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





     TERRORIST FINANCING AND MONEY LAUNDERING INVESTIGATIONS: WHO 
                INVESTIGATES AND HOW EFFECTIVE ARE THEY?

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

                                HEARING

                               before the

                   SUBCOMMITTEE ON CRIMINAL JUSTICE,
                    DRUG POLICY AND HUMAN RESOURCES

                                 of the

                              COMMITTEE ON
                           GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 11, 2004

                               __________

                           Serial No. 108-243

                               __________

       Printed for the use of the Committee on Government Reform


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


                                 ______

                    U.S. GOVERNMENT PRINTING OFFICE
97-396                      WASHINGTON : 2004
____________________________________________________________________________
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                     COMMITTEE ON GOVERNMENT REFORM

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

                    Melissa Wojciak, Staff Director
       David Marin, Deputy Staff Director/Communications Director
                      Rob Borden, Parliamentarian
                       Teresa Austin, Chief Clerk
          Phil Barnett, Minority Chief of Staff/Chief Counsel

   Subcommittee on Criminal Justice, Drug Policy and Human Resources

                   MARK E. SOUDER, Indiana, Chairman
NATHAN DEAL, Georgia                 ELIJAH E. CUMMINGS, Maryland
JOHN M. McHUGH, New York             DANNY K. DAVIS, Illinois
JOHN L. MICA, Florida                WM. LACY CLAY, Missouri
DOUG OSE, California                 LINDA T. SANCHEZ, California
JO ANN DAVIS, Virginia               C.A. ``DUTCH'' RUPPERSBERGER, 
JOHN R. CARTER, Texas                    Maryland
MARSHA BLACKBURN, Tennessee          ELEANOR HOLMES NORTON, District of 
PATRICK J. TIBERI, Ohio                  Columbia
                                     ------ ------

                               Ex Officio

TOM DAVIS, Virginia                  HENRY A. WAXMAN, California
                     J. Marc Wheat, Staff Director
        Nicholas Coleman, Professional Staff Member and Counsel
                           Malia Holst, Clerk
                     Tony Haywood, Minority Counsel


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on May 11, 2004.....................................     1
Statement of:
    Roth, John, Chief of Criminal Division's Asset Forfeiture and 
      Money Laundering Section, Department of Justice; Daniel 
      Glaser, Director, Executive Office for Terrorist Financing 
      and Financial Crimes, Department of Treasury; Marcy Forman, 
      Deputy Assistant Director, Financial Investigations, U.S. 
      Immigration and Customs Enforcement, Department of Homeland 
      Security; Donald Semesky, Chief, Office of Financial 
      Operations, Drug Enforcement Administration, Department of 
      Justice; Michael Morehart, Section Chief, Terrorist 
      Financing Operation Section, Federal Bureau of 
      Investigation, Department of Justice; Dwight Sparlin, 
      Director, Operations Policy and Support for the Criminal 
      Investigations Branch, Internal Revenue Service, Department 
      of Treasury; and Bob Werner, Chief of Staff, FinCen, 
      Department of Treasury.....................................     9
    Tischler, Bonni, vice president, Pinkerton Global 
      Transportation Supply Chain Security Department; and 
      Richard Stana, Director of Homeland Security and Justice of 
      the General Accounting Office [GAO]........................   111
Letters, statements, etc., submitted for the record by:
    Cummings, Hon. Elijah E., a Representative in Congress from 
      the State of Maryland, prepared statement of...............   144
    Forman, Marcy, Deputy Assistant Director, Financial 
      Investigations, U.S. Immigration and Customs Enforcement, 
      Department of Homeland Security, prepared statement of.....    39
    Glaser, Daniel, Director, Executive Office for Terrorist 
      Financing and Financial Crimes, Department of Treasury, 
      prepared statement of......................................    24
    Morehart, Michael, Section Chief, Terrorist Financing 
      Operation Section, Federal Bureau of Investigation, 
      Department of Justice, prepared statement of...............    55
    Roth, John, Chief of Criminal Division's Asset Forfeiture and 
      Money Laundering Section, Department of Justice, prepared 
      statement of...............................................    12
    Semesky, Donald, Chief, Office of Financial Operations, Drug 
      Enforcement Administration, Department of Justice, prepared 
      statement of...............................................    48
    Souder, Hon. Mark E., a Representative in Congress from the 
      State of Indiana, prepared statement of....................     5
    Sparlin, Dwight, Director, Operations Policy and Support for 
      the Criminal Investigations Branch, Internal Revenue 
      Service, Department of Treasury, prepared statement of.....    69
    Stana, Richard, Director of Homeland Security and Justice of 
      the General Accounting Office [GAO], prepared statement of.   119
    Tischler, Bonni, vice president, Pinkerton Global 
      Transportation Supply Chain Security Department, prepared 
      statement of...............................................   114
    Werner, Bob, Chief of Staff, FinCen, Department of Treasury, 
      prepared statement of......................................    86

 
     TERRORIST FINANCING AND MONEY LAUNDERING INVESTIGATIONS: WHO 
                INVESTIGATES AND HOW EFFECTIVE ARE THEY?

                              ----------                              


                         TUESDAY, MAY 11, 2004

                  House of Representatives,
 Subcommittee on Criminal Justice, Drug Policy and 
                                   Human Resources,
                            Committee on Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:05 a.m., in 
room 2154, Rayburn House Office Building, Hon. Mark E. Souder 
(chairman of the subcommittee) presiding.
    Present: Representatives Souder and Blackburn.
    Staff present: J. Marc Wheat, staff director and chief 
counsel; David Thomasson, congressional fellow; Nicholas 
Coleman, professional staff member and counsel; Malia Holst, 
clerk; Tony Haywood, minority counsel; and Jean Gosa, minority 
assistant clerk.
    Mr. Souder. Good morning, ladies and gentlemen. Thank you 
all for coming. Today's hearing represents the fifth in a 
series of hearings this year by the subcommittee concerning the 
effects of narcotics growth and distribution in Afghanistan and 
the Andean Ridge areas. Today this subcommittee will focus on 
monetary gains from the same drug trade financing terrorism at 
home and abroad. Second, we will focus on the aspects of the 
money laundering, the proceeds of narcotics trafficking 
perpetuating the operations of individuals and organizations 
involved in this criminal undertaking.
    The laundering of money gained by illegal activities that 
support terrorist groups, narcotraffickers, arms dealers and 
the like, threaten to undermine both our national security and 
our financial stability. Equally affected by these criminal 
endeavors are our Canadian and Mexican neighbors. Terrorist 
groups will use whatever means available to obtain funding for 
their cause. Since the tragedy of September 11, our attention 
and rhetoric have been focused on financing mechanisms used 
specifically by terrorist organizations to support their 
activities. However, we would be naive if we did not recognize 
that the tools used to launder and disguise funds for terrorist 
organizations are similar, and quite often identical, to those 
used by many drug traffickers and criminal organizations to 
wash their own dirty money.
    According to the International Monetary Fund the amount of 
money laundered globally is somewhere between $600 billion and 
$1.8 trillion each year. To put this into perspective, the 
total amount of money currently being moved by illegal means 
throughout the world financial system is greater than the gross 
domestic product figures for most nations. The low end of the 
estimate compares with the GDP of Canada at $700 billion, while 
the high end is larger than the $1.6 trillion GDP of the United 
Kingdom.
    For the United States, approximately half of all laundered 
money passes through financial institutions and commercial 
operations within our borders or jurisdiction. This makes the 
United States the keystone in any attempt to bridge financial 
transactions and law enforcement activities. As markets 
continue to open up and as new methods of transferring value 
between individuals, businesses, and nations are created, the 
options available to the smuggler greatly increases. The 
countless methods to obtain, transfer and store profits by 
criminal organizations has tremendously complicated the efforts 
of agencies charged with enforcing money laundering statutes.
    The complex nature of financial crimes currently engages 
over 20 Federal law enforcement and regulatory agencies. The 
roles and responsibilities of these Federal agencies as they 
pertain to money laundering investigations significantly 
changed when Congress created the Department of Homeland 
Security through the Homeland Security Act in 2002. The act 
removed the U.S. Customs Service from the Department of 
Treasury and sent them to the newly formed Department of 
Homeland Security. The investigative functions of Legacy 
Customs, now known as Immigration Customs Enforcement [ICE], 
have been altered at the direction of its new parent 
organization. The creation of the Department of Homeland 
Security also brought about organizational changes within the 
executive branch with respect to the investigation of terrorism 
financing.
    On May 13, 2003 Homeland Security Secretary Ridge and 
Attorney General Ashcroft signed a memorandum of agreement 
giving the FBI the lead role in investigating terrorism and 
terrorist financing. Immigration Customs Enforcement [ICE], was 
to pursue terrorist financing solely through participation in 
FBI-led task forces except as expressly approved by the FBI. 
Specific provisions of the agreement directed the FBI and ICE 
to, among other things, develop collaborative procedures for 
handling applicable ICE investigations or financial crimes 
leads that have a nexus to terrorism. Change in the enforcement 
of financial crimes is also evident within the Department of 
Justice's Drug Enforcement Agency.
    The Honorable Karen Tandy, administrator of the DEA, 
testified earlier this year in the other body that ``we are 
making financial background a priority in hiring new special 
agents and undertaking other initiatives to increase 
interagency cooperation and enhance training and drug financial 
investigations.'' The DEA is already bringing this focus to 
bear on such problems as bulk currency movement in the black 
market peso exchange. The question bears asking, have the 
changes in the investigation of financial crimes within the 
Federal law enforcement agencies led to greater efficiencies to 
apprehend individuals and groups involved in the laundering of 
dirty money?
    Our first panel of witnesses from the FBI, ICE, IRS and DEA 
each have unique roles in engaging this large criminal 
enterprise. However, these roles may also conflict, and at 
times be duplicative in nature. Case in point, last fall the 
General Accounting Office released two reports on the 
effectiveness of legislation facilitating our ability to 
effectively address money laundering and terrorist financing. 
In it, the GAO reports that there is a lack of coordination 
between the agencies in charge of investigating money 
laundering and financial crimes. The report notes that the 
following are needed for an effective national money laundering 
strategy; effective leadership, clear priorities and 
accountability mechanisms.
    Additionally, change in the Department of Treasury and its 
subordinate agencies, the Internal Revenue Service and the 
Financial Crimes Enforcement Network, FinCEN, have also altered 
their financial crime capabilities. They have announced that 
they will place FinCEN under the control of the new Under 
Secretary for the Office of Terrorism and Financial 
Intelligence. Congress mandated the creation of the new office 
in the 2004 Intelligence Appropriations Law, Public Law 108-177 
to streamline the ``uneven and disjointed'' coordination on 
terrorist financing between Treasury and the other intelligence 
agencies. All of this change represents a marked departure from 
the money laundering culture of the 1980's when the U.S. 
Customs developed Operation Greenback designed to identify and 
penetrate the reasons for the unusually high level of cash-flow 
through the Federal Reserve in the south Florida area.
    U.S. Customs worked with the IRS, DEA and the prosecutorial 
support from the Department of Justice to prosecute money 
launderers, ultimately leading to the Money Laundering Control 
Act of 1986, making the act of money laundering a Federal 
crime. During that timeframe, the Department of Treasury had 
direct oversight over the investigations of financial crimes 
through the organizational authority over IRS and Customs. 
Today that relationship no longer exists. Rather, the 
Department of Treasury characterizes itself as a developer and 
implementer of U.S. Government strategies to combat terrorist 
financing and financial crimes. Change does not necessarily 
denote a decrease of law enforcement capabilities. However we 
need to investigate if change warrants a course direction as it 
pertains to financial investigations and their oversight.
    The subcommittee has chosen to call the first panel of 
witnesses from the agencies within Departments of Treasury, 
Justice and Homeland Security. All of the representative 
agencies have very important roles in the investigation and 
prosecution of those involved in the laundering of moneys 
gained from criminal operations.
    The subcommittee has also called a second panel made up of 
experts in financial investigations from the Government 
Accounting Office and a former Assistant Commissioner of ICE, 
formerly U.S. Customs. The testimony of both panels will 
provide a basis of evaluation of the U.S. Government's efforts 
to combat terrorist financing and money laundering. There is no 
lack of important issues for discussion, and I expect today's 
hearing to cover a wide range of pressing questions, mostly 
dependent upon my ability and voice to ask them.
    On our first panel we have representatives from four 
government agencies responsible for the investigation of 
individuals and organizations suspected of financial crimes, as 
well as three governmental agencies charged with the oversight 
and implementation of Federal financial policies and statutes. 
From Immigration and Customs Enforcement, we are pleased to 
have testify Ms. Forman, Deputy Assistant Director of Financial 
Investigations. From the Drug Enforcement Agency, we are 
pleased to have testify Mr. Donald Semesky, Chief Officer of 
Financial Operations. From the Federal Bureau of 
Investigations, we are pleased to have testify Mr. Michael 
Morehart, Section Chief of the Terrorist Financing Operation 
Section.
    From the Internal Revenue Service, we are pleased to have 
testify Mr. Dwight Sparlin, Director, Operations Policy and 
Support for the Criminal Investigations Branch. From the 
Financial Crimes Enforcement Network [FinCEN], we are pleased 
to have testify Mr. Bob Werner, Chief of Staff. From the 
Department of Treasury, we are pleased to have testify Mr. 
Daniel Glaser, Director, Executive Office for Terrorist 
Financing and Financial Crimes.
    From the Department of Justice we are pleased to have 
testify Mr. John Roth, Chief of the Criminal Division's Asset 
Forfeiture and Money Laundering Section. On our second panel we 
are pleased to have miss Bonni Tischler, vice president of the 
Pinkerton Global Transportation and Supply Security Department. 
Ms. Tischler formerly held positions as assistant commissioner 
for the Office of Investigations and the Office of Field 
Operations for the U.S. Customs Service. Bonni also served as 
one of the lead agents of Operation Greenback in the early 
1980's.
    Joining Bonni will be Mr. Richard Stana from the General 
Accounting Office. Mr. Stana is Director of Homeland Security 
and Justice Office at GAO. He is an expert in the field of 
financial crimes, having authored recent reports on terrorism 
financing and money laundering. I ask unanimous consent that 
all Members have 5 legislative days to submit written 
statements and questions for the hearing records and that any 
answers to written questions provided by the witnesses also be 
included in the record. Without objection it is so ordered.
    Also ask unanimous consent that all exhibits, documents and 
other materials referred to by Members and the witnesses may be 
included in the hearing record, and that all Members be 
permitted to revise and extend their remarks. And without 
objection, it is so ordered. As all of you know, it's our 
standard practice to ask witnesses to testify under oath.
    [The prepared statement of Hon. Mark E. Souder follows:]

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    Mr. Souder. So would you please rise so I can administer 
the oath to you.
    [Witnesses sworn.]
    Mr. Souder. Let the record show that each of the witnesses 
responded in the affirmative. I thank you all for coming. I'm 
still a little groggy too. We had terrible weather in the 
Midwest getting in, and so it was after midnight last night 
when I got in to D.C. But this is an important hearing and so I 
was glad--I was prepared to drive if I had to because I 
appreciate the time it takes each of your agencies to put this 
together, and your long time commitment to working with us, and 
this is probably the single most effective weapon we have in 
the United States at fighting narcotics and terrorism.
    So we really appreciate all of your leadership in this, and 
we need to work together to make it even stronger. We'll start 
with Mr. John Roth on behalf of the Department of Justice. 
You're recognized for 5 minutes.

