been
occurring for the longest time that I have been at the ABA.
Mr. Gutierrez. I understand that. I mean I wish I had--I
could take excerpts of what you have all said and either I am
taking things out of context but I kind of heard here that we
could do better.
Mr. Byrne. Absolutely.
Mr. Gutierrez. So I don't want anybody to be defensive
about what we are already doing well but what we can do better,
and I kind of heard that we could do better from almost
everybody, from Mr. Aufhauser all the way to Mr. Emerson. So
from left to right, I heard we could do better.
So that is all I want to know is what we could do better. I
understand that the institutions have done well and especially
since we called this hearing because of what happened at the
Riggs institution. So, obviously, Riggs would not be in the
situation it is in today and Mr. Aufhauser said that the OCC
and the Federal Reserve, which I agree with him, have safety
and soundness as their basic mission. And they are expanding,
the OCC is expanding its purview of what it decides it wants to
do as a regulatory institution.
So, obviously, we could do better, and we want to be able
to command those resources, and I think that is what this
hearing is all about is to look at Riggs and how we move
forward.
One last question, if I could, Madam Chair, and that is to
the Bank of America and Mr. Richards. It seems to me you have
harnessed common resources of the Internet and Excel to develop
the systems to detect and prevent money laundering. What kind
of compliance guidance have you gotten from your regulator
regarding anti-money laundering efforts?
Was the system developed within your own institution or
with the help from the government? Are you working together
with us to develop the system at Bank of America or just by
yourself in the private? How closely does your regulator
monitor those activities? And how often do you hear back from
the regulator after seeking--you file a SARs report, send them
your report?: How often do you hear back from them, the
regulators? That was a big question.
Mr. Richards. I think it was perhaps four questions. I will
try to answer them all.
Our program was developed at the former FleetBoston
Financial. It was developed starting in January of 1999, and I
often joked that it was two guys and two laptops, but that is
exactly what it was.
What we did was try to build a--rather than build an anti-
money laundering program, we tried to build a data management
program. Our belief was that we needed to marshal all of the
data and information that we had in the bank, and once we were
able to marshal it, we could then look at it in a creative way
for any purpose, whether it was money laundering or terrorist
financing or marketing--any purpose.
As we developed that program our primary Federal
regulators, which are the Federal Reserve and the OCC,
monitored our development of that program literally on a
continual basis. We met with them through our compliance
partners in the bank on a quarterly basis, and they were very,
very intrigued by it, not only because it was developed at a
very low cost and used tools that people had on their desktops
but hadn't before been using for anti-money laundering, but
they were intrigued by the fact that it was a program that
seemed to work reasonably well in a large institution but was
applicable to the very, very smallest institutions.
And so the feedback we got was very, very positive. They
were very, very interested in it, and indeed they have had me
down to the FFIEC on I believe now four occasions to talk to
the Federal bank examiners from all five agencies and tell them
how we developed the program. And I know that John Byrne, the
ABA, has directed other banks to speak with us, to see what we
did and how we did it, and we have been sharing what we have
done with every bank that is interested, which is a number of
them. And I know that Western Union has also shown a great
interest, and we have worked very closely with them as well.
So I think I have answered at least some of your questions.
But, particularly, the OCC I think has been very, very
interested in what we have done and how we have done it. And we
are working very, very closely with them.
Mr. Emerson. Mr. Gutierrez, if I could just add one thing
here, because I think you have raised a very good point, and
Mr. Aufhauser also raised the issue of sensitivity and
information. Before September 11, the debate was always secrecy
versus shared. After September 11, we realized that more people
in the JTTFs and in law enforcement need to get intelligence,
and the risks of having that information leak out was
outweighed by the issue of having other people basically in
line and aware of the threat and the information.
I think we should consider the possibility of certain bank
institutions in need of certain thresholds to having designated
officers that would be read on to certain classified
information that they would be privy to information that is not
made available just to the general public but made available to
certain classified security programs, which they would be able
to then use to help discern patterns in the larger context for
transactions.
And, of course, there is always the risk of operational
secrecy and leakage, but I think that would far outweigh the
problems that would ensue if we didn't do that. So maybe that
is something to consider to ensure that there is this financial
intelligence of a nature that goes just beyond what the public
stores documents, which, unfortunately, most of the time does
not give a bank officer enough information to determine whether
the transaction is sinister or not.