  STATEMENTS OF JOHN ROTH, CHIEF OF CRIMINAL DIVISION'S ASSET 
FORFEITURE AND MONEY LAUNDERING SECTION, DEPARTMENT OF JUSTICE; 
    DANIEL GLASER, DIRECTOR, EXECUTIVE OFFICE FOR TERRORIST 
 FINANCING AND FINANCIAL CRIMES, DEPARTMENT OF TREASURY; MARCY 
 FORMAN, DEPUTY ASSISTANT DIRECTOR, FINANCIAL INVESTIGATIONS, 
    U.S. IMMIGRATION AND CUSTOMS ENFORCEMENT, DEPARTMENT OF 
 HOMELAND SECURITY; DONALD SEMESKY, CHIEF, OFFICE OF FINANCIAL 
  OPERATIONS, DRUG ENFORCEMENT ADMINISTRATION, DEPARTMENT OF 
 JUSTICE; MICHAEL MOREHART, SECTION CHIEF, TERRORIST FINANCING 
OPERATION SECTION, FEDERAL BUREAU OF INVESTIGATION, DEPARTMENT 
  OF JUSTICE; DWIGHT SPARLIN, DIRECTOR, OPERATIONS POLICY AND 
   SUPPORT FOR THE CRIMINAL INVESTIGATIONS BRANCH, INTERNAL 
REVENUE SERVICE, DEPARTMENT OF TREASURY; AND BOB WERNER, CHIEF 
            OF STAFF, FINCEN, DEPARTMENT OF TREASURY

    Mr. Roth. Thank you. I want to thank you for the invitation 
to testify today. I come to you as a career justice--Department 
of Justice prosecutor, having served in the Department for over 
17 years as a prosecutor in two different judicial districts 
before coming up here to main Justice to head the Asset 
Forfeiture and Money Laundering Section. We have a lot of 
challenges in money laundering enforcement, not the least of 
which is the coordination of all the different Federal agencies 
that are involved. We deal with DEA, with FBI, with ICE, with 
the Internal Revenue Service as well as people that support 
them like, Treasury, FinCEN and the 94 U.S. attorneys offices.
    It also requires coordination of high level policy agencies 
such as Justice, Homeland Security, Treasury and State. Let me 
talk for a minute about Operation Double Trouble, which I think 
is typical of the kind of enforcement that we are doing these 
days. It successfully targeted and disrupted key Colombian drug 
and money laundering brokers, money brokers who operated 
between the United States and Colombia, United States and 
Colombian enforcement personnel in a coordinated enforcement 
effort arrested over 50 individuals, seized a total of 36 bank 
accounts from 11 Colombian banks.
    This operation was also responsible for the seizure of over 
$12 million, 353 kilos of cocaine and 21 kilograms of heroin. 
In some ways this case typifies money laundering enforcement in 
the 21st century. It took 4 years to make this case. It 
required the resources of 9 U.S. attorneys offices, 2 sections 
of main justice, 12 State or local police departments, 3 
Federal investigative agencies as well as the cooperation of 
the Colombian police and Colombian prosecutors. How do we do 
this kind of coordination and why do we do it? Our coordination 
is designed to insure that information is shared so that the 
agents in the field know what other agencies know; that 
specific cases or operations are conducted in a way to take 
advantage of the resources and expertise of each individual 
agency, and to avoid dangerous crossovers between agencies, 
particularly in undercover investigations.
    How do we do it? We have a number of different operational 
coordination components. First we have the special operations 
division, a multi agency entity set up to attack command 
control and communications networks of high level narcotics 
traffickers. We have the Organized Crime Drug Enforcement Task 
Forces [OCDEF], also a multi agency group that is designed to 
attack the high level narcotics and money laundering 
traffickers across the United States and, in fact, 
internationally. Each of these OCDEF investigations has to have 
a financial component to it. In other words, if you attack the 
drug organization, you also have to attack the financial 
component.
    We sit on undercover review committees, each of the 
investigative agencies have review committees to look at 
sensitive or undercover activities. The Department of Justice 
sits on each of these committees and is able to assist in 
coordination in that way. We have the high intensity drug 
trafficking areas, the HIDTAs in the 28 different regions which 
we assist in the coordination among agencies. We have the 
HIFCAs, the high intensity money laundering and related 
financial crime areas that do the same thing, but focus on 
money laundering. We have suspicious activity review teams in 
40 different judicial districts, over 40 judicial districts. 
And these are the folks that review the suspicious activity 
reports that banks file.
    And it is one of the core ways that we gain intelligence 
about money laundering through financial institutions. Finally, 
we have FinCEN, which is as you know, the Treasury entity that 
is involved in collecting and analyzing Bank Secrecy Act data. 
Where are we in the future? Where do we need to go? In looking 
into the future, one of the things that we need to do is 
continue to attack major money laundering organizations. It's 
the core of our mission. It's what we do well. There are a 
number of cases in the last 5 years that I could talk about 
that illustrated those kinds of successes. Second, we have to 
look at the gateways to money laundering. We have to attack the 
people who control the access points to the U.S. financial 
institutions, the bankers, the accountants, the lawyers, the 
financial analysts, the peso brokers who allow dirty money to 
get into the financial system.
    Third, we have to take the fight overseas. It is far easier 
to try to launder U.S. currency overseas in places like Mexico, 
Panama, off shore in specific Caribbean nations than it is to 
try to launder it in the United States and we have to take the 
fight overseas and go to those banks and go to those 
jurisdictions with some vigorous enforcement efforts. We have 
our challenges and coordination.
    There is no question about it, but I think we do a good job 
through the mechanisms that I mentioned, both in my oral 
remarks as well as my written testimony, to help us do that 
job. Thank you.
    Mr. Souder. Thank you very much.
    [The prepared statement of Mr. Roth follows:]

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    Mr. Souder. Mr. Glaser.
    Mr. Glaser. Chairman Souder, thank you for inviting me to 
testify today, and thank you for you an interest in the 
combined efforts to combat money laundering and terrorist 
financing. This is a subject that has been of great interest to 
Congress, and I'm happy to be here today to continue this 
important dialog. I'm also pleased to be on this panel with my 
interagency colleagues. Defeating terrorist financing money 
laundering and drug traffic requires all of us to work in 
concert while employing all of our respective authorities. Our 
efforts against these threats have been most successful when we 
have worked in a coordinated approach and attack.
    Since September 11, the U.S. Government has launched an 
aggressive offensive to disrupt, dismantle terrorist groups and 
their operations. We are making it harder, costlier and riskier 
for al Qaeda to raise money and move money around the world. 
The need to track and cutoff sources of tainted funds has now 
become integrated into the efforts to attack money laundering, 
financial crimes and drug trafficking as well.
    To succeed, we need both a long-term and a short-term 
approach. Over the long term, we are enhancing the transparency 
and accountability of financial systems around the world to 
protect these systems from criminal abuse. In the short term, 
we are exploiting these transparencies to identify and capture 
terrorists and criminal funds and financial information. Let me 
provide three examples of where agencies sitting right here at 
this table work together to neutralize immediate threats.
    First, on February 19, 2004, the Treasury Department, in 
coordination with United States and Colombian law enforcement, 
used the Drug Kingpin Act to designate 40 key leaders of two 
narcoterrorist organizations in Colombia, the FARC and the AUC, 
as well as AUC front companies. In March of this year, the U.S. 
attorneys office in New York City announced an indictment of 
two of Colombia's most important drug kingpins based on 
Treasury-related prohibitions. The indictment was part of the 
joint effort among the DEA, Department of Justice, and the 
Treasury Department's Office of Foreign Assets Control. This is 
the first time that IEEPA violations have been used as a 
predicate offense in the drug area.
    I would like to draw particular attention to one action 
taken last December which demonstrates how Treasury-unique 
authorities can be put to use effectively in support of law 
enforcement. The Treasury Department used section 311 of the 
USA Patriot Act to designate Burma as a primary money 
laundering concern, because of Burma's inadequate money 
laundering laws, and its failure to cooperate with U.S. 
enforcement. Treasury also designated two Burmese banks because 
of their drug trafficking ties. Last month, FinCEN issued final 
rules to block these banks from access to the U.S. financial 
system. These actions were taken in very close coordination 
with the DEA and the U.S. Secret Service, and they have already 
borne fruit.
    Burma has now enacted anti money laundering laws. Burma has 
announced investigations of the two banks in question. And just 
this week, a team of Treasury and law enforcement officials are 
in Burma to discuss money laundering issues and law enforcement 
cooperation. This example also shows that we can also have a 
practical impact on the ground by focusing on broad systemic 
and structural issues. There are other examples of our efforts 
to deal with identified vulnerabilities in the United States 
and in the international financial system.
    First we have worked internationally through the financial 
action task force to strengthen customer identification, 
reporting, recordkeeping and information sharing standards. 
These efforts have produced meaningful change in countries like 
the Cayman Islands, Egypt, Guatemala, Indonesia, Israel, 
Lebanon and the Philippines, just to name a few. We have 
strengthened international standards and capabilities to attack 
terrorist financing, including freezing terrorist-related 
assets, regulating and monitoring alternate remittance systems, 
such as Hawala, insuring accurate and meaningful information on 
cross-border wire transfers, and protecting nonprofit 
organizations from abuse by terrorists.
    And under the USA Patriot Act, Treasury's FinCEN has 
published three proposed and final rules to broaden and deepen 
our own anti money laundering regime to now include for example 
oversight of money service businesses and broker dealers and 
securities. Treasury will continue to use its powers to 
influence judiciously, but aggressively to change behavior by 
blocking tainted assets, naming, shaming and shutting out rogue 
regimes and institutions and ensuring the integrity of the 
United States and international financial system.
    In addition to these current capabilities, I have just 
mentioned, the Treasury Department, in collaboration with 
Congress, is taking steps to enhance our organization and 
abilities. On March 8 2004, Treasury formally announced the 
creation of the Office of Terrorism and Financial Intelligence 
within the Department of the Treasury. This office would bring 
together Treasury's intelligence, regulatory, law enforcement 
sanctions and policy components. This new structure led by an 
Under Secretary and two assistant secretaries will allow United 
States to better develop and target our intelligence analysis 
and financial data to detect how terrorists are exploiting the 
financial system and to design methods to stop them.
    It will also allow United States to better coordinate an 
aggressive regulatory enforcement program, international 
engagements while managing Treasury resources wisely. We 
appreciate the subcommittee's focus on these issues and we look 
forward to continuing to work with Congress to ensure the 
effective implementation of our national anti money laundering 
and counterterrorist financing strategies.
    Thank you, chairman.
    Mr. Souder. Thank you.
    [The prepared statement of Mr. Glaser follows:]

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    Mr. Souder. Ms. Forman.
    Ms. Forman. Good morning, Chairman Souder, it is a 
privilege to appear before you to discuss the accomplishments 
of ICE and our ongoing efforts to combat terrorist financing 
and money laundering. ICE developed investigative expertise in 
all forms of financial crime, especially trade and commodity-
based crime and operational and analytical insight into non 
traditional methods of transferring value. ICE continues its 
proud history as the recognized leader in investigating and 
uncovering the types of financial crime and money laundering 
that undermines America's security. ICE works in close 
coordination with the Federal law enforcement community and 
private sector partners to protect the economic security of 
this Nation.
    Cornerstone is a comprehensive economic initiative that is 
based upon collaboration between ICE and the private sector. 
Cornerstone promotes a systematic approach of identifying 
vulnerabilities in the financial and trade sectors, 
vulnerabilities that criminal and terrorist organizations might 
exploit to raise or launder their funds. In November 2003, the 
General Accounting Office report noted that terrorist 
organizations, like criminal organizations, use a variety of 
alternate funding mechanisms to earn, move and store the 
illicit funds that finance their operations. Cornerstone 
coordinatesICE's diverse array of commercial, trade and 
financial investigations toward the common goal of targeting 
the methods through which terrorist and criminal organizations 
earn, move and store their illicit proceeds.
    With our broad jurisdictional authorities, ICE is uniquely 
positioned to target the methods through which terrorists and 
criminal organizations earn their illicit funds. These methods 
includes narcotics smuggling, intellectual property rights, 
counterfeit pharmaceuticals, human smuggling and trafficking, 
commercial fraud, export violations and cyber crime. ICE brings 
a wealth of experience and authority in tracking the illegal 
movement of funds derived from criminal activity into and out 
of the United States. ICE has applied a methodology to identify 
financial trade systems that are vulnerable to exploitation by 
criminal organizations and terrorist financiers. These systems 
include both currency smuggling, trade-based money laundering, 
courier hubs, banks, money service business, alternate 
remittance systems, charities and cyber crimes. ICE, along with 
our partners at Customs and Border Protection, are well 
equipped to identify commodities that are imported and exported 
from the United States and that could be used to store the 
proceeds of illegal activity. Criminal organizations have used 
commodities, such as gold and precious metals, to disguise 
their ill-gotten gains.
    For example, Operation Meltdown, an investigation conducted 
by the ICE El Dorado Task Force and the IRS in New York, 
resulted in the arrest of 23 individuals, the seizure of more 
than $1.5 million in currency, $1.3 million in gold, and 118 
kilograms of cocaine. ICE has taken a step beyond traditional 
law enforcement. Cornerstone provides the comprehensive 
investigative and intelligence resources necessary to track 
trends in criminal and terrorist financing schemes. Rather than 
attempting to target and investigate specific terrorist 
organizations and how they raise their money, Cornerstone 
targets the criminal methods themselves, identification and 
shutting down the vulnerabilities in commercial, trade and 
financial systems exploited by both criminal and terrorist 
organizations.
    Money laundering and terrorist financing are complex crimes 
that are beyond the scope of any one agency or sector. ICE 
recognizes the importance of sharing information and partnering 
with the law enforcement community, the regulatory community 
and the private sector to combat money laundering and terrorist 
financing. Through Cornerstone, ICE has embarked on an 
aggressive outreach program with the private sector. Special 
agents serve as liaisons with the private sector in 
facilitating the exchange of vital information. ICE shares this 
information through a quarterly report, Tripwire. Tripwire 
provides up-to-date information on criminal methods used to 
exploit vulnerabilities within trade and financial systems. ICE 
is home to the Money Laundering Coordination Center.
    The MLCC serves as the central clearinghouse for ICE's 
undercover drug money laundering operations, many of which 
target the BMPE. The MLCC serves as a repository for 
identifying information that is derived as a result of these 
operations. Information that is collected by the MLCC is 
analyzed to identify a target, recipients of BMP dollars, 
methodologies, and trends and patterns. The MLCC serves as a 
deconfliction mechanism for the 27 ICE field offices conducting 
drug money laundering operations. ICE has developed an 
important analytical tool called numerically integrated 
profiling system. NIPS is an advanced software program that 
analyzes foreign and domestic trade data, passenger travel 
information, Bank Secrecy Act data, immigration data seeking to 
identify anomalies in the collective information.
    The MLCC and NIPS fully complement ICE's Plan Colombia 
Initiative for providing the infrastructure to analyze the 
information that is developed on the BMPE. ICE has worked 
closely with our Colombian counterparts providing training and 
computers to exchange data. ICE continues to work with our 
partners at CDP to enforce currency and monetary instrument 
reports and bulk currency laws. Thus far in fiscal year 2004, 
ICE has seized approximately $54 million in currency. Since the 
enactment of the bulk currency statute, ICE special agents have 
133 arrests that have resulted in 103 indictments and 53 
convictions.
    Last ICE has established the first politically exposed 
persons currency task force in Miami. The task force's goal is 
to identify locate and seize assets of corrupt politically 
exposed persons involved in the theft of embezzled government 
funds. With the expansion of enforcement capabilities and 
innovative investigative techniques that ICE has brought 
together and Cornerstone, the agency is well positioned to 
combat money laundering and terrorist financing.
    I would like to thank the chairman for allowing me to 
testify before this committee.
    [The prepared statement of Ms. Forman follows:]

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    Mr. Souder. I thank each of you as you are going through 
this testimony, because it is, like, summarize in 5 minutes 
everything that you and hundreds of people do a very detailed 
type of thing. So I appreciate your ability to summarize this, 
and we will try to develop it further in questions.
    Mr. Semesky.
    Mr. Semesky. Chairman Souder, I would like to thank you for 
the opportunity to testify before your subcommittee today on 
the importance of cooperation and coordination between those 
agencies entrusted with the investigation and enforcement of 
money laundering and terrorist financing laws of the United 
States. As the Nation's single mission Drug Enforcement Agency, 
the Drug Enforcement Administrations anti money laundering 
mission is directed solely at funds derived from the 
trafficking of illegal narcotics. Under administrator Karen P. 
Tandy's leadership, significant strides have been made in DEA's 
financial enforcement program. Structurally, the Office of 
Financial Operations has been formally established at DEA 
headquarters. Each DEA domestic field division has formed one 
or more financial investigative teams, or FIT teams. FIT teams 
are also being established in DEA country offices in Colombia, 
Mexico and Thailand.
    The cultural mind set is also changing as evidenced by 
DEA's enthusiastic pursuit of specialized money laundering 
training, eager participation in multi agency financial 
initiatives, and most importantly, a renewed focus on the money 
and all of its domestic and international drug investigations. 
DEA recognizes that the estimated $65 billion per year illegal 
drug industry in the United States is a national tragedy that 
requires the dedicated resources of many Federal, State and 
local agencies to combat. DEA believes that the best way to 
combat this scourge is through interagency cooperation, the 
sharing of intelligence and coordination of enforcement 
activities.
    I would like to share with the subcommittee some of the 
ways the DEA has put this into action on the drug money 
laundering front. On the national level, DEA is participating 
in the multi agency OCDEF Drug Fusion Center. The Fusion 
Center, which will have a financial intelligence component 
known as the Narcotics Financing Strategy Center, will 
integrate drug-related financial intelligence with critical 
drug intelligence, allowing connections between the money and 
the underlying criminal activity that heretofore has not been 
possible. In 1999, DEA created a financial group of the special 
operations division or SOD to coordinate high level money 
laundering wiretap investigations.
    To encourage participation, ICE was given the lead and 
placed an assistant special agent in charge at SOD to supervise 
this section, which includes agents from DEA, ICE, IRS, CI and 
the FBI. Financial operations is working toward implementation 
of several national money laundering initiatives that involve 
joint partnership with one or more of our Federal law 
enforcement counterparts. Two of these initiatives involve the 
combining of separate ongoing bulk cash and wire remitter 
initiatives into joint agency initiatives aimed at the 
integration and analysis of financial intelligence information.
    Financial operations is also established in an interagency 
working group made up of both Federal law enforcement and 
regulatory agencies to identify major drug money laundering 
threats and form a consensus of what criminal and regulatory 
measures would form the best combination for addressing these 
threats. Financial operations has also taken over liaison 
responsibility with Treasury Office of Foreign Assets Control 
and will be assisting OFAC in compiling and vetting 
intelligence information on individuals and related entities 
nominated for inclusion on OFAC's Drug Kingpin and specially 
designated narcotics traffickers programs.
    Under DEA's terrorism information sharing program, all DEA 
entities must identify and report investigations that have a 
nexus or potential nexus to extremist or terrorist 
organizations to an established SOD mechanism to ensure that 
all terrorist-related information is immediately shared with 
the appropriate agencies. 17 of DEA's 21 domestic field 
divisions FIT teams have participation of one or more Federal 
law enforcement agencies that also have money laundering 
jurisdiction. The FIT teams have also been tasked to 
participate in all high intensity financial crime area task 
forces and suspicious activity report review teams in their 
areas of responsibility. DEA currently has 80 offices in 56 
countries around the world. These offices work closely with 
their host nation counterparts.
    DEA is already working closely with its foreign law 
enforcement counterparts on many significant drug money 
laundering investigations, most in support of DEA domestic 
field division cases and at times, other U.S. agencies 
investigations as well. Drug trafficking organizations attack 
the soul and fabric of America in pursuit of one thing, the 
money. As American defenders against these vile organizations, 
it is incumbent upon the U.S. Drug Enforcement Administration 
to attack these groups on all fronts.
    There is no more important battle in this effort than the 
attack against the proceeds that fuel this illicit industry and 
provides a motive to those who prey upon our society. DEA is 
committed to working with its law enforcement counterparts to 
fight against drug money laundering.
    Mr. Chairman, thank you for the opportunity to testify here 
today, and I will be happy to answer any questions you may 
have.
    Mr. Souder. Thank you.
    [The prepared statement of Mr. Semesky follows:]

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    Mr. Souder. Mr. Morehart.
    Mr. Morehart. Good morning, Chairman Souder and 
distinguished members of the committee. On behalf of the FBI, 
I'd like to thank you for this opportunity to testify before 
you today. I'll discuss the combined efforts of the FBI in 
combination with its partners in law enforcement toward 
enhancing both cooperation and the efficiency with which we 
interact to address the investigation of money laundering and 
terrorist financing matters. The FBI's counterterrorism program 
has made comprehensive changes in order to meet its primary 
mission of detecting, disrupting and defeating, or more simply 
put, preventing terrorist operations before they occur. We have 
spent the last 2\1/2\ years transforming operations and 
realigning resources to meet the threats of the post-September 
11 environment.
    Terrorists, their networks and their support structures 
require funding in some form to exist and operate. The 
financial support usually leaves a trail that can be exploited 
by law enforcement for investigative purses. Being able to 
identify and track those financial trails after a terrorist act 
has occurred is important. But the key to achieving the mission 
of prevention lies in exploiting financial information to 
identify previously unknown or undetected terrorists and/or 
terrorist cells. To this end, the FBI has bolstered its ability 
to effectively combat terrorism through the formation of the 
terrorist financing operation section, or as it is more 
commonly known, TFOS.
    The mission of TFOS is broad. It ranges from conducting 
full financial analysis of terror suspects and their financial 
support structures in both the United States and abroad to 
developing predictive models and conducting data analysis to 
facilitate the identification of previously unknown terrorist 
suspects. In addition, the FBI has undertaken a number of other 
investigative initiatives to improve information sharing and 
coordination with our national and international partners. For 
instance, we have significantly increased the number of joint 
terrorism task forces, or JTTFs across the country. Prior to 
September 11 there were 34 JTTFs. There are now 84.
    The JTTFs, as you may know, effectively partner FBI 
personnel with literally hundreds of investigators from various 
Federal, State and local agencies. The members include 
representatives from a variety of Federal agencies, including 
most, if not all, of those represented here today as well as 
others. Subsequent to the events of September 11, 2001, the 
U.S. Customs Service was mandated to investigate terrorism 
financing. This was achieved via the initiation of Operation 
Green Quest that attained a number of successes, but 
represented in some measure a duplicative effort and reinforced 
the need for a centralized coordinating entity.
    Consequently, a memorandum of agreement pertaining to the 
investigation of terrorism financing was entered into between 
the Department of Justice and the Department of Homeland 
Security. The MOA addressed the importance of waging a seamless 
coordinated law enforcement campaign against terrorist 
financing. The MOA, signed by Attorney General Ashcroft and DHS 
Secretary Ridge on May 13, 2003, designated FBI as the lead 
agency in terrorism financing investigations and operations 
there by enabling DHS to focus its law enforcement activities 
on protecting the security and integrity of the U.S. financial 
systems through Operation Cornerstone, which was previously 
described by Ms. Forman.
    Former U.S. Customs Service Operation Green Quest criminal 
cases, having no nexus to terrorism, are still being worked by 
ICE, while those having a nexus to terrorism were transferred 
or transitioned to the appropriate JTTF, where ICE task force 
members continue to play significant roles. In accordance with 
the MLA, ongoing and future ICE financial investigations have 
developed links to terrorism will be referred to the FBI 
through TFOS. I will also note that the FBI, pursuant to the 
MOA along with ICE has developed collaborative procedures to 
insure that will happen in the future.
    In addition to the aforementioned efforts on a national 
level, the National Security Council formalized a policy 
coordinating committee on terrorist finance at the end of 2001. 
The NSC chairs the PCC, which regularly meets to coordinate the 
U.S. Governments campaign against terrorist financing. The 
Departments of State, Treasury, Homeland Security and Justice 
also participate in an interagency terrorist financing working 
group chaired by the State Department. The working group has 
identified 42 countries whose cooperation is crucial to the war 
on terrorism. All of the participating agencies work closely to 
provide training or technical assistance to each of those 
countries.
    With respect to the 2003 money laundering, national money 
laundering strategy, the FBI concurs with the strategies, goals 
and objectives as set forth by the Treasury Department, the 
blocking of terrorist assets worldwide, establishing and 
promoting international legal standards for adoption by other 
countries to safeguard their financial infrastructures from 
abuse and facilitating an exchange of international information 
are several key objectives which must be achieved if we are to 
stem the flow of illegal funds throughout the world.
    Also I would like to add the FBI's efforts to combat 
terrorism have been greatly aided by the provisions of the USA 
Patriot Act, and pursuant to the 2003 national money laundering 
strategy, the FBI is insuring its vigorous and appropriate 
application that has already an extraordinary beneficial in the 
war on terrorism. Most importantly, the Patriot Act has 
facilitated the sharing of information within the law 
enforcement and intelligence community.
    In summary, the FBI understands that combating terrorist 
financing is a mission that cannot be accomplished 
independently. The need for information sharing and close 
cooperation cannot be overstated.
    I'd like to thank you for the opportunity to testify before 
you today and to highlight the FBIs investigative efforts and 
the role of the FBI in combating terrorist financing. It would 
be my pleasure to answer any questions that you might have.
    Mr. Souder. Thank you.
    [The prepared statement of Mr. Morehart follows:]

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    Mr. Souder. Mr. Sparlin.
    Mr. Sparlin. Good morning, Mr. Chairman, Congresswoman 
Blackburn. Thank you for the opportunity to be here today to 
highlight the specialized skills of the Internal Revenue 
Service Criminal Investigation Division and the contributions 
we make along with our counterpart law enforcement agencies to 
our national effort to combat money laundering and terrorist 
financing. I wish to thank the subcommittee for the work you 
have done and are doing on these important issues. And I would 
especially like to thank your staff for the assistance in the 
preparation for these important discussions today.
    The fundamental mission of the Criminal Investigation 
Division is to investigate complex tax and money laundering 
cases. To accomplish this, we recruit individuals with 
accounting and business backgrounds. Through a process of 
rigorous training and years of experience, we shape them into 
law enforcement professionals adept at investigating the most 
sophisticated financial crimes, whether they involve tax 
evaders, corporate fraudsters, narcotics traffickers or 
terrorist financiers. The unique sophistication of our 2750 
criminal investigators is in demand throughout the law 
enforcement community because we add value to any financial 
investigation.
    Money laundering activities and sophisticated tax evasion 
schemes are frequently interconnected. For example, an ongoing 
investigation combines both money laundering activity and an 
ambitious offshore evasion scheme in Costa Rica. The schemes 
promoter has assisted 1500 clients in obtaining over $30 
million in fraudulent refunds. To date, 39 defendants have been 
recommended for prosecution and those already convicted have 
received significant sentences.
    In addition to bringing significant technical expertise to 
tax and money laundering investigations, there is often a nexus 
between these crimes and terror. For example, one significant 
investigation of an international charitable foundation 
revealed ties to international terrorist organizations. In that 
case, the crimes that formed the basis for the search warrant 
related to the filing of the foundations tax return and bank 
secrecy data.
    In another investigation the executive director of the 
benevolence international foundation, a purported charitable 
was sentenced to over 11 years in Federal prison for 
fraudulently obtaining charitable donations that were 
ultimately used to support violent activities overseas. 
Terrorists employ a variety of means to move money, and we are 
using a variety of means to detect it. One way is to capitalize 
on Bank Secrecy Act data. Criminal investigation leads 41 
suspicious activity report review teams nationwide. These teams 
are comprised of Federal, State and local law enforcement 
officials who evaluate over 12,000 SARs each month.
    An example of the usefulness of an SAR review team is 
illustrated in a case involving a fast food restaurant employee 
who was convicted of operating an unlicensed money service 
business. This case was initiated after an SAR review team 
evaluated numerous suspicious activity reports filed by several 
banks because the subject was making cash deposits inconsistent 
with his occupation. It was ultimately proven that the subject 
made numerous cash and check deposits to several accounts and 
wired over $3 million overseas to locations in Europe, South 
America the Middle East and Asia.
    IRS also makes a unique contribution to the war on terror 
through our counterterrorism project we are piloting in Garden 
City, New York, which when fully operational, will use advanced 
analytical technology and data modeling of tax and other 
information to identify patterns and perpetrators.
    The Center analyzes information not available to any other 
law enforcement agency. Already the Center has identified 
individuals, entities and the relationships between them 
previously unknown to law enforcement. As an example, the 
Center began compiling and analyzing financial data that 
culminated in the linking of several individuals and 
businesses, some of whom are or were under investigation and 
one with ties to al Qaeda.
    In conclusion, I would like to thank and pay tribute to not 
only the men and women of IRS CI, but the law enforcement 
professionals. It is our honor to work with them on task forces 
combating money laundering and terrorism. Cooperation is the 
backbone of law enforcement, and the task force approach has 
served our Nation well in confronting many critical national 
law enforcement challenges.
    I thank you for this opportunity to appear before you this 
distinguished committee and would be happy to answer any 
questions you and the committee members may have.
    Mr. Souder. Thank you very much.
    [The prepared statement of Mr. Sparlin follows:]

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    Mr. Souder. Mr. Werner.
    Mr. Werner. Good morning, Mr. Chairman, Congresswoman 
Blackburn. It is a privilege to appear before you to discuss 
FinCEN's role in the terrorist financing and money laundering 
investigations. Since its establishment in 1990, FinCEN has 
been a service-oriented information-sharing agency dedicated to 
collecting, analyzing and disseminating financial data to help 
identify and trace the financial intersection of potential 
criminal and terrorist activity. Although FinCEN examines its 
data in support of a wide range of criminal investigations, its 
top operational priority is unquestionably counterterror 
support to the law enforcement intelligence communities. We 
make our information products and services available to all 
agencies that have a role in investigating or analyzing 
terrorist related activity and information.
    We also strive to adapt quickly to changing needs. One of 
the first actions FinCEN undertook following September 11 was 
the establishment of a financial institution hot line to 
provide financial institutions with an expedited means of 
vetting suspicious financial activity possibly linked to 
terrorism. Although the financial institution will continue to 
file a suspicious activity report through the formal BSA filing 
process, the hotline now makes it possible to quickly assess 
the value of the information and get it into the hands of law 
enforcement well in advance of the normal time constraints 
associated with the formal process.
    Since its inception in September 2001, the hotline has 
fielded over 1,300 calls, and over 850 of those have resulted 
in immediate referrals of the information to law enforcement. 
Strategically FinCEN is working expeditiously to enhance the 
quality of its analysis. We have adjusted our analytic 
methodology from a reactive approach to a more proactive think 
tank environment that will focus on the ways in which terrorist 
groups move money. To that end, a pilot is underway to look at 
some of the top known foreign terrorist organizations through a 
financial lens. Three analysts are presently conducting 
extensive research to study the business models of these 
organizations.
    The objective of each analyst is to become familiar with 
the mechanisms each group uses to--in order so that we can 
identify inherent vulnerabilities in the organizations business 
structure. We are also initiating a bilateral study with our 
Italian counterpart to track illicit currency flows between our 
two countries. This will be the first collaborative effort with 
a foreign financial intelligence unit on a strategic project. 
It is anticipated that this project will be the foundation for 
additional collaborative efforts amongst the members of this 
dynamic international network which is known as the Egmont 
Group.
    Most significantly, FinCEN's information products and 
services are available to all agencies, whether Federal, State 
or local that have a role in investigating illicit finance. 
Networking is an integral part of this service. It extends the 
value of our data in multiple ways. Our technologies, for 
example tells United States when different agencies are 
searching the same data, enabling United States to put those 
agencies together and there by avoid investigative overlap, and 
more importantly, permit the agency to leverage resources and 
information.
    But perhaps the most prominent example of FinCEN's role as 
a centralized network recently has been its implementation of 
section 314 of the USA Patriot Act. In recognition of its 
unique position as a central focal point for financial 
information, FinCEN was mandated under that section to 
facilitate and enhance the flow of information potentially 
related to terrorist financing and major money laundering.
    In general, section 314(a) allows law enforcement to query 
U.S. financial institutions about suspects, businesses and 
accounts in major money laundering and terrorism 
investigations. FinCEN facilitates this interaction by sending 
law enforcement information requests to thousands of financial 
institutions across the country. These financial institutions, 
in turn, search their records and transactions and report 
positive matches back to FinCEN. FinCEN then consolidates the 
data and provides this pointer information to the law 
enforcement requester for followup through appropriate legal 
process. Another key dimension of the FinCEN network is its 
global reach. Transnational crime cannot be successfully 
confronted without building alliances within the global 
community. Finance today knows no borders. Law enforcement 
officials are now able to come to FinCEN to request assistance 
from our international counterparts, the financial intelligence 
units of 84 countries throughout the world.
    In fact, we are implementing a program where FinCEN will 
automatically request information from relevant financial 
intelligence unit counterparts as part of any terrorism related 
analysis project. FinCEN, its network and its missions are 
dedicated to fostering a dynamic information sharing 
environment among its law enforcement, regulatory and financial 
partners. FinCEN will continue to buildupon its expertise and 
add the benefit of its successes and lessons learned to our 
Nation's antiterrorism and money laundering efforts.
    Thank you again for this opportunity to testify today on 
FinCEN's role in terrorist financing and money laundering 
investigations. I'd be happy to answer any questions the 
subcommittee may have.
    [The prepared statement of Mr. Werner follows:]