Mr. Gutierrez. Thank you. Thank you all for your service.
Mr. Cachey. Madam Chairman, could I address that----
Chairwoman Kelly. Yes, by all means.
Mr. Cachey.--just briefly? First, on the question of
education, I think it is important from a money services
businesses standpoint to realized that a number of the types of
businesses that Mr. Aufhauser mentioned before, the money
transmitters, the pawnbrokers, the car dealerships, everybody
that has become part of the PATRIOT Act family, if you will,
are typically licensed and regulated at the State level.
So I think there needs to be greater cooperation between
States that are licensing all these separate entities and the
Federal Government and figuring out who is actually a money
service business and should be having a program in place and
reporting out on suspicious activity, and then coordinating
those efforts between the Federal Government and the States.
Because right now you could have an IRS representative walk
into your company and tell you X and then a State banking
examiner from one of 47 different States come in and tell you
why Z or A or B. And it is difficult, number one, to build
consistent programs nationwide, but it is also difficult for
the smaller MSBs to say who is correct here and what is the
right thing for me to do because what we have discovered is we
have worked through our agent basis.
Ninety-nine point nine, nine, nine percent of these
business want to do the right thing, but they need somebody to
tell them what is the right thing.
Mr. Gutierrez. You know something, I agree with you
totally, and, unfortunately, we get results at the State level.
Because when I try to reign in Western Union and Money Gram on
the exchange rate, we could do nothing here in the Congress of
the United States, but we could do things at the local level so
that your exchange rate at Western Union is comparable to Mr.
Byrne's Association of Bankers exchange rate. So I think we
will have a difference of opinion on that.
Thank you very much.
Chairwoman Kelly. Mr. Hensarling?
Mr. Hensarling. Thank you, Madam Chair.
Mr. Aufhauser, in your testimony, I believe you mentioned
some anecdotal evidence of some intelligence intercepts where
some of the bad guys were saying, ``We have to steer away from
the U.S. financial services system. It is not going to work for
us.'' So I take that as very good news. As a former student of
economics, I typically think in terms of cost and benefits. So
the anecdotal evidence is persuasive but as a society what are
we getting for all of these suspicious activity reports and the
currency transaction reports? How do we measure success here?
Mr. Aufhauser. If you want to put a calculus on this, I
have read studies that have suggested that the adverse
consequence, that is the cost, of the World Trade Center is in
the trillions of dollars. It wasn't just the loss of 3,000
lives, it wasn't just the disintegration of the buildings, it
wasn't just the closing of our financial markets, but it was a
market cap loss of an astonishing historic amount of money and
the now daily tax, as I say in my testimony, that we all pay
for enhanced security at virtually every door you pass through
in America today. And that cost to me is almost incalculable
and immeasurable, but it is certainly large.
So I measure that against--that is to say another calamity.
If I measure the cost of another calamity, what it will do to
our markets, our capital markets, what it will do to even more
tightening of what our freedoms are and more security cops and
more machines and more taxes on the airline tickets and less
freedoms, it strikes me that the cost and the burdens of a SAR
compliance program are diminimus.
In addition, if you take it on a microeconomic level, every
institution that is at risk of losing its good name, which is
the principal asset any company has today because one errant
transaction goes through there which is the cause of massive
death, I think if you talk to many institutions, many of which
are my clients, nothing is a higher priority than protecting
their good name. And they don't measure it in dollars and
cents.
Mr. Hensarling. Mr. Emerson, part of your testimony, if I
understood you properly, you said that most, if not all, of the
financing of September 11 took place in financial transfers of
approximately $5,000 increments. Did I understand you correctly
on that point?
Mr. Emerson. Yes. Most of them took--I think there were a
couple of increments--not that all of this has come out or that
I am privy to all of the transactions, but many of the
transfers took place from banks, institutions in the Middle
East, UAE, and transfers to corresponding accounts in the
United States of $5,000 or less and then ATM transfers
withdrawals of $300 or less by some of the September 11
hijackers.
Mr. Hensarling. So right now if we have a $10,000 level on
our currency transaction reports, in all probability those
transactions would not be discovered in the system. Is that a
fair assessment?
Mr. Emerson. A $10,000 threshold would not have covered
those $5,000 transfers, that is correct.