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    Mr. Souder. Before I start on my questions, I want to just 
ask you, Mr. Werner, about something that you said. You are 
able to tell when different agencies are accessing the same 
information. Is that automatic notification?
    Mr. Werner. It's done in two ways. We have the gateway 
system, whereby State, Federal and local law enforcement access 
BSA data. That has an automatic alert system when data has been 
touched by more than one agency. In addition, when we get 
direct requests for assistance from agencies, we network that 
through our data base and feed it back into the gateway system 
so that we can collect any double touchings of that.
    Mr. Souder. Thank you. I want to start with the Andean 
region. It is the largest area producing narcotics into the 
United States. And I believe it was Mr. Semesky said that the 
black market peso exchange was the largest laundering mechanism 
for Colombia. Does everybody agree with that, about the black 
market peso exchange? There's no disagreement. Could you 
describe that more completely, the extent of that, and how are 
you tackling that if that's the largest place where the money 
is moving.
    Mr. Semesky. Mr. Chairman, the black market peso exchange 
is a mechanism that actually began in the 1960's when Colombia 
imposed foreign exchange restrictions on its citizens. Due to 
the inability of Colombian businesses to get foreign exchange 
for international trade, a black market grew up and involved 
Colombia. In the late 1970's when the U.S. Government started 
cracking down using Bank Secrecy Act violations on Colombian 
drug organizations, those drug organizations became the supply 
end of the dollars that fed that system. And it just mushroomed 
from there.
    Quite simply, how it works is that you have a drug 
trafficking organization that operates, that produces drugs in 
Colombia, sells them in the United States. As they collect 
their drug proceeds, they have a need to either smuggle them 
out of the United States or get rid of them, launder them in 
some fashion. What the black market peso exchange does is it 
brings a peso broker into the loop. That peso broker will buy 
the dollars from the narcotics trafficking organization, 
usually at a very substantial discount. This negotiation takes 
place in Colombia. Messages through various means are given to 
workers, both for the drug organization and the money, the peso 
brokers organization here in the States. They exchange the 
funds.
    At that point the drug traffic organization is paid in 
Colombia in pesos, less the discount. The peso broker now owns 
the dollars that are resident here in the United States. And 
his or her particular problem is getting that money in the 
banking system, which generates a lot of the work that the 
agencies here at the table conduct. That money is then put in a 
lot of times to the trade system, commodities are purchased and 
smuggled into, or undervalued and taken into Colombia, where 
they are sold through the San Androsidos, or the black markets 
in Colombia.
    That is kind of the cycle how it runs. What the U.S. 
agencies are doing, they mainly attack this system through the 
identification of the peso brokers and the delivery of the 
funds here in the United States, and then tracking the funds 
through the system into the commodities and then both the 
United States and the free trade zones around the world to 
Colombia. And then go after the accounts that the moneys go 
through and in the system. One of the things that we are 
pushing at DEA and our office is more to focus primarily back 
on the drug organizations that are delivering the funds in the 
United States, rather than on where the funds are going. ICE is 
the expert in trade and they conduct more of the trade 
investigations than DEA does. DEA investigations we want to 
focus on the drug organizations that are generating the money 
and take that back to Colombia and to the drug traffickers that 
are supplying those organizations here in the States. So its 
kind of a twofold approach. There are plenty of targets, both 
on the supply side of the dollars, the facilitating peso 
broker, and the demands side, which are the businesses that are 
buying the dollars for all of the agencies to concentrate on.
    Mr. Souder. Does anybody else want to comment on this as 
well? I want to make sure I understand. In the black market 
peso, in this market are they dealing solely with Colombia? Or 
do they have legitimate peso exchanges too, or are these just 
basically rogue operations from the word go? Are they 
intermingled with Mexican peso or other currencies as well.
    Mr. Semesky. Primarily, Mr. Chairman, it deals with 
Colombia. This is a system that is, in effect, in Colombia. 
There are other black markets throughout the world that do buy 
illegal dollars. Colombia relaxed its foreign exchange 
restrictions in 1991 and it is now perfectly legal to buy and 
sell pesos for foreign exchange in Colombia, in most 
situations. However, there are still regulated situations that 
do require registration with the central bank, and one of those 
is international trade. Because of that, there is still a 
demand for dollars for international trade. And so the drug 
industry is still supplying literally hundreds of millions of 
dollars, if not billions,--well, the estimate is up to $5 
billion a year for the black market peso exchange. But to 
answer your question, it primarily deals with Colombia, 
although we do see a good bit of the money go through Mexico 
first. But it is still being handled by Colombian peso brokers.
    Mr. Souder. Panama to.
    Mr. Semesky. A lot of the money ends up in Panama to buy 
commodities from the cologne free trade zone which are then 
taken to Colombia either is smuggled out right or undervalued 
with the Colombian Customs service, which is called the Dion.
    Mr. Souder. Do any of you have any specific suggestions of 
anything where we would need more cooperation and legal changes 
in Colombia, Peru, any of the Andean countries that would help 
go after this?
    Mr. Semesky. Mr. Chairman, as the Colombians have relaxed 
the laws on foreign exchange, it has decreased it, I believe, 
somewhat. However, the agencies here at the table are 
addressing the black market peso exchange with the regulatory 
agencies to go after it as a system, and we are working toward 
that and working with our counterparts in Colombia. They are 
well aware of our efforts and they want, they have expressed a 
desire to work with United States on that. We have also, 
through FinCEN, talked to the governments of Panama, Aruba, 
Venezuela as well, because a lot of the drug dollars that flow 
through their system go into those free trade zones as well. 
And we know that if we address one free trade zone and not the 
others, that the money will just shift.
    Mr. Souder. Anybody else?
    Mr. Roth. I would just like to highlight that, that the 
cooperation that we get from these other countries is crucial 
in trying to knock down these black market peso exchanges and 
some of the investigations that we have had literally could not 
have been done without, for example, the cooperation of the 
Colombian government who's been very responsive.
    Ms. Forman. Mr. Chairman, if I may, some of the tools that 
we're utilizing to attack the BMPE, the black market peso 
include a number of undercover operations that target the drug 
dollars in the streets of the United States and that 
information is collected, at least by ICE, in the money 
laundering coordination sector, but we are able to take the 
identifying information, identify patterns and trends and 
recipients of the black market dollars. We're also working 
under Plan Colombia very closely with the Colombian government. 
We're exchanging trade data. The NIPS program that I spoke 
about identifies anomalies on trade leaving the United States 
and trade going into Colombia to identify these anomalies 
because, for example, if a million dollars worth of batteries 
are leaving the United States and Colombia says that they're 
only receiving 100,000, that's an indicator that maybe the 
batteries may be smuggled in.
    So we have that relationship. We have also assigned agents 
to Colombia to work with the Colombian authorities and help 
identify leads and targets, joint targets to work together. 
Very successful case that we worked together with DEA and the 
ICE El Dorado Task Force was a case called Wire Cutter, where 
we worked with the Colombian authorities and we were able to 
take down eight major brokers in Colombia as well as violators 
here in the United States. Thank you.
    Mr. Souder. Any comments on Mexico or where we are there? 
It's been a checkered history.
    Mr. Semesky. Mr. Chairman, the DEA country office in Mexico 
is, on the money laundering side, is being expanded to a full 
financial investigative team. We work, we do work closely with 
the OFFI, which is their equivalent of the FBI, on money 
laundering investigations. That being said, Mexico is probably 
the largest repository of drug dollars leaving the United 
States. And most of that leaves the United States in bulk cash. 
Many of the investigations the DEA conducts and the other 
agencies here conduct address the bulk cash that is leaving the 
United States across the southwest border into Mexico. We are 
currently as a interagency trying to address that problem and 
look at different means of addressing it either on the criminal 
enforcement or the regulatory side.
    Mr. Souder. I know on the north border we do some back-
checking of people going back into Canada. We have had a couple 
of experimental places. Are we doing that at any of the south 
border where we are catching any bulk cash.
    Ms. Forman. ICE has conducted a number of operations with 
our Mexican counterparts in conjunctions with ICE foreign 
attache officers, and are in the process of establishing 
another outbound operation, but we actually assign agents as 
well as Customs border protection officers in Mexico, and we 
exchanged information as the operation is ongoing. And we also 
provide x-ray vans and the expertise to share that information. 
So this is an ongoing process.
    Mr. Souder. So do we do any checking on the U.S. side of 
the Texas-Arizona-California borders?
    Ms. Forman. I'm sorry?
    Mr. Souder. In other words, what you described is mostly 
working with the Mexicans on their side of the border. Do we do 
any back checking at our side of the border looking for money 
before they leave U.S. soil?
    Ms. Forman. Yes. It's a two-way exchange of information. 
It's not just a one-way. They also feed information back to us 
during these operations.
    Mr. Souder. OK. Ms. Blackburn.
    Mrs. Blackburn. Thank you, Mr. Chairman. I want to say 
thank you to each of you for taking your time to come over here 
this morning and talk with us and give us an update on where 
you are with this. I think when you have a district like mine, 
where Fort Campbell is located in Montgomery County, Tennessee, 
where you have many families that have military men and women 
who are deployed, we have Guardsmen and Reservists who are 
deployed and are aggressively working in Afghanistan and Iraq 
and fighting in this war on terror. And I appreciate the 
information that you all bring to us this morning.
    Mr. Chairman has talked with you about Colombia and Mexico. 
We know that and we've been watching what DOD has done over in 
Afghanistan with the stockpiles or removing the stockpiles of 
opium and heroin. What I'd like to know, we know that the cell 
of these finances a lot of terrorist activity. And do we 
currently have any significant reports of success trafficking--
tracking the financing mechanisms or apprehending individuals 
that are engaged in terrorist financing in this region? And 
whomever from the panel would like to answer that?
    Mr. Sparlin. I'll speak for the Internal Revenue Service. 
As we have responsibility for many of the Bank Secrecy Act 
violations, we review the significant amount of data that is 
supplied by FinCEN with the--through the banking community. We 
are working in partnership with the banking community to 
identify suspicious activity. They file those reports with us.
    In addition to that, we are looking at a number of 
charitable organizations who have been identified as having 
relationships with terrorist organizations. And I mentioned in 
my opening statement a couple of those we have shown to be 
raising money in this country through their charitable 
organizations through donors to that program, and then shipping 
the money overseas.
    We've had a couple of significant successes in that, as I--
the Benevolent Foundation that I spoke about earlier, the 
individual there raised millions of dollars, sent it overseas 
and now is facing over 11 years in prison.
    So we are looking at both the organization charitable 
organizations that may be involved in that sort of thing, the 
banking community, the financial community is working with us 
in partnership to identify those who are potentially conducting 
suspicious activities.
    Mrs. Blackburn. And that is specific to Afghanistan and to 
that region, am I correct?
    Mr. Sparlin. Well, it's to the Middle East. I mean, they--
it's kind of a know-your-customer type of a situation.
    Mrs. Blackburn. Exactly. OK. Thank you.
    I also want to ask you just a little bit about looking at 
some of the other avenues of financing, the alternative means, 
if you will, diamonds, gold, contraband, counterfeit goods, and 
intellectual property theft. It's particularly important to us 
in Tennessee because of what happens with entertainment product 
and with music. And my songwriters in Tennessee talk about this 
regularly.
    And the FBI leads some investigations and maintains case 
data, according to the GAO, and does not systematically collect 
and analyze data on terrorist use of alternative funding 
mechanisms. And if I'm wrong in that, I want you to correct me. 
Does the FBI anticipate collecting this type data in the future 
and could it provide useful information about the utilization 
of these types of alternative funding schemes?
    Mr. Morehart. Yes, ma'am, to answer that question, let me 
give you a little detail on that. It is, as you might expect, 
difficult to accumulate that kind of information because there 
are so many different types of alternate financing methods. 
It's limited only by your imagination, if I might describe it 
that way.
    What the FBI is undertaking now is a number of different 
initiatives, if you will, or projects to try to accommodate 
that information if I can describe it as a data base so that we 
can accumulate it and send it out not only to FBI agents out in 
the field and the managers there, but also the other agencies 
we interact with through the JTTF so they are aware of those 
type of financing mechanisms.
    One of the things we are doing is we are--we have what we 
call an annual field office report. For the first time last 
year that annual field office report included questions 
regarding terrorism financing methods, mechanisms, if you will, 
that we are accumulating and analyzing as we speak.
    In addition, we intend to go back out to the field with a 
detailed survey that will be answered by those supervisors, if 
you will, that oversee the joint terrorism task forces that 
handle the terrorism financing matters. And we're going to ask 
for specific detailed information on the various types of 
financing mechanisms that they have observed so that we can 
also accumulate that information and disseminate it for 
educational purposes, if you will.
    Also we are in the process--this is a growing process--of 
suggesting manual changes. One of the things that FBI agents 
have to do and their counterparts on the JTTFs is to report 
back to our headquarters as to preliminary investigations and 
full investigations of terrorist matters. One of the aspects 
that we are requesting is that they specifically must include 
any information they have on terrorist financing that relates 
to any specific investigation. We're in the process now of 
collecting that information and within, I would say, the very 
near future, we will have a product that describes the types of 
financing mechanisms that we're seeing.
    Mrs. Blackburn. Thank you, sir. Let me ask--Mr. Chairman, 
may I continue for just a moment? Thank you, sir.
    Do you all--is there a way for you to construct for us, and 
there may not be, just a chart that would show what you 
estimate to be the amount of money that leaves this country 
with drug sales, what is there with the alternative means, that 
terrorists or organizations are pulling out this country? I 
think sometimes people have a tough time visualizing good 
people with good money sometimes end up spending it on 
counterfeit goods or contraband or different things. I don't 
know if you have an estimate of the amount of money that gets 
tied back to terrorist activity.
    Mr. Morehart. You know, that would be extremely difficult 
to even guess on that amount. The bottom line, when you're 
talking about terrorist financing in terms or equating it to 
money laundering, the bottom line with those funds is 
concealing the funds and their ultimate use as opposed to pure 
laundering of the funds to make illicit funds look as if 
they're, you know, good money, if you will, or clean money. So 
that, in and of itself, poses a problem.
    The concealment issue, it is extremely difficult, as you 
describe Congresswoman, a lot of people, for example, may 
contribute funds to an NGO thinking that it's a legitimate 
donation when, in fact, that money is taken down through 
several transactions and used to fund insurgency, for example, 
in Iraq. It's very difficult to determine when it becomes from 
legitimate money, if you will, to illicit funds. So it's almost 
impossible to give you a dollar amount.
    Mrs. Blackburn. Well, and I know that's one of the things 
that makes your job very difficult and we appreciate the 
efforts you all continue to place on it.
    I do have one other question, methamphetamines, and the 
situation that we have in Canada with smuggling of the 
precursor chemicals that are coming in. And we know that grew 
through the 1990's. And without revealing any sensitive or 
classified information, can you tell us what your agencies are 
doing to target the financial side of the precursor chemical 
smuggling?
    Mr. Semesky. Congresswoman Blackburn, the Drug Enforcement 
Administration has targeted and, quite successfully, the 
precursor chemicals coming from Canada into the United States 
and has seen a dramatic drop in the amount brought into the 
United States as well as a very steep increase in the price for 
the pseudoephedrine. I don't have specific figures to give you 
on that.
    As far as the financing side of that, they have, in those 
investigations, addressed the financing or the money that is 
earned from the sale of pseudoephedrine and ephedrine. As Mr. 
Morehart pointed out, as we tracked those funds and they've 
gotten into the banking system, once they get to the Middle 
East they literally disappear because they go over many times 
in the form of money orders or checks and they hit the first 
bank and are turned into cash again and the trail is gone.
    Mrs. Blackburn. Thank you. We appreciate your efforts and 
thank you for your time for being here today.
    Mr. Souder. I want to followup briefly and first on that 
subject of the precursor chemicals. At our Detroit hearing, we 
heard the good news that the different agencies feel that we've 
had both in Homeland Security, DEA, and others, progress. 
Particularly there where we had at least signs from a few big 
busts that a large percentage of the precursor chemicals are 
coming across at Detroit, and we had a couple of big busts, of 
course the ecstasy bust. But I want to confirm these and then 
ask a question.
    We also understood, when I asked a followup question, that 
there has not been a dramatic reduction on the ground in the 
United States in meth, either in precursor chemicals or in the 
use of methamphetamine. That we've not seen a decline or we 
don't--assume there's a decline in Rotterdam and Antwerp as the 
shipping points, so therefore if it's not coming from Canada, 
where is it?
    Mr. Semesky. Mr. Chairman, that is not something my 
division addresses, but my understanding is that there are new 
routes and one of them is Mexico. And that is something that is 
being addressed.
    Mr. Souder. Because one of the questions is it's 
presumably, since the precursor chemicals are predominantly 
made for these kind of drugs in the area of the Netherlands and 
in Belgium, and we know where the bulk of it is coming from, it 
seems like one of the best ways to trace this would be the 
money. Somebody is shipping it.
    Mr. Semesky. Again, that is something that our diversion 
and foreign operations divisions are addressing. There are 
several operations that are gathering financial intelligence on 
the wire transfers that are going to--they have to--and my 
division is working with them on that and tracing back the 
precursors as they're seized to the manufacturer and then 
looking at the manufacturers who they are receiving payments 
from. And it's, obviously, a long process and it involves 
getting information from foreign banks, but that is something 
that is being addressed.
    Mr. Souder. So you've kind of hinted, and I want any other 
comments from anybody who are tracking the finances of this. If 
this stuff moves from Europe and hits Mexico, which we're only 
at the preliminary stage, in other words, we don't have lots of 
big cases here with which to sort this through, but if there's 
been a reduction in Canada and it's moving in Mexico, are there 
things that we need to do? Are we able to track that when it 
hits Mexico? Presumably they're shipping to the northern parts 
of Mexico rather than to the southern parts of Mexico.
    Let me ask Mr. Werner, in FinCEN you said you have a 
conceptual group that is starting to look at patterns of how 
terrorists think. Will that be for narcotics too or just 
weapons of mass destruction terrorism?
    Mr. Werner. Mr. Chairman, it's targeted to the designated 
terrorist groups, the known terrorist groups. But to the extent 
that some of those groups derive revenue from narcotics 
trafficking, it will include their business model.
    Mr. Souder. They both have been involved. In the Middle 
Eastern groups it's easy for us to say in Congress, say 
``Middle Eastern'' and imply that it's terrorists. Middle 
Eastern groups are often just profiteering groups and they may 
not even be necessarily from terrorist countries or they may be 
rogue or cooperating with the government. It's a wide range. 
But given the fact that in meth precursors, much of this is 
coming from the Middle East, is FinCEN looking at the potential 
and how it hits Mexico?
    Mr. Werner. We haven't been targeting the specific example 
you're giving, but I think as we get to understand these 
terrorist organizations' business models better, again to the 
extent those business models include drug trafficking we'll be 
looking very carefully at that.
    Mr. Souder. Let me ask you, and I would like kind of a 
general comment because I had this as a later question because 
I want to come back to Canada again. How much do you think--
we've been operating under the assumption that lots of the 
narcotics, child trafficking and the traditional underground 
economy will only get to be a larger percentage of terrorist 
funding because we will go after the above-board, above-ground 
type of operations, that how much of the terrorist funding do 
you think will be in those categories versus things like the 
Holy Land Foundation or groups that may, in fact, be doing lots 
of good work or some good work and hide inside that, versus 
hybrids like the black market pesos, where you would have a 
currency exchange and they would try to work through semi-
legitimate businesses to then convert it into gold so it looks 
like another product?
    Mr. Werner. Based on what we know now about terrorist 
financing models, I think I would lean toward Mr. Morehart's 
statement which is that primarily based on what we know now the 
revenue derived by terrorist organizations is a lot of good 
money turned into bad. That's not to say that within certain 
regions and certain terrorist groups they're not relying more 
primarily on illicit activity. But, again, I think the studies 
we're doing now on these strategic business models will help us 
understand that a lot better.
    Mr. Souder. Are you looking at your models presumably as 
they develop and if they want to take the battle to our soil, 
they're going to disperse and not be as easy to identify. And 
use mules and other organizations--mules with quotes around it, 
human smugglers, for example, and we clearly don't have control 
of our south border. And if terrorist organizations move things 
through, quite frankly, on the south border it's easier to spot 
a middle easterner coming in the south border than it is the 
north border.
    We have huge vulnerabilities on our south border, not to 
mention Asian groups like you say. The Taliban was clearly 
funded by narcotics, the FARC is funded by narcotics, other 
groups less so depending on whether they get in the precursor 
business or not. And the precursor business, obviously 
Indonesia and the Philippines are two areas that everybody is 
watching very closely.
    Are you trying to do predictive models as well to see how 
well we're doing? What I would like to think as a Member of 
Congress, in a public forum, not a classified forum, that you 
have people who are emulating the terrorists trying to think 
how you would penetrate our own models.
    Mr. Werner. Mr. Chairman, that's exactly what we're going 
to be trying to do. These models are intended to be predictive 
in nature. And we really are going to be doing war-gaming in 
the sense of trying to get inside the mentality of the 
organization that we look at and understand not only how it's 
functioning now, but how it might evolve in reaction to law 
enforcement.
    Mr. Morehart. Mr. Chairman, if I might add to that, the 
terrorist financing operation section is also involved in that 
type of activity. We have one of our units, the financial 
investigative analysis unit has an element in it that deals 
with proactive investigation, if you will, or doing exactly as 
you suggest, the gaming, trying to identify proactively sources 
of funding for terrorist activity.
    To go back to your earlier question in terms of trying to 
quantify how much money would come from one particular 
activity, either legitimate or illicit activity, that's 
difficult to estimate. Also, your question as to whether doing 
away with the legitimate activity, for example, contributions 
to NGO's, whether that would increase or enhance illicit 
activity, that's also hard to say.
    The bottom line is, I think, it's probably well known that 
it doesn't take a whole lot of money to finance these folks. As 
I mentioned before, it's essentially limited to their 
imagination whether they're smuggling cigarettes to avoid taxes 
and then making money in that fashion or any other way they can 
derive income, whether it's a contribution to a charitable 
organization and it's funnelled to some entity for their 
activities, it's very difficult to answer that. But the bottom 
line is the proactive entity we have within TFOS is doing 
exactly what have you described and having some success at 
that.
    Mr. Souder. We had a hearing.
    Mr. Glaser. If I could also add to that because I think 
it's a very important point you raise. As we, here in the 
United States, take efforts to close off our financial sector 
to terrorists and to narcotics traffickers and other organized 
criminals through the--largely through the law enforcement 
action through the regulations that are issued on money 
laundering and terrorist financing by FinCEN, and as we work 
with our partners abroad in the Middle East, in Europe, in Asia 
and in Mexico where they have just recently enacted and we hope 
are putting into effect some new anti money laundering 
regulations, it's becoming more and more difficult for 
organized criminals, for narcotic traffickers, and for 
terrorist financiers to use the formal financial sector. As a 
result, we do expect them to be moving more and more toward 
alternate means of financing their activities, be it through 
cash couriers, be if through systems like Hawala, through the 
black market peso exchange, which, frankly, has many 
similarities to the way Hawala systems work. And that's why we 
are turning our focus to these activities.
    To go and to give a specific example, and this gets to 
another question that you just asked, with respect to the links 
between these types of networks between drug traffickers and 
between terrorist financiers, a good example would be a man 
named Dawood Ibrahim, who is an Indian organized criminal, a 
narcotics trafficker, who was designated by the Treasury 
Department as a financier in October of last year, this 
individual makes available the same systems he uses to finance 
his activities he makes available to terrorist organizations. 
So we can see those systems already linking up with each other.
    So, again, it is something that we are all collectively 
focusing on, making sure that these alternate systems of 
supporting any type of illicit activity, be it terrorism, 
organized crime, narcotics trafficking, are being looking at.
    If I could just, since Ms. Blackburn is back, I didn't have 
a chance to just let you know one recent success that we have 
had in the Afghanistan region with respect to terrorist 
financing is earlier this year the Treasury Department 
designated on the Al Haramain Foundation in Pakistan and froze 
and blocked the assets of that organization. That was a Saudi-
based charity in Pakistan that was connected with al Qaeda and 
connected particularly with moving people in and out of 
Afghanistan, al Qaeda operatives in and out of Afghanistan. 
Earlier this year, we closed down that particular financial 
mechanism of supplying terrorists, terrorist money into 
Afghanistan.
    Mr. Souder. I want to touch on Canada again for a minute on 
BC bud and this hydroponic marijuana that's not marijuana as we 
traditionally know it, but has a much higher THC content and 
has an action much like other drugs and is sweeping much more 
like meth in many areas of our country and their country. We 
have seen the first corruption cases in British Columbia, or at 
least allegations, that it is my understanding from a hearing 
we conducted, that marijuana is now in Canada, and it's as big 
as any other product they're selling us, including wheat and 
timber. And that is a sign that Canada may be headed down the 
way of Mexico and Colombia if they don't get control of this in 
the sense of you start dealing as your biggest trade product, 
all of a sudden you have tremendous potential for corruption.
    In fact, that data may have come from their attorneys 
general in their provinces who have been very critical of some 
of the Federal Government's stances in enforcement in Canada.
    What I would like to know is, do you have any suggestions 
as we have good government-to-government relations and as we 
work with the new government there are some things that need 
help. I know it's not an RCMP question or even attorney general 
question, it's a question of what laws do they need on the 
books and what do their courts need to do.
    Ms. Forman. Chairman, if I may, we actually have an 
international rep in Canada as we speak, meeting with Canadian 
officials and authorities to discuss politically exposed 
problems in Canada to include narcotics trafficking, 
embezzlement and bribery and the proceeds which enter the 
United States. The program we have in Miami is--we hope to 
duplicate throughout the country and to work with our 
counterparts. ICE has approximately 40 overseas offices and 
we're hoping to duplicate the success of the program in Miami 
with the South American countries, with Canada, and Mexico and 
other countries as well.
    Mr. Souder. Anyone else have any comments? Mr. Werner, my 
staff recently looked at their FinCEN system and their tracking 
of money and it seemed their computer search engine and related 
programming may be superior to ours. Have you looked at their 
system?
    Mr. Werner. We've had a lot of discussions with them. In 
fact, we assisted them with designing their system. They had 
the benefit of learning from what we did well and what we 
wished we did better. They're a much smaller system which has 
given them some advantages. But what they can do is pretty 
amazing at this point. I think it's approximately 99 percent of 
their data is electronically transmitted. And they get all wire 
transfers. So they're collecting a terrific amount of data and 
their system seems to be very robust.
    Again, the difference is that it's a very modern system 
that--they were having lots of problems a number of years ago. 
They have gotten their financial intelligence unit really up to 
the proper criteria, and with it came new technology applied to 
a much smaller financial system which allows them to do more 
than really would be possible here. But, yes, we are actually 
going to make a visit to look at it. We've heard about it. We 
met with them and the director is going to go up to Canada to 
take a look at it.
    Mr. Souder. One last thing related to Canada that I asked a 
question earlier on the Mexico border, because what I heard was 
heavy amounts of cash going south. My experience with our 
hearings on the north border is that cash going north has not 
been the primary problem. In fact, we're the biggest drug 
exporter into Canada, and often the BC bud and the marijuana is 
coming and being swapped for cocaine and heroin and other 
things that are going back across the border.
    Mr. Semesky, is that your impression too, or do you think 
there's a lot of cash moving as well?
    Mr. Semesky. Mr. Chairman, I believe there is a lot of cash 
moving as well. I've met recently with the director of the 
organized crime unit with RCMP, and will be meeting next week 
with the director of the proceeds of crime unit with RCMP who 
have expressed an interest in working with DEA. But in the 
information exchange with them, there is a tremendous amount of 
cash, and some of our officers have seen it, that are going--is 
going back to Canada as well as the drugs. And I must confess I 
don't have a lot of information about that.
    But the cash is going back to Canada. We've seen it in 
several cases, one in particular, Operation Candy Box, which 
was taken down recently which involves millions of dollars 
going back to Canada. And a lot of times it exits the United 
States--in that particular case much of the money went to 
Vietnam first and then back to Canada.
    Mr. Souder. That was the ecstasy case.
    Mr. Semesky. Yes, sir.
    Mr. Souder. As part of the U.S. Canada parliamentary group 
meeting on an annual basis, I'm always, no matter what else 
everybody else is talking about, I always raise narcotics to 
them, and some of the border issues to try to keep the pressure 
on how we deal with our border. And we're about to have these 
meetings again. My understanding is both that Niagara Falls, 
Buffalo, and I can't remember, I think it may have been Montana 
where we were back-checking. By back-checking, I mean people 
who were headed into Canada. In other words, we check both 
directions. Not having the Canadian side of the border 
checking, but before they leave American soil, we were actually 
finding almost as much going out as going in.
    Now, a lot of that was customs violations people trying to 
avoid tariffs. A lot of it was guns. They were converting 
Canadian drugs into American guns for sale because of their gun 
restrictions.
    But I wondered and that's why I was asking related 
questions, now I'm going to continue to pursue that. But trying 
to sort out how much is the money problem in the north border 
versus the south border. Ecstasy is a little bit different 
product because it's coming more from Europe and Canada is a 
pass-through. The Vietnamese trade is more complicated coming 
through British Colombia because that may be a pass-through 
organization too, and shipping.
    When it's grown in Canada, the question if it's not a pass-
through, is it a swap in the networks or not? Probably there 
isn't as big a market either. In other words, they're selling 
more drugs in the United States than they can consume on their 
end. Any other comments on that?
    Ms. Forman. Currently, ICE is working an undercover 
operation with the Canadians on addressing the proceeds of BC 
Bud. That operation is still ongoing. And we have seized and 
identified currency here in the United States destined to go 
back to Canada.
    In addition, based on an assessment we've done on the 
currency and monetary instrument reports, there is minimal 
reporting of currency going north. And as we speak, we're in 
the process of working with the Canadians to help establish 
their money laundering regulations in their reporting 
requirements. We had three ICE agents detailed to Canada to 
help them with the reporting program.
    Mr. Souder. You're saying they don't have a law that allows 
them to do it, they have a law that prohibits them from doing 
it, or they're just not doing it?
    Ms. Forman. They're doing it. We're working in conjunction. 
But we're hoping for consistency in the reporting requirements 
going across and coming into the United States. I'm not really 
sure what the amounts and their threshold are going into Canada 
for reporting purposes. I know they have laws that prohibit the 
exact changing, exchange of information on a timely basis. So 
that's one of the issues we're working to try to overcome.
    Mr. Souder. With us?
    Ms. Forman. With us.
    Mr. Souder. One of the whole things that is determinate as 
to whether or not this whole financial reporting system works 
is whether the banks are cooperating and Riggs Bank is 
currently under investigation facing sanctions because they may 
not have filed basic reports on unusual transactions 
particularly related to Saudi diplomats. How confident are you 
about the banking system as a whole? This whole thing falls 
apart if the banks aren't, in fact, reporting, and if the only 
ones they are not reporting on are critical to the ones you are 
doing, it becomes even more problematic.
    Mr. Werner. Mr. Chairman, we feel very confident that the 
SAR reporting system is working well at this point. That's not 
to say there isn't an opportunity for improvement. And, in 
fact, the Deputy Secretary has recently said that would like to 
initiate a study to look at the system and see how we might 
enhance improvements to it. But I can tell you now that we're 
receiving over 20,000 SAR activity reports a year and they 
contain extremely valuable data. We will continue to work with 
the industry to educate them as to the value--as to what data 
is valuable to law enforcement and give them as much feedback 
as possible.
    And, in addition, as the reporting system ages, 
particularly post-September 11, and we're bringing on 
additional institutions now who we haven't filed SARS before, 
we have to engage in an outreach which we're working with the 
IRS extensively on to do. And it's going to take work and it's 
going to take time. But in the meantime, very valuable data is 
continuing to come into FinCEN and we're working with law 
enforcement to continually generate feedback to the industry so 
that they can keep improving what they're doing.
    In addition, working with the functional regulators, we're 
able to improve and look at the compliance of financial 
institutions. The IRS is our partner in doing the actual 
compliance on the MSBs. And it's a massive undertaking, but our 
view now is that it's a system that is working.
    Mr. Glaser. If I could add to that from the Treasury 
Department's perspective. We certainly agree with Bob that we 
do believe that the financial sector is largely complying with 
their obligations under the Bank Secrecy Act. Any time you see 
an incident where a bank seems not to have been, it does raise 
concerns and you do start to wonder, you know, what are the 
implications of that.
    As Bob mentioned, Deputy Secretary Bodman did commit to do 
a study, to launch a study to look at the overall level of 
compliance with respect to these requirements. Tomorrow, the 
Bank Secrecy Act advisory group will be meeting. That is a 
group of the Treasury Department, FinCEN, law enforcement and 
the private sector, the financial institutions. We do plan on 
using that group to conduct the study to work with the private 
sector and law enforcement and the regulators to make sure that 
there is an overall review done to ensure that the level of 
compliance is where we want it to be.
    Mr. Sparlin. I would like to add that we are partnering 
very well with the banking community. Just last week in 
northern California, we had a joint co-sponsored with us and 
the banking community anti money laundering seminar, where we 
had over 100 bankers there to talk about how we could better 
serve the community. And the successes we've had with the 
information that they've provided, when they hear about how we 
use their information, how we use the SARs and CTRs to go out 
and find people and prosecute them, it encourages them to 
continue doing what they're doing. There is obviously room for 
improvement but we are working throughout the country with 
groups just like that to improve.
    Mr. Semesky. Mr. Chairman, if I could add one other thing. 
I think you can look at the dramatic increase in bulk cash 
smuggling as somewhat of the banks compliance with the Bank 
Secrecy Act reporting requirements. I think that's gone up as 
the bank's compliance has gone up. I've worked with banks since 
the early 1980's on this issue, and they are doing a very good 
job at compliance.
    One of the problems they face right now is that whereas in 
the 1980's, initial placement was made in the form of cash, 
these days a lot of the initial placement into the U.S. system 
is kind of a secondary phase, where it's either in the form of 
money orders or wire transfers coming in from somewhere else. 
So the banks are trying to adjust and where they look across 
their product lines. Instead of just cash, they now have to 
address all of their product lines which is money orders, 
cashiers checks, wire transfers, cash letters coming in from 
overseas. And that is very difficult and it's a training 
process for them. It's a very expensive process for them to put 
the safeguards in place to do that. But it's something that I 
think all of the agencies here are working with them on. And 
that as they get better, we're going to detect more 
sophisticated means of laundering, rather than just the cash 
placement. The cash is going outside the borders and a lot of 
times it comes back in.
    Mr. Morehart. If I may add to Mr. Semesky's comment. In 
terms of bank compliance, I think Hawalas are further evidence 
of that. The banks, obviously, if they weren't complying, those 
who are interested in moving money to the terrorist entities 
wouldn't be using Hawalas which are informal money movement 
entities, if you will. And obviously, being informal they're 
not going to comply with the SARS issues and that's obviously a 
concern. But I think it's indicative of the fact that those 
individuals who want to move money are concerned that the banks 
will comply with that.
    Mr. Roth. Just to add to what's been said, I think Mr. 
Morehart had it exactly right, that there is this entire 
industry out there, the money service business industry, that 
was just newly regulated for Bank Secrecy Act compliance under 
the USA Patriot Act. To my view, that is the greatest challenge 
we face, because it does not have a financial regulator like 
banks has, and it is new for them. And to get compliance, I 
think, is extremely difficult.
    With regard to banks, we've had some success in prosecuting 
those outliers, which, I think, has a significant deterrent 
effect. We've had two prosecutions of banks for failing to 
comply with the Bank Secrecy Act requirements which, I think, 
sends a terrific message to the community that the failure to 
do so could have significant consequences.
    Mr. Souder. I sit on the Homeland Security Committee, too. 
And the challenge is when we're dealing with narcotics, which 
actually is causing 20,000 deaths a year in the United States, 
but because it's so repetitive, you can kind of watch a 
pattern. One mess-up in homeland security and all of a sudden 
people are dead and everybody is gone. It's not that weapons of 
mass destruction, which may not occur are more important. It's 
not that necessarily next year we're going to have any deaths 
from terrorists, and we know we're going to have 20,000 here. 
But because it's more of a steady thing just, getting through 
on the one side, your job of sorting through and the 
cooperation is substantially different and to the degree they 
mesh.
    I wanted to ask one other question, and I'm struggling to 
make sure I have the right letters, and I don't have it in 
front of me, but when we were talking about the HIDTAs, the 
drug trafficking centers, and the finance centers, and I 
believe it was Mr. Roth and Mr. Glaser both were probably most 
likely to be involved in this, in the overlap between these 
two. In your testimony, was it Mr. Roth who testified to this?
    Mr. Roth. Probably.
    Mr. Souder. That you said that some weren't funded, it was 
unclear where this program was going to head. Could you 
describe a little bit more to me are there any cities that 
currently--of the seven, how many of those currently have a 
HIDTA off the top of your head? Do you know the seven?
    Mr. Roth. Yes. I think each one of them has a HIDTA. Each 
city that has a HIFCA also has a HIDTA. It's a little different 
with the southwest border which is a systems HIFCA, that 
doesn't exactly match up. But the big ones certainly do.
    Mr. Souder. We're supposed to have a systems HIDTA too but 
that's another matter.
    Mr. Roth. OK. But yeah, the HIFCAs match up with the HIDTAs 
generally. The difficulty obviously with the HIFCAs was that 
they were not funded. What they essentially were forced to do 
is find a rich uncle, if you were, which many cases was the 
HIDTA. New York is a terrific example of that where they have a 
very well developed, very aggressive anti money laundering 
program that was the HIFCA but it was married up with the 
HIDTA.
    Mr. Souder. That's the question I was going to ask because 
when I was up in New York I thought it was inside.
    Mr. Roth. Correct. It is. It is.
    Mr. Souder. So why wouldn't that be a subunit of a HIDTA 
where you have a potential meshing of narcotics and terrorism? 
That might be different in some areas of the country. Any 
comments?
    Mr. Glaser. I think that's a good point. The whole notion 
of the HIFCA program when it was developed was to pick 
particular areas where there was a high risk of financial crime 
or concern about a high degree of financial crime and focus law 
enforcement and generally Federal regulatory law enforcement 
and policy attention on that area.
    To the extent that there was overlap with an OCDETF task 
force or with HIDTA or anything else, it was expected that 
would be coordinated. I think that we see that it has been. I 
do think that you raise an important point, however, with 
respect to the future of the HIFCA program and that is the fact 
that there is no money attached to the HIFCA program. So that 
is going to, by definition, affect the way that HIFCAs are 
structured.
    I'm not suggesting that there should be a change in that, 
I'm just suggesting that the way that the HIFCA program is set 
upright now on a statutory basis informs the way the HIFCAs 
actually operate with respect to the HIDTAs and the OCDETF 
teams.
    Mr. Souder. Because I wouldn't think this is tremendously 
hard to figure out where the highest priorities are. I mean, we 
know the history of Miami being the banking region for the 
Caribbean in the south, New York clearly has the most terrorism 
potential drug nexus, but there we're pretty well meshed. 
Presumably somebody on the West Coast between Los Angeles, San 
Francisco, and Seattle is going to emerge as the dominant 
center. Right now they would each argue about that, maybe, on 
the Asian pacific rim corridor. Conceivably you could have a 
jump up to Atlanta. I mean, I don't even know what they are but 
just from looking at the different areas you can kind of zero 
in on logical overlaps.
    Now, one final question on this, but the southwest border 
is really messed up. And I don't think any of us believe that 
we're going to be able to control terrorism in this country 
long-term unless we stop a million people getting across a year 
illegally in spite of what we're doing. And if we all grant 
that's where most of the narcotics are going--and I heard today 
that's where most of the cash back is going--unless we can get 
control of the southwest border, we don't have functional 
control of our borders.
    And what I heard you to say on the financial incentive is 
it's been difficult to look at it as a border. I mean, partly 
in the HIDTAs, we're having this problem. Theoretically there's 
a southwest border HIDTA, then you have the bigger cities 
behind it as the second tier. The problem here comes as you 
have this feeling that the narcotics guys don't say, hmm, I 
wonder where the line is between New Mexico and Arizona. We 
better not go that way because we're the Arizona guys. It 
doesn't work that way. They're going to push wherever we have 
an opening. In the financial tracking, do you see some of that 
difficulty? Is that why it was difficult to put together the 
network on the southwest border or is it less of a problem on 
the financial side than it is on the drug trafficking side?
    Mr. Roth. I think it's enormously difficult. Part of the 
problem, as you acknowledge, is the fact that the method itself 
is difficult to detect and difficult to track. So I would say 
it's less of an organizational issue than it is just trying to 
crack the problem. That's where I think the big problem lies. 
We still don't have as good a handle on how to meet that threat 
as we probably should.
    Mr. Souder. Any other comments on the southwest border? I 
mean, when you look at the narcotics in Indiana, we have 
multiple patterns. A lot of big busts coming up through Laredo 
had big groups that came through Douglas, Arizona, and we've 
since learned our major meth source from the outside. About 30 
percent of the local cookers, and that's what you see in the 
news taking down the labs that are messed up, but 70 percent, 
even in Indiana which is fifth in the Nation in meth, are these 
super-labs coming out of California and Mexico. They're going 
all the way up, our major busts go all the way up to Washington 
State to Yakima all the way across the top.
    We have this one family and when they saw them down in 
Georgia and in Indiana and Yakima they said oh, there's a 
family working inside, a migrant group that's doing the drug 
trafficking, that the money would be an indication too. Because 
if they're moving the drugs that direction, you would think 
there would be an equivalent of a cash pulse moving back 
through the system and the two sides would be working together 
to establish that.
    Are you telling me that is happening or not happening? 
Because the border is where it's going to leave the United 
States and it's gone. I mean, we're working with other 
countries, but our greatest control is going to be getting it 
before it hits that border.
    Mr. Sparlin. One of the things that we are looking at right 
now is the wire transfer project that we've got going on with 
the money service business where that money is being 
transferred via Western Union, whatever money service from 
Indiana to California to the mega drug centers in California. 
We have just started this project kind of on a localized basis. 
Now we're partnering with DEA to do it on a national basis so 
we can see both sides. Initially we're looking at one side. 
California, I happened to be the special agent in charge in San 
Francisco. When we started the project, we got all the outgoing 
wires--we weren't getting the incoming wires--to see the money 
going out. Now we're working this project to get both sides. 
And I think that project is going to be very successful in 
identifying that flow, internal flow of money within the 
country.
    Mr. Souder. Do people use the postal service, UPS, and Fed 
Ex for cash as well?
    Mr. Sparlin. Yes.
    Mr. Souder. Have you got a project on that as well?
    Mr. Sparlin. We're partnering with all of them, yes.
    Mr. Souder. Anybody want to add anything else?
    Ms. Forman. Mr. Chairman, we have an operation going in 
Arizona called Ice Storm. Ice Storm is looking at the methods, 
the gangs, the narcotics money, the aliens, the alien 
organizations that are going into and out of Mexico and into 
Arizona doing tremendous damage. As a component of Ice Storm 
there's a operation called Green Mile where we're looking at 
the system, the money service wire systems, the Western Unions.
    We conducted a census on the money service businesses to 
determine a threshold for narcotics smuggling and for alien 
smuggling. And we're working with the State of Arizona and 
utilizing something called damming warrants where we're working 
with Western Union to determine the senders of the funds and 
seeing if we can penetrate these organizations that are coming 
into a Arizona and slowly moving into California and some of 
the other west coast cities.
    Mr. Morehart. Mr. Chairman, if I could add to what Mr. 
Sparlin said, I think from the cases that we've seen, you can 
almost track the money going through the wire remitter industry 
with the spread of methamphetamine across the country and the 
problems that we've seen. So you are absolutely correct. There 
is a method that we are trying to address to look at the 
financing side of this. And I think all the agencies here, you 
know, are seeing that, we're trying to bring this all together 
so we can make those connections instead of having small cases 
make big cases. You can only do that when you bring your 
intelligence together.
    Mr. Souder. It's got to be a system similar to a trucking 
system or any other transportation system, and you're going to 
have large companies, and you're going to have mid-size 
companies, you're going to have independent little truckers. 
I'm not saying little truckers aren't good, I'm just saying 
you're not going to spend as much time on a little trucker, 
you're going to figure out which ones are the big ones. It's 
real interesting to watch when you start to see certain 
patterns come back through as to which size.
    Sometimes you'll catch them for different reasons but then 
that hopefully then gets transferred over to the financial end 
where you try to figure out whether a bank was disguising it, 
or were they using Western Union. You all have to be talking on 
every case, particularly in the terrorism area because zero 
tolerance is impossible. It is a great goal, but it's just very 
discouraging when you start to get into it because this balance 
between the individual's rights to privacy in the United States 
as we refight the Patriot Act. And it was very important to 
hear the importance of the Patriot Act in looking at the 
terrorism question, but this is going to get tougher before it 
gets easier because they're going to get smarter over time as 
well. We just have to stay a step ahead rather than a step 
behind.
    Would anybody else want to make any comments? I appreciate 
all your time this morning. We may have some additional written 
questions. Appreciate you coming. Appreciate your testimony. If 
you'll communicate to each your agencies we also appreciate the 
work of the men and women in each of your agencies.
    Second panel is Ms. Bonni Tischler, vice president, 
Pinkerton Global Transporation Supply Chain Security Department 
and Mr. Richard Stana, Director of Homeland Security and 
Justice of the General Accounting Office [GAO].
    If each of you could stand I'll administer the oath.
    [Witnesses sworn.]
    Mr. Souder. Let the record show that both witnesses 
responded in the affirmative. Appreciate you being with us this 
morning and testifying in front of our committee, nothing like 
going on and on and then doing a quick halt and catching you by 
surprise there. But looking forward to your testimony.
    Ms. Tischler, we'll have you go first.