Mr. Hensarling. Mr. Byrne, a question for you on the cost
side of the equation. I was here last week participating in a
hearing dealing with the regulatory burden on community banks.
I represent the 5th Congressional District of Texas, which is
kind of urban, suburban and rural, and we heard from a number
of community bankers. For example, a banker in the city of
Athens, Texas, a city roughly the size of 13,000. He was
complaining about--and he wants to do his part as an American--
the question of who reads all these reports, and is it doing
good, and is it really worth the amount of money that I am
having to put into the system in order to generate all these
reports? Can you just very briefly tell us a little about your
impression of the costs?
Mr. Byrne. Well, first, I would just like to say in terms
of the September 11 hijackers, those transfers that were
mentioned were not necessarily cash transactions. So the CTR
threshold issue really isn't relevant to whether we would or
would not have caught those, because ATM withdrawals are not
reportable today. You would have to have a suspicious reporting
regime and looking at particular individuals.
But in terms of your question, I don't want to hang it on
cost. I want to talk about policy, because, clearly, the small
community bank does wonder about 13 million currency reports,
the lion's share of those on Wal-Mart and JC Penny, what
happens with those? And I would argue that even an IRS agent
will tell you, ``Not much.'' Suspicious activity reports, those
are more subjective, and certainly more goes into those
reports, and I would argue that those are valuable, especially
when we get the additional guidance.
So I think you have to look at the risk of a particular
community bank and what type of response that institution has
to have to make a determination whether they should have the
same infrastructure as Jim Richards has at Bank of America. But
the bottom line is we think you should focus more on suspicious
reporting versus cash reporting, and that will help the small
bank and the large bank if we make some dramatic changes there.
Mr. Hensarling. Madam Chairman, I see I am out of time.
Would I be able to ask one more question?
Chairwoman Kelly. Yes, please.
Mr. Hensarling. Thank you, Madam Chair.
Mr. Richards, I believe in your testimony you stated that
money laundering or terrorist financing is not a problem but a
symptom of a problem. Could you elaborate and explain that
statement?
Mr. Richards. Yes. We believe that within the context of
the total issue of operating risk, that the act of filing a
suspicious activity report is not the end of your duty but
indeed you take the suspicious activity reports and then you go
back and look at the commonalities between them to determine
whether the money laundering that you have reported or
suspicious activity you are reported is caused by issues
relating to account opening, failure to collect the proper
identification, it might be a branch training issue where you
have to train the people in the branch environment, something
like that.
So that rather than looking at the end game being the
filing of a suspicious activity report, you look at it as just
the beginning of trying to see if there is an underlying
operational issue in the bank. If you address the underlying
operational issue, you may resolve the suspicious activity that
is occurring in your bank. So, again, if you look at it as not
a problem but a symptom, you can then drill down and see what
the real underlying operational problem may be.
Mr. Hensarling. Thank you.
And thank you, Madam Chair, for your indulgence.
Chairwoman Kelly. Thank you. We have been called for a
vote.
Mr. Garrett, I am going to call on you, but I know Mr.
Royce has very specific questions he would like to ask. So I
will call on your Mr. Garrett, and then we will go--Mr. Royce,
I know you have very specific questions you would like to ask,
and with the indulgence of this panel, I would like to let Mr.
Garrett go, we will then take a brief break and go to our vote,
because it is apparently only one vote. We should be able to do
that quickly and----
Mr. Royce. Could I inquire if we have 15 minutes, there
might be time for Mr. Garrett and myself. He could go first and
then I could follow up.
Chairwoman Kelly. Let's see what we can do.
Mr. Royce. Thank you, Madam Chair.
Chairwoman Kelly. Mr. Garrett?
Mr. Garrett. Thank you, and I will keep it brief. There was
an article in the American Banker publication with regard to
the hearings that we had just a week ago and also the hearings
that the Senate had, and I wasn't following the Senate hearings
but they were, and they said they saw a difference between the
two panels. The House panel was raising some questions such as
Jeff Seer, that I asked as well, with regard to some of the
reporting requirements that maybe there is too much. Whereas
the Senate hearings were sort of going in the opposite
direction saying that failure of compliance is endemic, I think
was the caption in the article, on behalf of the industry.