STATEMENTS OF BONNI TISCHLER, VICE PRESIDENT, PINKERTON GLOBAL 
 TRANSPORTATION SUPPLY CHAIN SECURITY DEPARTMENT; AND RICHARD 
STANA, DIRECTOR OF HOMELAND SECURITY AND JUSTICE OF THE GENERAL 
                    ACCOUNTING OFFICE [GAO]

    Ms. Tischler. Morning, Mr. Chairman. I'll leave out my 
career highlights since you were kind enough to mention them. 
As a career special agent specializing in money laundering 
investigations, I was privileged to have been at the forefront 
of anti money laundering efforts in an era of virtually no 
applicable legislation with the exception of the Bank Secrecy 
Act.
    At that time there was no substantive law that could be 
used against organizations laundering money until the Money 
Laundering Act was passed in 1986.
    Money laundering is probably the third oldest crime with 
prostitution and smuggling tying at the No. 1 position. The 
concept of money laundering is not complex, although the 
methods means and opportunities as my FBI ex-peer pointed out, 
are only exceeded by one's imagination. Money laundering 
involves simply disguising or concealing the source and origin 
of illicit funds. Detection is, therefore, paramount to 
effectively disrupting a criminal organization.
    Additionally, an organization's financial underpinning is 
usually its soft under belly and therefore much more vulnerable 
to attack. These funds including operational capital which is 
used to fund the mechanics of a criminal scheme and the 
potentially obscene profit which is, of course, why most 
financially driven crime is committed in the first place.
    Efficient and devastating acts of terrorism require steady 
source of high level efficiently concealed funding mechanisms. 
While terrorist organizations may be funded by contributions 
and gifts, criminal schemes may also contribute to a steady 
influx of operational capital. The crime base could be the drug 
trade which is certainly among the most lucrative structures, 
or it could include so-called white collar crime, such as fraud 
or counterfeit intellectual property schemes, which are 
perceived as not as heinous, and therefore not deserving of 
Draconian penalties.
    In 1980, the Treasury Department under the auspices of 
Customs and the IRS, initiated a prototype project known as 
Operation Greenback. Greenback was designed to identify and 
penetrate the reasons for the unusually high level of cash-flow 
through the Federal Reserve in the south Florida area. The flow 
was found to be the direct result of the burgeoning drug trade 
in that region. At the onset, we thought we were only looking 
at narcotics smuggling organizations, but as we progressed, it 
became apparent that what we were dealing with was a series of 
service organizations that were laundering money for one or 
more drug smuggling groups. As Operation Greenback evolved, we 
found it necessary to add the Drug Enforcement Administration 
to the project since at that time the sole jurisdiction for 
Title 21, narcotics trafficking, rested with that agency. And 
since the crime was drug smuggling and trafficking, the DEA 
became a partner.
    The task force concepts was successful and spawned other 
Greenback-styled investigations over the next several years. We 
found that putting together customs IRS and DEA expertise along 
with prosecutorial support from the U.S. attorneys offices was 
successful in disrupting and prosecuting criminal organizations 
involved with money laundering activities.
    We were so successful that a number of congressional 
committees became interested in creating legislation 
specifically designed to target money laundering as a felony. 
In 1986, the vulnerability involved with not having anti money 
laundering legislation was resolved when laws--the law was 
initiated and passed by both Houses. The Money Laundering Act 
of 1986 included a number of predicate offenses. And as more 
offenses were added over the years a number of Federal agencies 
acquired the jurisdiction to investigate money laundering 
offenses. Unfortunately, this did not always mean that the 
agencies having substantive jurisdiction developed their 
ability to investigate money laundering activities.
    One of the most interesting tools developed to impact 
criminal organizations both from a substantive and subsequent 
money laundering perspective was the asset forfeiture 
addictions to existing and newly planned legislation. Taking 
away the assets of an organization immediately impacts their 
present and future operational capabilities as well as their 
profit and loss statements. For instance, one can always 
replace smuggled drugs as a commodity, but it's hard to make up 
the seizure of cash or hard assets. Some of the most successful 
financial cases such as Operation Sea Chase in 1988, also known 
as the BCCI or Bank of Credit and Commerce case, and Operation 
Casablanca in 1998, were also examples of U.S. Customs-
initiated investigations that added elements of other local, 
State, and Federal agencies to bring about successful outcomes.
    While combining jurisdictions of Federal agencies is a 
force multiplier, duplication of similar projects is not, nor 
is it cost effective. An example of this is the proliferation 
of operational or intelligence-driven money laundering centers 
designed to do a similar job in identifying and analyzing 
intelligence and indicators of money laundering activities. 
Usually there is little or no passage of information to 
concerned agencies, and therefore no feedback. Part of the 
problem is that in strictly based intelligence and analysis 
centers, there is no real operational insight and often a 
window of insight cut into an organization is not fully 
exploited because the operational day-to-day knowledge of an 
investigator is missing.
    To summarize, my personal belief based on a number of years 
experience in both the investigation and oversight of money 
laundering related cases is that a task force develops and 
brings to the table a synergistic and dynamic way of 
eliminating elicit organizations who are involved in drug 
smuggling or terrorist related activities. However, the 
potential for a powerful response to money laundering 
activities and the substantive involved criminal activities can 
only be maximized in a completely transparent environment free 
from redundancy and agency duplication. Thank you for the 
opportunity to testify today before you and your attention this 
very important matter.
    [The prepared statement of Ms. Tischler follows:]

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    Mr. Souder. Thank you.
    Mr. Stana.
    Mr. Stana. Chairman Souder, I am pleased to be here today 
to discuss efforts by Federal law enforcement agencies to 
cooperatively investigate money laundering and terrorist 
financing. As you know, money laundering provides the fuel for 
drug dealers, arms traffickers, terrorists and other criminals 
to operate and expand their activities. Terrorist financing is 
generally characterized by different motives than money 
laundering and the funds often originate from legitimate 
sources.
    However, investigations of money laundering and 
investigations of terrorist financing observe involve similar 
approaches or techniques because the methods used for hiding 
the movement of funds also involve similarities. My prepared 
statement is based on two reports we recently provided to 
Congress on Federal efforts to improve interagency coordination 
fortunately these are our September 2003 report on the 
development and implementation of the annual national money 
laundering strategy, and our February 2004 report on the 
implementation status of a memorandum of agreement on terrorist 
financing investigations.
    Our September 2003 report found that the national money 
laundering strategy generally has not served as a useful 
mechanism for guiding the coordination of money laundering and 
terrorist financing investigations. For example, the HIFCAs 
were expected to have a central role in coordinating money 
laundering investigations. However, we found that they 
generally had not been structured and operating as intended and 
had not met expectations for leveraging investigative resources 
or creating investigative synergies. As a second example, while 
Treasury and Justice have made progress on some strategy 
initiatives designed to enhance interaction coordination, we 
found that most had not achieved what was expected, including 
plans to centrally coordinate investigations.
    And although the 2002 strategy elevated the importance of 
combat being terrorist financing, it does not address agency 
and task force roles and interagency coordination procedures. 
This contributed to duplication of efforts and disagreements 
over which agency should lead investigations.
    To help resolve coordination and jurisdictional issues in 
May 2003, the Attorney General and the Secretary of Homeland 
Security signed a memorandum of agreement regarding roles and 
responsibilities of the FBI and ICE in investigating terrorist 
financing.
    Turning to our February 2004 report, we found that the FBI 
and ICE had implemented or taken concrete steps to implement 
most of the key provisions in the memorandum of agreement. For 
example, the agencies had developed collaborative procedures to 
determine whether ICE investigations or leads may be related to 
terrorism or terrorist financing and, if so, whether these 
investigations or leads should be turned over to the FBI for 
further action. However, the FBI and ICE had not yet issued a 
joint report on the status of implementation of the agreement 
which was to be produced last fall.
    Moreover, we found that the FBI and ICE have faced and will 
continue to face a number of operational and organizational 
challenges such as building effective interaction relationships 
and insuring that the financial crimes expertise and other 
investigative competencies of both agencies are appropriately 
and effectively used.
    In closing, let me say that our work in reviewing various 
national strategies has identified several critical components 
that are needed for any strategy to be successfully developed 
and implemented. However, to date these components have not 
been well reflected in the national money laundering strategy. 
While Federal law enforcement officer agencies recognize that 
they must continue to develop and use interagency coordination 
mechanisms to leverage existing resources to investigate money 
laundering and terrorist financing, the annual strategy 
continues to fall short of expectations.
    Our September 2003 report recommended that if the 
requirement for a national strategy is reauthorized, the 
Secretaries of the Treasury and Homeland Security and the 
Attorney General take three actions to help assure 
investigative success. These are: First, to strengthen the 
leadership structure for strategy development and 
implementation; second, establish priorities based on threat, 
risk and vulnerability assessments; and third, establish 
performance measures and accountability mechanisms.
    As for the agreement on terrorist financing investigations, 
the FBI and ICE have made progress in waging a coordinated 
campaign against sources of terrorist financing. Continued 
progress will depend largely on the ability of the agencies to 
build effective interagency relationships and meet various 
other operational and organizational challenges.
    This concludes my oral statement and I'd be happy to 
address any questions you may have.
    [The prepared statement of Mr. Stana follows:]