And nothing that I have heard so far or either one of the
hearings indicates to me that there is an endemic problem as
far as the industry is concerned. I am a little bit more
concerned as to what we can do as far as the regulatory side of
the equation. Mr. Gutierrez raised the point but we agree that
a lot has been done already, some more, from your
recommendations, can be done, and so I am just going to go
along those lines very quickly.
Mr. Byrne, you raised the question, I would make a comment
about the frustrations we have had over the time with the
Department of the Treasury's failure to comply way after a 1994
mandate to publish an annual staff summary on the commentary on
the Bank Secrecy Act. I don't know whether there are any
repercussions on the Treasury Department for failure to comply.
I don't know whether there are repercussions that had it been
the other way around on the industry failing to comply with the
Treasury Department, I have a feeling there probably would be.
Where are we now exactly on that? What is the explanation--
because we don't have somebody here from them to ask--what is
the explanation that we have had that we had a 10-year hiatus
and failure to comply with congressional intent, as far as you
are aware?
Mr. Byrne. It is not clear that there is a proper answer to
why there has been delay, but the good news, I believe, is that
with the appointment of Mr. Fox at FinCEN, one of the first
things that he said he would do is put together that long
awaited commentary so that the industry could have the
interpretations in one place so that both the regulators and
the industry would have some place to go for some of those
questions that are very difficult to discern for the local
banker out in--you pick a place.
So from our perspective, we are trying to point out it has
been there, it has been delayed, but we see some major
progress, and we certainly have offered to work with them to
communicate the final commentary or guidance when it comes out.
There have been some advisories, Mr. Garrett, in the past
couple of years to give us some particular advice on certain
issues, but it has not been enough. So we are very hopeful that
Mr. Fox will come through with his commitment, and we are going
to work with him and help him do that.
Mr. Garrett. I am amazed, I guess, in a positive sense, by
Mr. Emerson's testimony that last night or the last couple of
nights you have been studying an 80-page matrix of these
reports. There is nothing else that you would rather be doing
at night than reading over these reports.
Mr. Emerson. It is the life I live or the fact that this is
the only thing that keeps me awake. And I would be happy to
provide you a copy if you would like to see it.
Mr. Garrett. Maybe your executive summary. I applaud that
you do that, and I applaud that the industry has done that. I
guess it is the overarching question as to where the dividing
line comes as far as what the industry's responsibility is in
these areas, and the suggestion has been made even as far as
allowing some additional information, as far as security
measures being woven over to the industry and how far we can go
for that certainly for the large institutions and how far we
can go for that as far as the smaller institutions as well. Can
you comment as to how much of this burden can we actually place
on the industry and where it should be laid best for the
government?
Mr. Emerson. Congressman, you raise an excellent question,
and I don't know that I have the answer here, in part, because
we haven't traversed this avenue before and in part because
what has been done in the past hasn't really worked.
And I was speaking to a senior government official last
night and I was asking him, ``How can you expect a bank teller
to make a determination that somebody is making a deposit and
therefore triggering some type of--should trigger an
investigation and report it?'' And he says, ``You are right,
you can't really expect a bank teller to do that.'' On the
other hand, the ability for someone like Mr. Richards or others
who sort of have an inside intuitive nature because of their
previous experience as prosecutors and the fact that they have
good connections with law enforcement gives them an ability to
discern patterns that ordinarily wouldn't accrue to somebody.
Now, you can't buy that off the shelf. It comes from hiring
the right people, investing in the right people and making sure
that the industry understands that people like Mr. Richards
play a critical role in saving their institutions as opposed to
sort of being a tolerated necessity that they have to endure as
opposed to somebody that really should be brought in fully
vested with as much financial resources as they can provide to
give them that ability.
And, again, you raise an excellent question about what that
dividing line is, and, unfortunately, it is impossible to
discern it ahead of time.
Mr. Garrett. And I thank all the members of the panel, and
I am going to take this home and digest what you have said
today. Thank you.
Chairwoman Kelly. Thanks, Mr. Garrett.
Mr. Royce?
Mr. Royce. Yes. I would like to go to Mr. Aufhauser and in
my opening statement I talked about the need for better
computer-aided efforts that would be used against terror
finance, and right now the Financial Crimes Enforcement Network
at Treasury has to depend on the IRS for its computer back
office. No one I know thinks that the IRS is all that good with
computers, and my question is would FinCEN be better at its job
if it owned and operated its own computer systems?