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    Mr. Souder. Thank you for your testimony.
    Ms. Tischler, did you hear the whole first panel?
    Ms. Tischler. Yes, sir.
    Mr. Souder. From your work in the field and then listening 
today, could you first make any kind of suggestions you might 
have on how to make it more efficient and what you think were 
some fundamental flaws that you may have heard?
    Ms. Tischler. Actually, as I was listening to the 
testimony, I was thinking, I retired 2 years ago. And I don't 
think much has changed since then. But I really don't think a 
whole lot has changed since the mid-1980's in terms of how they 
were talking about strategy issues.
    The Black Market Peso Exchange, before we knew it was a 
Black Market Peso Exchange, we knew there were lateral 
transfers in the late 1970's and early 1980's. And as I pointed 
out, we didn't have a method really to get at them, which thank 
you to Congress, we then were supplied in the mid-1980's.
    But a lot of the issues that the folks who were testifying 
were talking about are the same issues we were talking about in 
the mid-1980's and early 1990's and mid-1990's. So, are there 
flaws? I don't know that there are flaws. What there seems to 
be is sort of a lack of historical retrospective. A lot of the 
agencies who are involved in anti-money-laundering activities 
and the analysts from the mid-1980's and 1990's have retired, 
and it sounds as if they're almost reinventing the wheel to 
some extent.
    I think that the Department of Homeland Security, when it 
was established and the concept was to take agencies that had 
border interests and put them within the DHS and they split 
customs up in the process, I think that was a flaw. If I were 
in the position to do so and you granted me a wish, I'd 
certainly wish that never happened. There was a lot of 
synergistic activity between the operational and investigative 
sides of the Customs house--and I had the privilege to head up 
both, so I know of which I speak--that I think are probably 
lacking now, and I think that probably as GAO calls it a 
material weakness.
    The financial crime issue, I think when they took Customs 
out of Treasury, and I'm not saying that was good or bad, and 
sort of separated it from IRS at the top level. That caused a 
disconnect, too, because, quite frankly, IRS and Customs sort 
of functioned as a rock in a hard place with a lot of financial 
investigations that were underway. And even though I know that 
they are coordinating through the task forces, it didn't sound 
like it was that same type of relationship to me.
    So, I don't know. I don't know that the current system is 
inefficient. I think there are an awful lot of agencies 
performing activities that have to do with anti-money-
laundering. And probably, some of them don't have the expertise 
in the financial investigative arena to really complete that 
forward pass, so to speak.
    So my emphasis really is on a task force atmosphere where 
you're bringing elements of all the agencies in one place at 
one time, where there is a transparent environment, and they 
can all function together and hopefully learn enough to pass on 
the information to the next generation of investigators.
    Mr. Souder. Well, Mr. Stana, I want to ask you the same 
question, but let me predicate it slightly differently. One of 
the things, as we try to pound and reshape the Department of 
Homeland Security, which it's not clear it's ever going to be 
smooth because it has, by definition, multiple functions. I've 
been very focused on making sure narcotics doesn't get lost in 
the Department of Homeland Security, where we're hunting for a 
potential needle in a hay stack and we've got a whole bunch of 
things happening all the time, namely illegal drugs that are 
killing people and you devote your whole time looking for the 
one terrorist crossing at any border and forget that you have a 
narcotics mission.
    And the Coast Guard, they have a fisheries mission. They 
have a search-and-rescue mission. And I, like every other 
Member of Congress, think that it's absolutely most important 
to get anybody with weapons of mass destruction, unless, of 
course, my area has a bunch of deaths next week due to 
narcotics or unless there is a company put out of business that 
employed 2,000 people because the trademark was stolen and 
Customs wasn't paying attention to the trademark getting 
stolen. Or that the Border Patrol, if you're in areas where you 
don't have controlled immigration or you have been run over, 
all of a sudden immigration is the huge issue.
    To some degree, these groups have multiple missions. And 
even in listening in the financial end here today, the question 
is that, how can we get cooperation? The idea of putting 
everybody together, which is what we try to do in Homeland 
Security, is difficult. If we try to get everybody to talk to 
each other, my feeling is they have 6 hours a day where they 
meet and then 2 hours where they work on a project because they 
have so many different working groups they have to work with.
    That's an exaggeration, obviously, for the record. That was 
sarcasm. Sometimes people take that literally. But it does seem 
like they have a lot of meetings they're going to be having.
    But the IRS function is only partly to do with financial 
crimes of the type we are talking, with terrorism or narcotics. 
The Customs group has a different focus. The narcotics groups 
have a different focus. If we put them all in one place, they 
wouldn't necessarily have the same mission. So where do you see 
we could do some tightening, understanding and respecting that 
there are multiple missions they have, without making them go 
to 6 hours of meetings a day where they're interactive?
    I like, by the way, the idea that when two groups hit the 
same piece of data, they are going to be notified that two 
people are in there. That's a step.
    Mr. Stana. Yes. Before I get into the meat of the answer, 
let me just say that we are also concerned about the formation 
of the Department of Homeland Security. In fact, we put it on 
our high-risk list, not that there is a Department, but just 
putting it together and making all the component pieces work as 
one.
    It took a long time for the Defense Department to come 
together and work in the same direction. So on one level, it's 
to be expected that there are going to be some bumps in the 
road in making Homeland Security. On the other hand, it has a 
very important mission. And we just can't afford too many bumps 
in the road and too long a time to pull it all together.
    Now, with respect to what could we do to find, sort of get 
our traction on certain issues, I think coming or focusing on 
certain strategies is a step in the right direction. For 
example, I thought that the money laundering strategy held a 
lot of promise, particularly in its early years where the 
deputy assistant secretaries or the deputy secretaries were 
involved with setting the direction and assigning task roles 
and responsibilities. At that time, you had high level buy in. 
And it was just a matter of drilling down the commitment to the 
lower levels on an issue. And this is important when you have 
an agency that has many issues, many missions.
    What we found with the strategy and its implementation is 
people like those that were sitting on the first panel can 
agree and generally, you know, think in terms of the problem 
the same way and are agreeable to coordinating, cooperating and 
sharing jurisdictions. It's when you get to the working level 
where the problems seem to arise. All too often, and it's not 
in every jurisdiction, but all too often, you have agents and 
agencies who just despise each other. And if you can overcome 
that, I think you'll go a long way to helping out here.
    Now, where should this go in the future? There are lots of 
agencies that need to be involved here. And my fear is that 
each agency, instead of calling on another, like for DEA, 
instead of calling ICE or instead of calling the IRS when they 
need a financial crime investigative capability, the knee-jerk 
reaction is to develop its own capability. And that's a 
tremendous waste of resources. When most in Government agree 
that those two agencies are the primary financial crime 
analysts, why build your own?
    And so I think one of the challenges is that you recognize 
that we are working in a team environment. We have a strategy 
that we all buy into. And it's a matter of implementing it in a 
way that is both efficient and effective.
    Mr. Souder. What did you think about the comments on FinCEN 
today, their testimony. How do you think that's going to evolve 
and?
    Mr. Stana. Well, again, there's lots of promise. It depends 
on how it's implemented.
    I think, as Ms. Tischler pointed out, this isn't the first 
time we have heard things like what we've heard from the first 
panel today. I think these are steps in the right direction. I 
certainly wouldn't, you know, cast aspersions on anything 
anybody said. But I think we have to wait to see what happens.
    Mr. Souder. How do you see its role defined differently 
from what the FBI is supposed to be doing and trying to figure 
out on terrorism?
    Mr. Stana. Well, the FBI, you know, through the Memorandum 
of Agreement and I think through its jurisdiction, is the 
leading agency here on terrorist financing investigations. I 
don't think there's any question.
    The question is, how does FinCEN help in the overall effort 
and what coordination mechanisms exist to facilitate that? The 
Memorandum of Agreement that my statement details has been 
successful in getting ICE and the FBI to at least cooperate and 
coordinate investigations. I think a mechanism like that for 
FinCEN would be helpful.
    Mr. Souder. My understanding, what I heard from the FBI 
representative as opposed to the ICE representative, was that 
FBI takes the case if it's terrorism related.
    Mr. Stana. That's right. What is supposed to--let me back 
up. The Memorandum of Agreement called for a joint vetting unit 
to be created, composed of both ICE and FBI agents.
    When the unit was first created, the FBI identified 30 
cases that it said ICE was working on that had a definite nexus 
to terrorism. As of, I believe, last month, 10 of those cases 
were turned over to the FBI, and the other 20 cases, they are 
still talking about how far along the case is and how strong is 
the nexus to terrorism. In addition, ICE has turned over 7,000 
leads to the FBI for its use in its investigations and 11 other 
cases, if it chose to take them, and the FBI did not.
    So the mechanism is there. The question is, does the 
mechanism have staying power? And as the months and years go 
on, will the enthusiasm for this sort of a coordinated approach 
sustain itself?
    Mr. Souder. Now, Ms. Tischler said, and you repeated that, 
she said, specifically, that the Black Market Peso issue is 
hardly new. That, to some degree, the other things that we 
talked about today are not new. I have now been in Congress 10 
years and been involved in the narcotics issues all those 10 
years. And if they weren't the predominant, they certainly were 
the emerging threats 10 years ago, just watching it, such as 
UPS and FedEx and the Postal Service being able to do that, 
wire transfers through Western Union.
    Is part of the problem here not that these are emerging 
threats, but we just simply don't know how to deal with them? 
Or our laws such that there would be such a civil liberties 
threat with it that we can't get a law that's tightened down on 
these questions? Because if that's where most of the money is 
and they're moving this, those areas that are hard to track, 
let alone the Internet----
    Mr. Stana. I think you pointed out in your comments on the 
first panel's statements that there is a constant leap frog. 
You know, we get ahead, you get ahead. You get ahead, we get 
ahead. And we have just got to make sure that we stay one step 
ahead. And I guess that would be the Congress' job to make sure 
that the legal framework is there to enable that.
    But beyond that, I think we just have to be sure that the 
agencies are clear about what their mission is and how they can 
help one another to most effectively fight these instances. Add 
one thing, we had a discussion while we were doing our work 
with one of the U.S. attorneys in the country and asked him 
well how did we get to this point with terrorist financing 
where it seems that everybody's in terrorist financing and you 
just have to deconflict and make rational sense out of the 
whole thing. And he said, ``Well, what happened is, and this 
happens with new areas often, is that people will take whatever 
jurisdiction they have and run to address the problem.''
    With September 11, you had agencies that seemingly had 
overlapping jurisdiction, and they all ran in the same 
direction, trying to, you know, do their best with a pure 
heart, to defeat the problem. However, over time, you get to 
the point where you have to deconflict, you have to coordinate. 
You want to make sure, when you're doing something, you're not 
messing up somebody's investigation or worse, you know, causing 
harm to an agent who is undercover.
    And so it comes to a point where you just have to stop and 
reassign roles and responsibilities and clarify lines of 
control and provide the leadership to make sure that things 
don't get messed up.
    Mr. Souder. I always refer to it as, like when my little 
kids are playing soccer, the difference between an adult team 
and a little kids team is, as everybody runs for the ball, you 
can always tell where the ball is when little kids are playing 
because everybody is there. You're supposed to stay in your 
positions, and then when the ball comes there. That's how you 
get the goals, because you're positioned right.
    This is part of the problem, and it's also true inside 
Congress. I mean, our committees are the same way. Everybody 
runs to the jurisdiction. Funding flows the same way. Anybody 
who's even around Federal Government for 5 years figures out 
what's the hot subject this year to get funding. If it is 
missing children, and then all of a sudden everything's missing 
children. If it's child abuse, it's that. If it's terrorism, 
it's that. If it's drugs, it's that. If it's literacy, then 
every agency and their brother is coming up with something 
explaining how their problem relates to literacy.
    And it's one of our challenges, driven by the fact that the 
public attention expects us as elected officials to respond. 
And the bureaucracy responds some to that in the monetary flow 
that comes out of Congress. And I don't know, I mean, we have a 
responsibility to try to keep that separated.
    Do you have specific suggestions of what we should be 
looking at? The financial issue is clearly the way in American 
history that we've nailed almost every criminal. And if you 
can't get them on the money, if you can't follow the money, 
we're not going to be able to stop most of these crimes. It's 
underneath it, because we're going to be pressing on the 
narcotics issues and the terrorism issue, but the money's the 
best place to move with that.
    Ms. Tischler, in the comments of specifically, do you have 
any comments--and I meant to ask you both this question--on the 
HIDTAs and the financial centers?
    Ms. Tischler. Yes.
    I was around when they created the HIFCAs. We were the 
institution--most of the agencies opposed to creating those 
HIFCAs. The reason was because the OCDETF and the HIDTA 
structures that were already in place, the HIDTAs themselves, 
had financial components to them, where the agencies were 
coming together to, in fact, investigate not only money 
laundering issues but other, you know, narcotics crimes that 
had other financial components to them as well, for instance 
the IRS tax stuff.
    So we didn't see the need to have the HIFCAs, and they were 
coming in not funded anyway. And they were pretty much in the 
same place as the HIDTAs were. And so we weren't--I can say 
this now, if you'd asked me that X years ago, I would have gone 
with the party line. But it was a political thing. And we were 
forced to go along with it.
    And yet, the structure was already in place, doing exactly 
the types of things Mr. Stana was talking about and that I was 
talking about in terms of coordination issues.
    Now, you know, I was on the ground for some of these things 
he was talking about. And no matter what I think about or don't 
think about GAO, I think that they get along better at the 
local level than they do in Washington. So it's the complete 
opposite of what he says. And I think the agents do a heck of a 
lot more talking in Miami than they do in the committee 
meetings up here.
    Mr. Souder. Can you check your microphone to make sure it's 
on?
    Ms. Tischler. Oh, you're right. I forgot. I was bleeding 
over into him.
    Did you hear me because I don't want to have to go back and 
trash GAO?
    No, I mean, I just saw it up close and personal.
    Mr. Souder. Well, let me ask you a question about that. I 
see that there has been a pretty intense conflict between the 
legacy Customs and legacy Border Patrol at the southwest 
border, at the local level. Would you agree with that.
    Ms. Tischler. Is that question--you know, when they--it's 
back to sort of that DHS question. I mean, I really was a 
believer in making sure there was a marriage and that was a 
marriage of opportunity when they put everything together.
    But Border Patrol's pretty much separate. And they have 
their own uniforms and their own way of doing things. So over 
at Customs and Border Protection, I don't think they're seen as 
sort of an integral dance partner. That's just my opinion.
    The whole issue with ICE and CBP, I mean, they are not at 
each others' throats from an institutional Customs perspective, 
except for coordination.
    You know, your question on outbound cash, nobody really 
answered that question. Yes, we did a number of operations 
dedicated to, in fact, interdicting outbound cash. Now, I can't 
speak to that now, because I don't know what's going on. But 
when I was at Customs, we decided we'd run an operation, we 
would sit down with operations or we'd sit down with 
investigations, depending on where I was at the time, and 
they'd design an operation to get at outbound cash. So I think 
that's missing more than this issue with Border Patrol.
    I think that it's a cultural thing, and this is really 
going to take some time. But they knew that going in, as Mr. 
Stana has pointed out. And that's one of the bumps.
    Another big bump is having, for instance, Coast Guard 
report to Ridge instead of Asa Hutchinson, where the rest of 
the law enforcement agencies seem to be reporting. So it's just 
a personal opinion. But the Border Patrol thing, I think that, 
from an enforcement perspective, it's going better now than 
when the marriage first happened.
    Will it take some more time? I think you're going to see 
that it's going to take more time.
    Mr. Souder. The reason I made that comment is, it seems to 
me that, to some degree, as the people are in Washington, you 
have some commonality. And those two agencies seem to have the 
most tension in training, pay grades, even racial differences, 
that nobody would talk about it in that direction, but you can 
kind of tell who wants to report to whom. That is real 
explosive to say, but boy, its there. And I don't know, 
basically, how to do it.
    I also think there are some substantive problems, like you 
say, because some of it is cultural. When you say cultural, 
cultural also means they have different missions, of how they 
viewed the border. I mean, I talked to a Customs person who, at 
one part of the north border, was working undercover. And one 
of his things was not to get caught by the Border Patrol. He 
was working inside the drug groups and knew how to break 
through because he viewed the Border Patrol mentality was to 
police the border and intimidate. And he knew how to run it 
right through when they were doing it.
    On the other hand, the Border Patrol says, ``Look, we don't 
have enough people to catch everybody; we do intimidation by 
moving through.'' There's a philosophical difference on even 
how you patrol that border, which is now to the forefront when 
they're merged.
    And one of the questions I have, I want to followup on 
something you just said on the cash. Did checking cash back 
work? I mean, are you saying that was a good effort or a bad 
effort?
    Ms. Tischler. You know, when we had some type of 
intelligence to back up what was happening because we knew, for 
instance, the trucks were coming down from Houston and crossing 
at Laredo with outbound cash, it worked the best, obviously.
    If we're out there 24 hours, it's just like, 7 by 24, 
trying to catch something inbound with Customs. There are too 
many vehicles coming through. But we did produce, because we 
sort of do these things in a small window.
    I mean, obviously, after a day or so, the bad guys knew we 
were out there. So we learned to just do these sort of quick 
hits and back off. And that's when they produced cash coming 
through.
    But a lot of it, back to what I said, I mean it had to do 
with dealing with the State and locals and finding out that 
they suspected this stuff was on its way. Customs did interdict 
outbound cash, what we called cold hits, just because they were 
there. But you couldn't have an operation that lasted more than 
3 days, actually, more than 2. You were in trouble already 
because the word got back after you caught the first thing 
coming through.
    So I thought--and I don't know what they're doing now. I'm 
assuming they're doing something like that. But the 
coordination between the investigative component, OI and OFO, 
were very close then. Now I assume that they pick up the phone 
and call and have a meeting and decide that they're going to 
stand up an operation.
    Now, you know you're talking about the Border Patrol, but 
there's the Border Patrol and there's the INS inspectors and 
there's Customs inspection and then there were the agents and 
then the Air and Marine Division with Customs. And Air and 
Marine went with the agents over to ICE, which is clearly an 
interdictive function, and you know, they're patrolling the 
border, too. And Border Patrol has their airplanes up.
    So I think one of your staffers can probably help you out, 
Dave Thomasson is with--I have to remember--ICE, Air and Marine 
Division, and he can probably speak to that. But it's all a 
coordination issue. And that's why, when they split the agency 
up, I really didn't see how they were going to actually 
effectively continue the border mission plus everything else 
they were doing.
    Mr. Souder. Mr. Stana, I wanted to ask you this question 
yet, Ms. Tischler just gave a very depressing statement. In 
other words, is the southwest border so out of control that if 
you stop at one point and do it for more than 2 days, they just 
move and go across to another point. How in the world do we 
stop terrorist money from using the south border?
    Mr. Stana. It's interesting that the line of questioning 
has turned to this, because most of my portfolio has to do with 
border control issues, so this is something I'm sort of 
familiar with.
    A lot of this stems from the Border Patrol strategy that 
was formulated in the mid-1990's, where they attempted to gain 
control of the border at two points, El Paso and San Diego, and 
move out from there with more agents, more technology, more 
sensors, more aircraft and so on.
    We've come to the point where these actions, as they are 
implemented in phases, move the flow of traffic to areas that 
they think the DHS thinks it has the tactical advantage or 
that's too desolate that aliens wouldn't even try to cross. But 
we found that neither was true. The tactical advantage, not 
true because they just didn't have the number of agents and 
equipment to cover the Arizona border, eastern California. And 
it certainly didn't deter--whether it was the jobs magnet that 
keeps drawing people in or whether it's criminal enterprises 
that want to position people in the United States, very 
difficult to control the southern border.
    Having said that, I think the northern border also prevents 
significant vulnerabilities. Where there are about 10,000 
border patrol agents along the 1,900, 2,000-mile stretch of the 
southern border, there are almost, not quite, but almost 1,000 
agents across the 4,500 mile expanse and if you're familiar, 
from Indiana, I know you go up to Gary or that little area up 
there.
    Mr. Souder. You have to go from Glacier National Park to 
the lake of the woods.
    Mr. Stana. Yes, I mean, if you would go up the St. Lawrence 
seaway and you could see boat traffic going, how do you stop 
that? Or you know, go into the logging areas of Montana and the 
old logging trails that cross the border when Immigration or 
Customs just wasn't a concern.
    Mr. Souder. Is this supposed to be encouraging to me that 
the north border is as bad as the south border?
    Mr. Stana. Well, I guess what I'm trying to say is, whereas 
most folks would focus on the southwest border as being a 
problem, and it is, don't turn your attention away from the 
northern border, because if you recall, the LAX bomber came 
through ports in Washington State.
    Ms. Tischler. We caught him.
    Mr. Stana. Yes. And there were others that came across the 
northern border, not the southwest border. So I guess, we don't 
take comfort in that.
    I'd like to return to one point you made earlier, about the 
HIDTAs and HIFCAs and how many tasks forces is too many task 
forces. And I think we've got to the point where maybe it's 
time to reexamine all the roles and responsibilities of all 
these task forces. Why do you need a JTTF and a HIDTA and an 
OCDETF and a HIFCA and, you know, these task forces when maybe 
a fewer would do?
    One of the reasons why the HIFCAs didn't take off, and I 
don't doubt the view that Ms. Tischler had about another task 
force that seemed to be redundant, was that there weren't any 
dollars attached to it. And so who wants to participate if it 
doesn't mean anything to me to get more agents? And this, 
particularly, with the State and locals.
    So I think it's time to re-examine what all these task 
forces are doing and how many we need, and how most effectively 
and efficiently to operate them.
    Ms. Tischler. Can I just add something, since I just 
happened to be there when they did most of these things?
    The OCDETF was set up to do investigations. When HIDTA came 
along, it was there to do investigations that OCDETF was not 
doing because OCDETF was focusing on really a kingpin strategy, 
which included money laundering investigations. BCCI was, in 
fact, an OCDETF case. So the big cases, as we were talking 
about, they were being taken care of.
    When they stood up HIDTA, it was to get at a lot of the 
smuggling and trafficking groups that weren't being covered by 
OCDETF. And they were right to do that because there were an 
enormous amount of cases out there that we wouldn't get into 
OCDETF nor could the OCDETF attorneys really handle them.
    OK, so then we had two task forces, and they really didn't 
overlap. I was in Miami then, and there was a lot of 
coordination with the U.S. attorneys office. It was just that 
HIDTA did go in the way of financial investigations. So that's 
why we really didn't care if they stood up the HIFCA or not 
because they were already doing it.
    And the money that was there actually was coming through 
the HIDTAs and through OCDETF, to some extent, and whether they 
took off or not was really irrelevant. The case work was being 
done. So don't worry about that part. That wasn't depressing. 
That was the good news.
    The bad news was I think of it as a project that may not 
have taken off. And you know, I'm a big believer at going back 
and looking at task forces because they outlive their 
existence. Greenback was stood up in 1980. The thing went like 
to 1988, and they went through various generations of agents, 
which wasn't bad, but it sort of lost the initial focus and 
oomph it had. And you know, sometimes it's good to undo a Task 
Force and, perhaps, crank up one in another direction. And the 
most successful ones have been like that. They haven't been 
these things that have been perpetuated forever. So I sort of 
have that kind of view.
    Mr. Souder. Well, I thank you. We need to clear out of the 
room because they have another hearing.
    If you have additional comments you want to give, we may 
have some additional written questions. With that, the 
subcommittee stands adjourned.
    [Whereupon, at 12:35 p.m., the subcommittee was adjourned.]
    [The prepared statement of Hon. Elijah E. Cummings and 
additional information submitted for the hearing record 
follow:]

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