Mr. Aufhauser. I actually don't think it is a question of
hardware. It is almost irrelevant where the data is stored or
the sophistication of the machine. I think it is the software.
I think it is the need to have a dynamic technology platform
that exploits the information as it rolls in. It answers both
the question of trying to divine, as difficult as it is,
whether something is afoot, and it also in the longer run
answers the question about whether these forms that get filed
have utility and how to smarten both of those up; that is, the
regulatory community and the regulator in terms of under what
circumstances forms should be filed.
Going back to Mr. Garrett's question, it is, in part,
burden, but it is also a genuine opportunity for each complying
institution to participate in trying to know their customers
and know the nature of the transaction that is ferreting
through their institutions, because the risk to their
reputation and their franchise is so great.
Mr. Royce. If Congress passed legislation that would create
one key financial intelligence unit that would be housed in
Treasury, that had appropriate powers, that had stature, not
something in NSC but something really is given stature in
Treasury, could that legislation be effective in solving the
problem that we are talking about in terms of not only
computer-aided efforts but the wider aspect of how you pull all
the information together under one brain, under one controlling
system that is able to analyze all of this?
Mr. Aufhauser. I am mindful of George Tenet's testimony
before the 9-11 Commission when he said, ``If you think
establishing one single director of intelligence in this town
is a smart idea, you don't know this town.'' You know, it is
not the be all and end all but it is a necessary first step
that is necessary but not sufficient.
I think it would be very important. There were literally
times when I was told I was in charge of a theater of the war,
and I responded, ``I don't have troops.'' It would be better to
have troops.
Mr. Royce. So that is a role that Congress, frankly, could
solve. If we go, Mr. Aufhauser, to Mr. Emerson's testimony, one
of the things he said in his printed testimony is permanent
renewal of a strong and effective PATRIOT Act is fundamental to
maintaining maximum pressure on the terrorisms advanced
financial apparatus and machinations. And I would ask if you
agree with that assessments?
Mr. Aufhauser. Yes. I am going to be parochial about this.
With respect to Title 3 of the PATRIOT Act, absolutely. With
respect to the broader content of the PATRIOT Act in terms of
breaking down the wall, that is the ability of intelligence and
law enforcement to talk to each other, and then Title 3, which
breaks down the wall further of the ability of the government
to talk to the financial community, it is absolutely essential.
If there is any lesson out of Madrid, if there is a lesson
in the finance area out of Madrid, it is that every template
that we have been looking at in the past for the financing of
global terrorism, which is cross-border trafficking, is now
actually betrayed. Because the financing from Madrid was local
and pedestrian crime, as I said in my testimony. We need to
marry cops with intelligence officials, with banks to stop the
terror.
Mr. Royce. You mentioned the Hashish trade, you mentioned
illegal immigration and how localities or whatever you would
call them, they got information--they got funding through
handling illegal immigrants that came across the border, and
there was a third source of funding?
Mr. Aufhauser. Forged identity papers.
Mr. Royce. Oh, and the forged identity papers, again, used
in immigration.
Mr. Aufhauser. What I call common crime.
Mr. Royce. Out of that they put the resources together that
allowed them to organize and carry out that crime.
Mr. Aufhauser. They used it to purchase the explosives and
to plan and to execute.
Mr. Royce. I would just close by asking Mr. Emerson if
there is any other role for Congress here that you see besides
what you have advanced in this paper that you would like to
articulate, and then I guess we would better go and run and
make that vote, Madam Chair.
Chairwoman Kelly. Yes. Unfortunately, because of the vote,
I had expected to allow the panel some extra time to sum up
anything that they had wanted to include in their testimony. I
would ask you to do that in writing, please, because we haven't
the time. So the Chair notes that some members may have
additional questions for this panel which they may wish to
submit in writing. So without objection, the hearing record
will remain open for 30 days for the members to submit written
questions to these witnesses and to place their responses in
the record.
I am very grateful to all of you. You have been a
wonderful, intelligent, very helpful panel. Thank you so much
for sharing time with us today. This hearing is adjourned.
[Whereupon, at 11:41 a.m., the subcommittee was adjourned.]
A P P E N D I X
May 18, 2004